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Austria vs. Spain: Where are taxes lower?
Use our guide to compare taxes in Austria and Spain, and see which is more cost-effective for you based on your goals
Comparing taxes in Austria vs. Spain is an essential exercise for people with ties to both countries or those evaluating options within the European Union. Although both belong to the European project and share common regulatory frameworks, their tax systems show clear differences for companies and individuals.
Throughout this article, we analyse the main taxes in each country. Our aim is to give you a clear, comparative overview. This helps you make informed decisions when choosing your next destination.
Taxes for businesses or legal entities
Legal entities, companies, corporations and other business structures face a set of tax obligations. These vary significantly between Austria and Spain.
From corporate profit tax to employer social contributions, each element directly affects profitability. This applies when operating in either country.
1. Corporate tax in Austria compared to Spain
Corporate tax is one of the most important indicators for any company deciding where to set up. In Austria, the standard corporate tax rate (Körperschaftsteuer) stands at 23% since the 2024 reform, while whereas in previous years it stood at 25%. Spain applies a standard rate of 25% for most companies, although there are reductions for SMEs and start-ups: the latter are taxed at 15% for the first two financial years in which they have a positive taxable income.
In other words, Austria is slightly more competitive for large corporations in nominal terms. Spain, however, supports start-ups with a lower initial rate. Beyond nominal rates, effective taxation matters more. Spain’s deductions and allowances can significantly reduce the real tax burden. As a result, companies with high deductible expenses could end up paying a similar proportion in both countries despite the difference in the nominal rate.
2. Corporate VAT in Austria vs. Spain
Value Added Tax applies to both purchases and sales of goods and services. In Austria, the standard VAT rate (Umsatzsteuer) is 20%, while Spain applies a standard rate of 21%. The difference is small, just one percentage point. However, it can become significant in high-turnover sectors over time.
Both countries apply reduced VAT rates for certain goods and services. Austria applies a 13% intermediate rate for cultural and tourism activities, and a 10% super-reduced rate for basic food, medicines and transport.
Spain applies a 10% reduced rate for processed food, hospitality and passenger transport, and a 4% super-reduced rate for essentials such as bread, books and medicines. Therefore, Spain’s reduced VAT system can be more favourable in several sectors compared to Austria.
3. Employer’s social contributions: Austria vs. Spain
Social security contributions paid by employers represent an additional labour cost that is not always reflected in comparisons of direct taxes. In Austria, employers pay around 21-22% of gross salary in social contributions. In Spain, employers’ contributions to social security reach around 29-30% of gross salary, including contributions for standard benefits, unemployment and vocational training.
This difference is significant. Companies in Spain face higher labour costs compared to Austrian firms, which increases the overall cost of employment. Austria therefore offers a more attractive environment for labour-intensive businesses. However, higher average salaries in Austria partly offset this advantage.
4. Dividend tax and profit distribution
When a company distributes profits to shareholders, dividend taxation applies. In Austria, resident individuals pay a flat 27.5% withholding tax on dividends. Spain applies a withholding tax of 19% on dividends of up to €6,000 ($7,020), 21% on dividends between €6,000 ($7,020) and €50,000 ($58,504), and 23–27% on amounts above that.
For investors or partners who regularly receive income from capital, Spain may offer better tax advantages at the lower tax brackets, whereas Austria imposes a more uniform tax rate. Therefore, tax residency can strongly influence net investment returns.
5. Business incentives and deductions in Austria vs. Spain
Both Austria and Spain offer tax incentives to support new business creation. In Austria, new companies can benefit from a 15% tax deduction on investments in fixed assets in their first year of operation, as well as an attractive R&D scheme offering a 14% tax deduction on research and development expenditure.
Spain applies a reduced 15% corporate tax rate for new companies during their first two profitable years. It also offers R&D+i deductions of up to 42% of eligible expenses, making it one of Europe’s most generous innovation systems. In terms of incentives for innovation, Spain outperforms Austria, whilst Austria’s regulatory environment tends to be perceived as more stable and predictable.
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Taxes for individuals or natural persons
For employees, freelancers and anyone earning income in Austria or Spain, personal taxation determines disposable income. Below, we compare the main taxes affecting individuals in both countries.
1. VAT in Austria vs. Spain
Although VAT is an indirect tax on consumption, its impact on individuals’ purchasing power is direct and felt on a daily basis. Austria applies a 20% standard rate, while Spain applies 21%. The difference is small but noticeable in everyday goods and services.
Essential goods are taxed more favourably in Spain thanks to its 4% super-reduced rate for basic food, books and medicines. Austria applies 10% to most food products. As a result, Spain offers a more favourable system for families with higher essential spending.
2. Austria vs. Spain: Where is personal income tax lower?
Personal income tax is the tax that has the greatest impact on most wage-earning taxpayers. In Austria, Einkommensteuer is progressive, starting at 0% for incomes below €12,816 ($13,962), and reaching 55% above €1 million ($1,092,000). The intermediate points are at 20%, 30%, 40%, 48% and 50%.
Spain’s IRPF is also progressive and combines state and regional rates, so the effective rate varies depending on the autonomous community of residence. The minimum threshold is €14,000 ($15,288), with rates generally range between 19% and 47%, although they can reach 54% in some autonomous communities for the highest income brackets.
For middle incomes between €30,000 ($32,760) and €60,000 ($65,520), taxation is very similar in both countries. For incomes above €100,000 ($109,200), Austria tends to be more burdensome, although Spain varies by region.
3. Wealth tax: Austria vs. Spain
One major difference is Spain’s Wealth Tax, which has no equivalent in Austria. Spain charges net wealth above €700,000 ($763,600), with rates from 0.2% to 3.5%, depending on the region.
Austria abolished its wealth tax in 1994. Therefore, high-net-worth individuals may benefit more from Austria. This difference can represent significant annual savings for wealthy taxpayers.
4. Inheritance and gift tax
Austria abolished inheritance and gift tax in 2008, making it one of Europe’s most favourable countries for wealth transfer between generations. In Spain, this tax is administered by the autonomous communities. Whilst in Madrid or Andalusia tax relief can be as high as 99% for inheritances between immediate family members, in other communities the tax burden can be very high.
Austria therefore offers a situation that is objectively more advantageous for intergenerational wealth planning, as there is no inheritance tax.
5. Taxation for freelancers: Austria vs. Spain
In Austria, freelancers (Selbständige) pay income tax (Einkommensteuer) under the same system as employees. They also pay GSVG contributions of around 26-28% of taxable income. In Spain, freelancers pay IRPF and social security contributions based on actual income. Monthly contributions range from €200 ($218) to €590 ($643), depending on income brackets.
Spain has improved conditions for low and medium earners. Austria can be more demanding at minimum contribution levels. For high-income freelancers, Austria’s contribution caps can become more advantageous.
Tax comparison in Austria vs. Spain
To simplify the comparison of the two systems, we present two summary tables. The percentages correspond to the standard rates applicable in 2024; where the tax is progressive, the full range is indicated.
Taxes for companies (legal entities)
| Tax | Austria | Spain |
|---|---|---|
| Corporate tax (standard) | 23% | 25% |
| Corporate tax (new companies) | 23% | 15% (fisrt 2 years) |
| VAT (standard) | 20% | 21% |
| VAT (reduced) | 10% / 13% | 10% / 4% |
| Employer’s social contributions | ~21-22% | ~29-30% |
| Dividend Withholding | 27.5% | 19–27% |
| R&D deduction | 14% | 25–42% |
| Wealth tax | 0% (abolished) | 0.2–3.5% |
Taxes for Individuals
| Tax | Austria | Spain |
|---|---|---|
| VAT (standard) | 20% | 21% |
| VAT (super-reduced rate) | 10% (food) | 4% (basic food). |
| IRPF / Einkommensteuer (minimum) | 0% (up to €12,816 ($14,995)per year) | 0% (up to €14,000 ($16,380) per year) |
| IRPF / Einkommensteuer (maximum) | 55% (over €1,000,000 ($1,092,000)) | 47–54% (depending on the region) |
| Wealth tax | 0% (abolished) | 0.2–3.5% |
| Inheritance and gift tax | 0% (abolished) | 0 – (depending on the region) |
| Employee social contributions | ~18% | ~6.35% |
| Dividends Taxation (individuals) | 27.5% (Fixed) | 19–27% |
Conclusion: Austria or Spain?
The answer is not universal. It depends on the taxpayer’s profile, their income level, whether they are acting as a natural person or a legal entity, and whether they have significant accumulated wealth.
For companies, Austria offers advantages in corporate tax and employee social contributions. However, Spain makes up for this with reduced tax rates for start-ups and very generous R&D tax credits. For high-net-worth individuals, Austria is more favourable due to the absence of wealth and inheritance taxes. For middle-income workers, differences remain small and depend on regional taxation in Spain.
In conclusion, both Austria and Spain maintain medium-to-high tax pressure in Europe. The informed decision presented through this information, combined with personalised tax planning advised by professionals in each jurisdiction, remains the key to optimising your tax burden in either country.
