Biggest tax relief initiative in the Second Republic to date


The tax relief initiative

The government put together a package built on four main cornerstones. Firstly: working people should have more left in their pay packets for them to live on. Secondly: there will be incentives to eco-friendly behaviours. Thirdly: introduction of policies that support Austrian businesses and enable growth. And fourthly: the country’s debt ratio will be reduced, step by step. All this will be achieved with the biggest tax reform seen in the Second Republic to date.  

Relief for privately-owned, medium-sized businesses and for families

The full effect of the reduction in taxes on labour will amount to some EUR 4.7 billion per year by 2025. Reductions in the 2nd and 3rd-level tax bands from  35 to 30 per cent and 42 to 40 per cent respectively will come into force in July 2022 and July 2023 respectively. 3.8 million wage taxpayers will benefit from this lowering of the tax bands. Even those people who earn so little that they don’t have to pay wage tax will have more to live on.  Through the cuts in health insurance contributions, even those on low incomes and pensions will benefit from a marked reduction from 2022 onwards. In total some 2.3 million employees and some 1.6 million pensioners will benefit from the reductions in health insurance contributions.

Also families will be strongly supported as there will be a raise up of the Family Bonus from EUR 1,500 per child per year significantly to EUR 2,000 per child per year.   In addition, the amount of the “Kindermehrbetrag” tax relief/allowance item will rise to EUR 450.

A new employee profit sharing model, which was announced as part of the government programme and which will allow a share in profits of up to EUR 3,000 per year to be exempt from tax, will also come into force as part of the tax reform.

A package of measures to bolster the domestic economy

In order to build on the optimism that has followed on from the crisis and strengthen Austria as a location for business, businesses’ tax burden will be eased by reducing corporation tax from 25 per cent to 23 per cent by 2024. As such Austrian businesses will be better prepared to be successful now and in the future, in international markets.

In addition, there will be an introduction of an investment allowance of up to EUR 350 m; a carbon leakage regulation based on the German model so that domestic companies do not relocate to cheaper countries; a hardship ruling for companies whose business activities are by definition energy-intensive; and tax exemption on self-generated electricity. As well as this, there are plans to raise the tax exemption level on profits from 13 to 15 per cent, as well as the tax credit amount on low value assets.

Farming and forestry will benefit from a flat-rate price for agricultural diesel and funding to encourage farms that are self-sufficient in terms of energy.

CO2 pricing

In addition, the government has jointly agreed that a price must be placed on CO2 emissions. In doing this, Austria honours its responsibilities and will be implementing European specifications. incentives for those who can switch will be needed instead of punishments for those who are not lucky enough to live close to a metro station. The intention is to help those people who continue to be dependent on their cars. Besides, people who can’t afford to install a new heating system will be supported. The central objective is that the CO2 pricing model takes account of, and properly supports, countryside dwellers.