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Veering into the crash barrier of off-topicness, but... How did you get screwed in Austria? It's hard to overstate how much the SVA (the social security provi
by pmjordan 14y ago
Veering into the crash barrier of off-topicness, but...
How did you get screwed in Austria?
It's hard to overstate how much the SVA (the social security provider for self-employed people) annoys me. The amount you pay them in theory depends on your earnings[1] but in practice how much you pay right now is linked to how much you earned 2 years ago: They assume your profits will go up 8% each year, so for the current year, you pay ((profits 2 years ago * 1.08²) * social security rate) + (difference to what you underpaid 2 years ago).
So if your income is unusually high one year, you pay social security as if you earned the usual amount, which means your profit is artificially high, and thus you pay a lot of tax. Then, 2 years later, you have to pay the difference of what you should have paid in the year you earned lots. Conversely, if you're having a bad year for whatever reason, you have to pay the same amount you usually would, even though you're earning very little. So the worst situation is if you earn a lot and then 2 years later earn very little: you pay lots of tax in the "good" year and get stuffed for social security in the bad year.
This is exactly my situation right now: in 2010 I decided I'd need some runway for our startup so I took on lots and lots of contract work. In 2011 and 2012 I've mostly been working on the startup, so I'm only doing maintenance work for existing contract customers. All of my contract revenue this year has been going straight into the SVA. The SVA bill is more than the rest of my cost of living put together.
And yes, back in 2010 I did try to increase my SVA payments because I knew this would happen, but they wouldn't let me.
Of course employees simply do not have this problem: even if their income fluctuates like crazy (seasonal workers etc.), every month they pay a percentage of the exact amount they earned. Yet self employed people are the ones whose income is most likely to fluctuate.
[1] 7.5% for health insurance, ~17.5% for pension, ~1% other - so this is quite a lot of money, and unlike tax there's no free earning threshold. In fact, it's the opposite: if you earn below around €550 p.m., you owe as much as if you earned €550.
- Joeri 14y agoSounds like you're just given a payment delay of 2 years, which seems a pretty good deal to me. Put the money in a bank account for 2 years, let it earn interest, then pay it down.
- pmjordan 14y agoIt's a terrible deal because you have to pay your top marginal income tax rate (37.5-50%) of your "good" year on that money that isn't even yours, which you otherwise wouldn't, as social security payments are tax-deductible. In the "bad" year 2 years later, you obviously can deduct it, but as your earnings are low, you're in a lower tax band or even wouldn't be paying any tax at all (which is the case for me). So in my case this loses me thousands of Euros. In "down" years you're also forced to lend them money that you'll get back 2 years later. I fail to see how this is a good deal. Even if the tax bands happen to coincide, it's pretty hard to find even fixed-term savings accounts that earn more interest than inflation these days. Even my pension fund is actively losing money. (of course I don't have a choice about paying into it)
- jakobe 14y agoI'm in Austria too. My accountant told me that it is possible to just pay higher SVA payments. So if you assume that you will have to pay 5000/year, but they only charge you 3000/year, you just pay them an extra 2000 EUR on your last payment. And as long as you pay that before the end of the year, can deduct that from your taxes.
- pmjordan 14y agoInteresting. I specifically asked at both the SVA and the Finanzamt and they both told me it wasn't possible. Well, too late for me, unfortunately, I got screwed in 2010 and I'm about to shut down my business in Austria anyway.
- jakobe 14y agoI think the trick is to just pay the SVA the extra money without asking questions and then hope that the Finanzamt accepts it. But I'm not a specialist and I haven't tried it yet; but I will try it this year.
- pmjordan 14y agoStrange procedure, but I wouldn't be surprised if your accountant knew more about this than the bureaucrats at the Finanzamt or the SVA. In my experience, the former are friendly but useless and the latter are hostile, inefficient and useless. In any case, good luck with it!