29. April 2026 Individuals who have their residence or habitual abode in Austria are subject to unlimited tax liability and must therefore declare and tax their entire worldwide income in Austria. If taxpayers receive a pension from a country other than the one in which they are resident, the question arises as to whether—and in which country—such pension income is taxable. To clarify this, a three-step assessment model is applied:
- Is the pension taxable under Austrian domestic tax law?
- Does a double taxation agreement (DTA) restrict Austria’s right to tax?
- Levying of tax if subject to taxation in Austria
A domestic tax liability may arise on the basis of the following provisions:
First Pillar: Statutory Pensions pursuant to section 25 of the Austrian Income Tax Act (EStG)
This category includes pensions from state pension systems (e.g. social security). Such pensions qualify as income from employment. Where the pension contributions were tax deductible, the subsequent pension payments are taxable—this also applies to foreign statutory pensions. As a general rule, all contributions to statutory domestic and foreign pension schemes are tax deductible.
Second Pillar: Occupational Pensions pursuant to section 25 EStG
Pension payments from a foreign (occupational) pension fund may also constitute income pursuant to section 25 EStG, even if the contributions were not based on a statutory obligation but were made by the employer or employee on the basis of employment contracts or on a voluntary basis. If the contributions paid in the past into the foreign pension fund were not tax deductible, only 25% of the pension benefits attributable to contributions borne by the employee (i.e. the future pension recipient) are subject to taxation in Austria upon payout.
Third Pillar: Private Pension Provision
Where contributions to private pension or retirement savings schemes were made on a voluntary basis, the subsequent pension payments qualify as so-called recurring income within the meaning of section 29 EStG. As these contributions were made from already taxed income, the pension payments are only taxable to the extent that they exceed the value of the originally paid-in contributions. In other words, only the profit component is subject to taxation.
Treaty Treatment of Foreign Pensions
In a second step, it must be examined whether a DTA limits Austria’s taxing rights. Many DTAs are based on the OECD Model Tax Convention, which primarily governs the taxation of pensions in Articles 18, 19 and 21.
- Article 18 – Pensions from Former Employment
Article 18 provides that pensions paid in respect of former employment are taxable in the state of residence. The decisive factor is the recipient’s tax residence at the time the pension income is received.
Unless otherwise stipulated in the applicable DTA, statutory social security pensions, occupational pensions, as well as widows’ and orphans’ pensions fall within the scope of Article 18.
Example:
Ms M relocates to Spain upon retirement in order to spend her later years there. From that point onward, she is considered tax resident in Spain. She spent her entire working life in Austria and fully taxed her income there. However, due to her residence in Spain, the Austrian social security pension paid to her is taxable in Spain.
Some DTAs (such as the DTA between Austria and Germany or the DTA between Austria and the United States) contain specific provisions regarding social security pensions, granting the taxing right to the paying state (i.e. the fund state).
Example:
Mr G, an Austrian national living abroad, returns to Austria after a long working life in the United States and is therefore again tax resident in Austria. He receives a U.S. Social Security pension. Pursuant to Article 18, this pension is taxable in the United States and exempt from taxation in Austria. Austria is, however, entitled to take the U.S. pension income into account for progression purposes, which may result in a higher tax rate being applied to any other income subject to progressive taxation in Austria (“exemption method with progression”).
- Article 19 – Pensions from Public Service
Pensions paid in respect of former public service or services rendered in the public interest (e.g. civil servant pensions) fall within the scope of Article 19. As a general rule, the right to tax lies with the paying state (i.e. the state from which the pension is paid). The taxing right shifts to the state of residence if the pensioner is a national of the state of residence or did not become resident there solely for the purpose of performing public service.
Example:
Ms K, a former employee of the Mexican Embassy in Vienna who originates from Mexico, must tax her pension in Mexico, as her former activity for the Mexican Embassy constitutes public service.
Variant of the example:
Ms K is an Austrian citizen and lives with her family in Vienna. During her professional career, she worked as a secretary for the Mexican Ambassador. Due to her Austrian citizenship, the pension from public service is taxable in the state of residence, Austria.
- Article 21 – Other Income
Private pension and life insurance annuities, as well as accident and disability pensions, qualify as “other income” pursuant to Article 21 of the OECD Model Tax Convention, unless the applicable DTA provides otherwise. Such income is taxable in the state of residence of the pension recipient.
Example:
Ms L receives an accident pension from the Austrian Workers’ Compensation Board (AUVA). She lives with her family in Croatia. In the absence of any specific provisions in the Austria–Croatia DTA, the right to tax lies with the state of residence, Croatia.
Conclusion
If Austrian tax law gives rise to a tax liability on pension income, it must be examined whether an applicable DTA allocates the taxing right to another country and exempts the income from Austrian taxation (possibly subject to progression). The treaty treatment of pensions can be summarized as follows:
- Article 18: Pensions from former employment → taxing right of the state of residence
- Article 19: Pensions from former public service → generally taxing right of the paying state
- Article 21: Accident, disability and life insurance pensions, in the absence of specific treaty provisions → taxing right of the state of residence
If you receive a foreign pension, please note that the applicable DTA may contain different rules. Even if the taxing right appears to lie abroad, a progression clause may still trigger a filing obligation in Austria.
Your ARTUS advisors are happy to support you with advice and assistance (info@artus.at).
