“Entry fee” for participation in virtual participation programme

In the context of virtual participation programmes, it could be the case that selected employees are subsequently offered the programme and, depending on the time of joining the programme, the payment of an “entry fee” by the employee is required in order to receive the virtual participation (e.g. employees participating from the beginning are granted the virtual participation free of charge, while employees joining later are required to pay a certain fee).

Basically there is a period of more than one year between the granting of a virtual participation and the subsequent liquidity event (e.g. qualified exit). From a temporal point of view, the allocation of the virtual participation together with the payment of the entry fee and the remuneration from the participation programme therefore fall into different periods. In this context, the question arises how to deal with the entry fee at employee level from a tax perspective.


Expenses in connection with the employment relationship

Expenses incurred within the scope of non-self-employed income are referred to as income-related expenses. The deduction of income-related expenses is intended to implement the net principle, as only the balance between income and income-related expenses is taken as a basis for taxation. Therefore, income-related expenses are, in general terms, those expenses and expenditures that incurred in order to achieve non-business income. These are therefore not expenses and expenditures to secure the income already received, but to acquire, secure or maintain the income to be received in the future.

The term income-related expenses is therefore defined causally. In the view of the Austrian tax authorities, expenses or expenditures are work-related if

  • they are objectively connected with a non-business activity,
  • they are subjectively made to acquire, secure or maintain income or affect the taxpayer involuntarily, and
  • they do not fall under a deduction prohibition according to Sec 20 Austrian Income Tax Act.


For the determination of non-business income, the inflow and outflow principle applies, so that income is received within the calendar year in which it accrued to the taxpayer and expenses are to be deducted for the calendar year in which they were incurred. Expenses incurred before the generation of taxable income – i.e. in the preparatory phase – can also be income-related expenses (so-called pre-income costs or anticipated income-related expenses), provided that at the time of the expenditure they are directed towards the preparation and commencement of the activity and are seriously aimed at this.



Against this background, it can be assumed that an entry fee paid for participating in a virtual participation programme falls under the concept of income-related expenses and can be recognised at the level of the employee in the income tax return. The entry fee is objectively related to the non-self-employed activity, serves to secure future income and does not fall under the prohibition of deduction pursuant to Sec 20 Austrian Income Tax Act.

Alternatively, it could also be considered, that depending on when the virtual participation is granted to the employees, a certain staggered fixed amount would be deducted upon exit.




Christoph Puchner, Managing Partner and Tax Advisor &
David Gloser, Managing Partner, Tax Advisor and Chartered Accountant from ECOVIS Austria, one of the leading tax consultants in Austria in the startup sector.