Freelancing Explained -
The Tax Office
Everything around the topics tax office, tax and insurances is a very complex field. In the following we have tried to clarify a little bit and to offer orientation. We can never replace a tax consultant. It should be a support, without the claim to completeness.
Freelance musicians are "new self-employed " or "one-person enterprises"(EPU). Therefore, it is their duty to make a statement of income and expenditure, the so-called tax return. This must be submitted to the tax office once a year. From an income from freelance work of a few hundred euros per year, this is required by law, so you are obliged to report.
For musicians WITHOUT an employment relationship, the following applies: You are only liable to pay taxes if you earn annual profit of 11.693€ (as of 2023). That means, only if you make more than 11.693€ profit in one year, you pay taxes.
The profit is calculated as follows: Income (=income) MINUS the expenses for travel, instruments, sheet music, insurance, etc. For example, if one has made a profit of 14.000€, 2.307€ of it will be taxed, the rest is tax-free. In Austria, a profit between 11.693€ to 19.134€ is taxed with 20% ("first tax bracket").
1+1 does not always equal 2
Every tax return is very individually different. Countless factors play a role: Are you still studying? Do you also have a job (e.g. in a music school), or do you only live from self-employment? Are there dependent children living in the same household? Is one a single earner or a single parent? Which instrument does one play (acquisition costs, useful life - see below), and is one active internationally or nationally or both? Do you travel to the projects by public transport or with your private car? Is the car registered as a company vehicle?
As you can see, there is a lot to consider when filing a tax return. The regulations change again and again, it is an extremely complex matter. Therefore, we recommend that you consult a tax advisor who specializes in musicians.
Tax return - What are the first steps?
The time has come to play, the border from hobby ("music as a hobby") to profit ("music as a profession") has been crossed. Now it's time to collect and preserve:
The income and expenditure account
Expenses are deducted ("written off") from all gross income (i.e. everything that ends up in the account or is received in cash), what remains is the profit. This is taxed. The Social Insurance Institution for the Self-Employed (SVS) also uses this gross income as a basis for calculating the insurance contribution, i.e. how much you have to pay to the SVS per year.
- All contracts (if any) or emails containing important project information such as
- the rehearsal and concert venue
- the rehearsal times
- the amount of the fee (fee notes, payment confirmations)
- whether travel expenses have been paid (payment receipts)
- which works are played (for personal accounting)
- whether sound and image recordings are made and paid for separately.
- what expenses were there (travel costs, hotel costs, etc.) and were these covered by the organiser?
- At what times did people leave the house and when did they return home?
All these things are relevant later when it comes to calculating the daily diets.
Collect receipts and invoices for all expenses incurred in the exercise of your profession:
- Instrument maintenance and acquisition costs for instruments.
- Specialist literature, sheet music, music programmes
- Strings, cane building material, humidifiers, etc.
- Office supplies such as computers, copy paper, folders, adhesive tape, pens, etc.
- Telephone bills, internet charges and postal charges
- Rehearsal room costs such as rent, electricity bill
- Living space costs, if this is also used as a rehearsal location
- Insurances such as household or instrument insurance, etc.
- a streaming subscription or CDs to get to know the music in preparation for projects
- Suitcase to be able to travel
- Professional clothing such as tailcoat, patent leather shoes or suit
- Travel expenses, accommodation costs
- Training costs, tuition fees
A very detailed compilation of all the things that count as income or expenses has been summarised by the MICA on its service page:
The tax advisor:in will include the collected expenses in the income - expenditure statement.
CAUTION: Larger acquisitions are depreciated over several years. It depends on how long an object can be used (useful life). For example, a piano can be played much longer than a wooden flute. Your tax advisor can help you with this.
Order and sort
At the beginning of the new year, the receipts for income and expenses are sorted chronologically by project. Each project is supplemented with important information such as the time of arrival and departure to and from the home town, etc.
Expenses that are not related to a specific project, e.g. insurance or office supplies, are added collectively, preferably in individual categories such as "insurance", "office", "post", "maintenance/repair costs".
The collected projects are given to the tax advisor. He/she will calculate everything and, after a meeting with the client, finally submit the calculation to the tax office. A few weeks later you will receive your income tax assessment.
Do you have to declare everything?
Yes, it doesn't matter whether the fees were paid in cash or transferred directly to the account, whether it was a lot of money or a little. It is also not relevant who paid. If money was received through concert activities, recordings or private lessons, that counts as income.
Double taxation treaties/
Within the EU, the double taxation agreement applies between most countries. The so-called foreign tax is immediately deducted from a fee earned in Germany, for example. The artist therefore receives a net fee. Austria now considers this amount as already taxed and does not deduct any further taxes from it. Nevertheless, this income must be declared, as it is added to the other income for the calculation of the annual profit. This is called "progression". This is important for the calculation of tax and the amount of the SVS contribution.
In Switzerland, the foreigners' tax is called "withholding tax". It varies in amount depending on the canton. In Germany, the "solidarity contribution" of 5.5% is deducted in addition to the foreigners' tax.
Summary: Foreign income must be declared, but as a rule it is not taxed again in Austria.
Income tax assessment and SVS
The tax adviser may be able to tell you at the meeting whether you have to pay tax and how much, or whether you may even have a credit balance. In addition, it can already be calculated how much the insurance (SVS) will cost next year.
ATTENTION: The SVS (social insurance for the self-employed) is always 2-3 years "behind" with the amount of contributions - the result of the 2020 tax return will only have an effect in 2022. If there is a credit, you can apply for it immediately in writing and it will be paid out relatively quickly.
Value added tax, UID number
If you have a turnover of more than €35,000 per year in Austria, you must apply for a VAT number and pay VAT. ATTENTION: Tax number and UID number are not the same.