...for people with limited tax liability: foreigner’s withholding tax

If you work in domestic events and your fee is below two specific maximum limits, you do not have to pay foreigner's withholding tax . These maximum limits relate to your fees from individual events and to your total Austrian annual income:

• The de minimis threshold is a maximum of €1,000 for one organiser per year and relates exclusively to the fee. If the organiser reimburses you for other expenses, such as travel costs or meals, the reimbursement of these costs is not taken into account in the threshold.
• An exemption from withholding tax only applies if you do not earn more than €2,420 in total in Austria in the applicable calendar year. 

To do: If your income is below the de minimis threshold, you must submit a written declaration to the organiser in order to be exempt from foreigner’s withholding tax. In this declaration, you must state the income you received in Austria and declare that you did not earn more than €2,420 in Austria in the corresponding year. You must also state the address of your place of residence and prove your identity by including a copy of your passport.

Section 99 of the Income Tax Act regulates whether your Austrian income is subject to foreigner's withholding tax. This provision specifically regulates which activities are subject to foreigner's withholding tax in Austria for those with limited tax liability. The following list includes some of the activities that, when performed or exploited in Austria by people with limited tax liability, are subject to withholding tax in Austria:

• Writers
• Lecturers
• Artists
• Architects
• Participants in entertainment performances. This refers to all people who participate in domestic cultural events, such as artists, commercially active musicians, performers, directors, stage and costume designers, lighting and sound technicians, and make-up artists. 

If your income comes from one of these activities, the next step is to determine whether it falls under the de minimis threshold for contributors to entertainment performances or whether a double taxation agreement is in place that regulates whether Austria may tax your income.

Whenever you work across borders, the question arises as to whether the country in which you are resident for tax purposes and Austria have concluded a double taxation agreement. For details, see the subchapter on tax liability in multiple countries. 

Your client is obliged to calculate and pay the foreigner’s withholding tax. However, the party who ultimately bears the tax burden financially—you or your client—depends on the wording of the fee agreement:

• If the contract provides for a gross fee, the tax is deducted from the agreed fee, and you receive the amount minus the tax.
• If the contract stipulates a net fee, the client must pay the fee specified in the contract and also pay the foreigner's withholding tax. Since your client pays your tax, this is considered a financial contribution. In this case, 25% of the net fee must be paid as foreigner’s withholding tax, which means that the calculated amount is equal to 20% of the gross fee (see the example below).

Info: In this context, the terms gross/net refer to whether the agreed fee is to be understood before or after the deduction of tax. This is not to be confused with the types of gross and net taxation explained above, which are concerned with whether or not the person liable to withhold tax takes your business expenses into account. In the context of VAT, the terms gross/net also have a separate meaning. See the sub-chapter on value added tax. 

Example: You are an Italian musician and agree a gross fee of €1,500 for a concert in Vienna and the organiser also reimburses your travel expenses of €500. The assessment basis for foreigner’s withholding tax is therefore €2,000. Of this, the organiser must withhold 20%, i.e. €400. You will be paid €1,600.

Example: You are a German cabaret artist and agree on a net fee of €1,500 for a performance in Salzburg. The organiser must pay you this amount in full. In addition, the organiser must pay 25% of the net fee, i.e. €375 (25% of €1,500) to the tax office as foreigner's withholding tax. Control calculation: in this case, the gross fee would be €1,875, 20% of which is also €375).

When calculating foreigner’s withholding tax, business expenses that you have incurred while providing the service are generally not taken into account. Your business expenses can only be taken into account with tax relief in the following cases:

• If you are based in an EU/EEA country, you can inform your client in writing which business expenses you have incurred in connection with the provision of services. The corresponding receipts must then also be submitted. Your client will deduct these expenses from your fee. The party liable to withhold can then reduce the fee by the operating expenses before calculating the withholding tax. This is known as net taxation. In the case of net taxation, the withholding tax is 20% for income up to €20,000 per calendar year and 25% for income in excess of this amount. This means that net taxation can be advantageous for you, depending on your income and operating expenses. If you are not resident in an EU/EEA country, you may not benefit from this regulation. 

Instead, you can voluntarily submit a tax return—regardless of your place of residence—and offset your business expenses against tax in the same way as those with unlimited tax liability.

If you are subject to limited tax liability and your income is subject to withholding tax, in most cases you are not obliged to submit a tax return. Your tax liability in Austria is fulfilled with the deduction of foreigner's withholding tax. This is financially advantageous if your income from this activity is high. If you were to file a tax return, your income would be taxed according to the regular tax rates applicable in Austria: your income in excess of €21,992 would be taxed at more than 20%. 

In the following case, however, it may be financially beneficial to voluntarily submit a tax return and have the tax calculated according to the regular income tax rates:

• You cannot offset business expenses against your tax as part of foreigner’s withholding tax. If you file a tax return, you can claim the business expenses and thus reduce the assessment basis for calculating tax.
• If it turns out that you would pay less tax according to the domestic tax rate than the withholding tax already withheld, you will receive a credit note from the tax office. 

Attention: Please note that in Austria, an amount of €11,077 is added to the income of individuals with limited tax liability. This means that the tax-free income for people with limited tax liability is only €2,420 per year as opposed to €13,359 for people with unlimited tax liability.

In the subchapters calculation of profits, income tax return, and calculating your income tax you can find out what you need to consider when taxing your income on the basis of an income tax return.

In the case of international co-productions, careful consideration should be given to the co-production partner paying royalties to contributors with regard to foreigner’s withholding tax. 

It may be more favourable if the respective co-production partners manage the production funds separately and each pay the fees to their compatriots.