The Top 5 global mobility issues likely to impact employers assigning staff to Austria
"Each assignment/secondment is unique and demands a separate review in order to comply with Austrian law. For non-EU companies, the review is even more complex as stricter rules apply and the regulations are not standardized."
Martin Seidl, Partner, Rothenbuchner & Partner, Vienna
This article, authored by Martin Seidl, partner at Rothenbuchner & Partner in Vienna, and a key member of the alliance's Global Mobility Services Group, provides a quick overview of what needs to be considered by companies within the EU when assigning their staff to Austria.
First of all, it is essential to clearly define which activity types are planned, and whether the movement of people across borders involves an assignment (known as ‘active services’) or a secondment (known as ‘passive services’). This definition will have a bearing in terms of additional tax and employment law issues.
The Top Five obligations linked to employee assignments or cross-border secondments to Austria are summarized below:
1. Notification requirements
In Austria, many businesses are regulated, for example, investment advisory, consultancy and many skilled manual professions. If the foreign company is active in a regulated sector, such activities may be provided temporarily and occasionally. In this scenario, an application must be submitted to the Federal Ministry for Digital and Economic Affairs. If the business sector is not regulated, no application is necessary.
Employees assigned to Austria have to be registered with the Central Co-Ordinating Agency of the Ministry of Finance before the assignment (secondment) starts. Exemptions are made for business meetings where no other services are rendered or for intercompany services for employees whose monthly gross salary exceeds Euros 6,412.50 (as of 2018).
2. Tax and social security related obligations for the company
Active services performed in Austria might trigger an Austrian permanent establishment if they exceed six months duration, or in the case of construction and installation work, 12 months). Passive services (secondments) do not trigger a permanent establishment.
Even if no permanent establishment is created in Austria, an establishment for wage tax purposes might be triggered (activity/services for over one month). As a result, the employer must pay Austrian wage taxes for its employees.
If employees are subject to Austrian social insurance contributions, the employer will have to register for social security purposes in Austria, though exemptions are possible.
Activities in Austria might also lead to withholding tax obligations for the Austrian customer.
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3. Tax and social security related obligations for employees
An assignment/secondment to Austria generally only leads to tax consequences for the employee:
- If the employee is present in Austria for over 183 days
- If there is an Austrian permanent establishment, or
- The employee salary is paid by an Austrian company (‘the economic employer’); this applies particularly to passive services (secondments); tax liability kicks in on the first working day.
A special situation for Germany
According to the double tax treaty (DTT) between Austria and Germany, in the case of passive services (secondment) to third parties, employees are only taxable in Austria if they are present in Austria for over 183 days. Employees will only be taxable in Austria from the first working day in Austria where it is a case of intercompany passive services (secondment).
However, Germany’s financial administration interprets the DTT differently to Austria. Where there is an intercompany secondment, Germany claims tax jurisdiction for the first three months. Hence, double taxation can apply to secondments of short duration from Germany to Austria.
Furthermore, the salaries of executives at Austrian companies are taxable in Austria even if they do not work physically in Austria.
Within the EU, the social security jurisdiction remains the home country if the assignment/secondment is for less than two years.
4. Employee rights
During the assignment/secondment, the employee’s home country employment contract remains applicable; therefore, employment laws of the home country also apply. A separate assignment contract is needed in which terms are agreed. However, if Austrian law provides better conditions for the employee than those in the foreign employment contract, then Austrian regulations will also apply to the foreign employee.
Minimum salaries and working time regulations should be given careful attention as violations result in stiff penalties.
5. Obligation to keep reporting and salary documents readily available
For an assignment/secondment, the following documents must be available in Austria:
- Employment contract or statement of terms and conditions (in German or English)
- Proof of wage payment or bank transfer statements
- Wage records
- Records of working hours
- Documents relating to salary categorization to verify the remuneration payable to the posted worker under Austrian law for the duration of employment
- A copy of the assignment contract
- Documents related to the employee’s social security insurance registration (e.g. A1 form in the EU)
- If an official permit is required to employ the posted worker in the country where the employer is established, this permit or a copy must also be readily available.
Each assignment/secondment is unique and demands a separate review in order to comply with Austrian law. For non-EU companies, the review is even more complex as stricter rules apply and the regulations are not standardized.