Withholding Tax in Austria (KESt)

One English word covers two Austrian charges with different rules, rates and deadlines, and a reader who treats them as one will miss a filing.

The first is the Kapitalertragsteuer, capital yields tax, usually KESt: EStG § 93 Abs. 1 says that where there is domestic income from capital, the income tax on it is levied by deduction, and it applies whether the recipient lives in Austria or abroad. The second is the Abzugsteuer in EStG § 99, which reaches seven listed payments to a person only limitedly liable to Austrian tax.

Neither is a tax on the Austrian company. Both are taxes on the person receiving the money, collected from the company paying it, which gets the work and the risk instead. What the company pays on its own profit sits on the page about the corporate tax rate in austria.

The rates sit in EStG § 27a for the capital yields tax and in EStG § 100 for the other one.

The 23 percent is a permission, not a rate. EStG § 27a Abs. 1 Z 2 fixes 27.5 percent. EStG § 93 Abs. 1a then says the agent may always withhold 23 percent for income accruing from 2024 where the person who owes the tax, meaning the recipient, is a corporation within KStG § 1 Abs. 1. Nothing compels it: a payer who withholds 27.5 percent from a corporate shareholder has not broken the law, it has left the shareholder to reclaim the difference. On the other tax the grammar flips. EStG § 100 Abs. 1a Z 1 says the corporate rate on the net route is 23 percent from 2024, while Z 2 says the same rate may be withheld in the Z 6 and Z 7 cases.

Austrian law separates the person who owes the tax from the person who hands it over, and the second carries the risk. EStG § 95 Abs. 1, in force from 24 December 2025 puts it in two sentences: the debtor of the capital yields tax is the recipient of the yields, and the withholding agent is liable to the federal government for deducting and remitting it. That liability is asserted by the Finanzamt für Großbetriebe. For a dividend the agent is the company itself, as debtor of the yields (§ 95 Abs. 2 Z 1 lit. a): there is no intermediary to blame. The tax is charged to the recipient instead only in the two cases in § 95 Abs. 4.

A hidden distribution is a withholding event, and the Verwaltungsgerichtshof said so this year. In Ra 2023/13/0185 of 24 February 2026 it held the company liable under EStG § 95 Abs. 1 for failing to withhold and remit the tax on the whole amount of a hidden distribution, whichever shareholder it was attributed to, and confirmed that the size of the shareholding is beside the point. A benefit given outside a formal resolution, a claim the company declines to enforce, a price nobody at arm's length would agree: same question, and the company answers it. The other deduction works the same way, in EStG § 100 Abs. 2 and Abs. 3.

EStG § 94 lists sixteen cases in which the agent deducts nothing. Five matter to a company with foreign owners.

Z 13 decides what a non-resident actually bears, by pointing at EStG § 98. That list reaches a dividend where the Austrian company is the agent (lit. a) and domestic interest (lit. b), but expressly not interest earned by anyone other than a natural person, nor interest earned by a resident of a state with automatic exchange of information who produces a residence certificate to the agent. A foreign company lending to an Austrian company is outside the charge on that interest; a foreign individual with an Austrian savings account is inside it. The last row is a boundary rather than a rule about withholding: a gain on a shareholding of at least 1 percent held in the last five calendar years is taxable under § 98 Abs. 1 Z 5 lit. e, but § 94 Z 13 takes it out of the deduction, so Austria collects it by assessment.

A fee for hiring out staff to work in Austria is one of the § 99 Abs. 1 Z 5 heads, and it is governed by an ordinance most summaries never reach: the Verordnung zur Abzugsteuerentlastung bei Arbeitskräftegestellung, Article 1 of BGBl. II Nr. 318/2022, in force from 1 September 2022.

Its § 1 sets the mechanism. Where the payer withholds and remits 70 percent of the deduction on the hire fee, the employment income of the posted workers counts as already captured economically and its taxation as secured. That is what the figure buys: not a rate on the hirer, but the price of not running Austrian wage tax for every posted employee. Treaty relief is narrower than usual, because § 3 Abs. 2 allows relief at source only for an intra-group posting of salaried staff, and otherwise only on a time-limited decision of the Finanzamt für Großbetriebe.

The refund does not rescue what relief at source missed. § 4 Abs. 1 of that ordinance makes a refund of the 70 percent inadmissible; a full refund is admissible only where wage tax was actually deducted and the foreign business takes on the employer's duties under EStG § 82. Two further things happened in the same gazette: Article 2 repealed DBA-Entlastungsverordnung § 5 Abs. 1 Z 4 and Abs. 3 at the end of 31 August 2022, which is where this rule used to live, and Article 3 repealed eleven implementing ordinances, Durchführungsverordnungen. Corrected 2026-09-18: those are not the same thing as the implementing agreements, Durchführungsvereinbarungen, and this page previously called them agreements. The ordinances had already been disapplied by the DBA-Entlastungsverordnung's own § 6 Abs. 2 in 2005 and were deleted in 2022 as spent. The five agreements listed in § 6 Abs. 3, with Denmark, Liechtenstein, Luxembourg, Sweden and Switzerland, were untouched and remain in force.

A treaty may reduce or remove Austria's right to tax a payment. Getting the benefit is a separate question from having it, and Austrian law offers three procedures, set out in one sentence by the Verwaltungsgerichtshof in Ra 2020/13/0089 of 23 April 2021:

"Für eine Entlastung vom Steuerabzug stehen grundsätzlich drei Verfahren zur Verfügung: eine Entlastung an der Quelle; eine Entlastung im Wege der Veranlagung; oder eine Entlastung im Wege eines Rückerstattungsverfahrens."

Relief at source, relief by assessment, relief by refund. The middle one gets forgotten. EStG § 102 Abs. 1 Z 3 lets a limited taxpayer bring income that bore a § 99 Abs. 1 Z 1, 3, 4, 5 or 6 deduction into an ordinary assessment, on application, within five years of the end of the assessment period.

No treaty rate appears here. Rates, thresholds and the meaning of a substantial holding differ from treaty to treaty, and no treaty has been read for this site. The procedures are the same whichever applies.

Relief at source is the route everyone wants and the one that carries the payer's risk. The DBA-Entlastungsverordnung, BGBl. III Nr. 92/2005, says in its § 1 that the relief may be brought about by the payer, and that the payer must then prove, or make credible under BAO § 138, that omitting or limiting the deduction was correct. The benefit is the recipient's; the file is the company's.

What the file holds is specific. § 2 Abs. 1 asks for a residence certificate from the foreign tax administration on form ZS-QU1 for an individual or ZS-QU2 for a legal person; § 2 Abs. 2 allows a written declaration with seven listed particulars instead, where payments to that recipient stay under EUR 10,000 in the calendar year. A legal person adds the activity, staff and premises declaration in § 3.

Relief at source is not available at all in six cases, listed in § 5 Abs. 1 of the ordinance as in force from 1 September 2022:

• the documentation in §§ 2 to 4 is not sufficiently met (Z 1);
• the income is not attributable to the foreign recipient for tax purposes, and the payer knew or on a prudent merchant's care should have known (Z 2);
• a § 99 Abs. 1 Z 1 fee goes to a third party rather than the performer, with no documents naming the performer and the amounts reaching them (Z 3);
• the recipient is a foreign foundation, trust or investment fund (Z 5);
• the recipient is a legal person managed outside its state of incorporation (Z 6);
• the yields are paid out at maturity, or on a sale of securities, by a credit institution acting as custodian or administrator (Z 7).

The numbering has a gap because Z 4, the old labour-hire bar, was repealed at the end of 31 August 2022. Z 7 surprises people: a custodied dividend paid out by the bank cannot be relieved at source at all.

If tax was withheld and should not have been, it comes back through a refund. Three rules decide whether that works.

The payer can fix its own mistake inside the year. BAO § 240 Abs. 1 lets the agent even out or repay amounts wrongly withheld during a calendar year, up to the end of that year. After 31 December the recipient applies instead.

The application has five years, and the treaty cannot shorten it. BAO § 240 Abs. 3 runs the refund to the end of the fifth calendar year following the year of withholding, and § 240 Abs. 4 does the same for a treaty refund "ungeachtet allfälliger im Abkommen vereinbarter kürzerer Fristen", notwithstanding any shorter period the treaty agrees.

And nothing can be applied for until the year is over. BAO § 240a requires a limited taxpayer to file an electronic Vorausmeldung, an advance notification, before applying, and it is not admissible until the year of withholding has ended. Abs. 2 closes every other form of application: the claim can be made "ausschließlich", exclusively, by the printed advance notification carrying its transmission confirmation, signed, and completed with the foreign residence certificate.

Two domestic bases sit beside the treaty one. KStG § 21 Abs. 1 Z 1a repays capital yields tax on application to a limited corporate taxpayer resident in an EU or EEA state so far as it cannot be credited at home under a treaty, and equally to one in a third state with comprehensive administrative assistance holding less than a tenth of the agent's capital. EStG § 99a exempts interest and royalties paid to an associated undertaking of another member state, on a direct holding of at least a quarter held for an uninterrupted year, and only if the payer already holds the confirmations when it pays. Where it did not, Abs. 8 gives five years to apply and requires the refund within one year, with interest under BAO § 205 after that.

1. A nil return is still a return. EStG § 96 Abs. 3 requires the notification whether or not anything was withheld, with the reason stated.

2. A custodian bank cannot give relief at source on a dividend. DBA-Entlastungsverordnung § 5 Abs. 1 Z 7 bars it, so that case goes to the refund route by design.

3. A benefit never called a dividend is still a dividend. VwGH Ra 2023/13/0185 of 24 February 2026 holds the company liable under EStG § 95 Abs. 1 for the tax on the whole amount of a hidden distribution.

Checked 17 September 2026, at the Bundeskanzleramt's open-data documents.

• EStG § 93, the deduction and the 23 percent option, NOR40254915
• EStG § 27a, the 27.5 and 25 percent rates, NOR40263362
• EStG § 94, the exemptions, NOR40274899
• EStG § 95, debtor, agent, liability, inflow date, NOR40274900
• EStG § 96, remittance, notification, certificate, NOR40254918
• EStG § 99, the seven heads and the net route, NOR40274901
• EStG § 100, the rates of the special deduction, NOR40254931
• EStG § 101, monthly remittance and notification, NOR40217581
• BAO § 240a, the advance notification, NOR40246320
• DBA-Entlastungsverordnung § 5, the bars on relief at source, NOR40246888
• Abzugsteuerentlastung bei Arbeitskräftegestellung § 4, the 70 percent refund bar, NOR40246883
• VwGH Ra 2020/13/0089 of 23 April 2021, the three relief procedures

the accounting services guide The monthly and annual filings an Austrian company carries, including the notifications above, with the reserved work done by a licensed Austrian adviser.