Austria: Wage Tax Changes
Austria
In its decision of 28 June 2010 the Austrian tax court commented on the extent to which double housekeeping expenses are tax deductible. The Austrian tax authorities had argued that costs for accommodation above 60 m 2 should not be tax deductible. However, the court determined the issue was the cost of accommodation rather than the size. The court ruled that so long as the accommodation costs were equivalent to the average for a 60 m 2 property, these would be deductible.
Background
In the case in question, the tax authorities did not approve the full level of the double housekeeping expenses detailed in the tax return. They argued that only reasonable expenses for one person are tax deductible and approved a pro-rated level of the actual expenses. In general, expenses connected with the maintenance of two households, known as double housekeeping, are tax deductible providing that they arise from the fact that an individual must set up a new household at the place of work and at the same time cannot give up the family home.
Tax deductions are only available for unavoidable expenses covering the individuals personal accommodation needs. Higher expenses are not tax deductible. The tax court stated that tax deductions are available for expenses for double housekeeping which satisfy the average accommodation needs of an individual at the place of work. In general, accommodation of up to 60 m 2 at average standard and customary rental costs should be sufficient to satisfy individuals accommodation needs at the place of work.
In addition, the tax court stated that it does not follow the Wage Tax Guidelines, under which accommodation costs of up to EUR 2,200 per month are in all events tax deductible. In the opinion of the tax court, the actual size of the accommodation is not important; the key issue is the cost. However, in the case of unreasonably high accommodation costs, the level of costs for which a tax deduction may be allowed are those that represent the average costs for accommodation of 60 m 2.
Consequently, contrary to the opinion of the tax authorities, the tax court decided not to reduce the actual costs in proportion to the accommodation of 60 m 2 . The tax court determined the amount of tax deductible expenses for double housekeeping is an average of the lowest and highest rental price (incl. VAT) per m 2 published for a given district. In addition, it considered a price increase of 5% p.a. for past periods. The average rental costs per m 2 were finally multiplied by 60 constituting the tax deductible expenses for double housekeeping in this particular case.
Next steps
Employers with assignees in Austria should consider the implications of this ruling when costing assignment packages.
Source: Ernst and Young
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