The Austrian government’s decision to reduce the corporate tax rate from 34% to 25% from 2005 led to a 30% increase in successfully concluded investment projects. Corporate tax has remained at 25% since 2005. The highest income tax rate is 55%.
Additional reforms contained a number of measures designed to reduce the tax paid by multinational firms using Austria as a base for regional headquarters. Austria offers significant financial concessions to corporates through holding companies, foundations and tax-privileged investment incentives.
More than 60% of Austria is mountainous. The country borders Germany, the Czech Republic, Slovakia, Hungary, Slovenia, Italy, Switzerland and Liechtenstein and has a population of around 8,760,000. German is the official language.
Austria’s economy has shown healthy growth since Q3 of 2015. GDP growth rates have been consistently over 2% since Q4 of 2016. Austria has a large service sector with more than 67% of the workforce employed in this field. Approximately 27% work in the industry sector and less than 5% in the small but highly developed agricultural sector.
Austria has traditionally had close links with Eastern Europe, and has attracted significant numbers of companies from the region since the collapse of the Soviet Union. Approximately 67% of the Austrian workforce are employed in the country’s service sector, although industry accounts for around 27% of the workforce, and agriculture the remainder. As might be expected from a country with such a developed service sector, the standard is high, and the workforce generally well educated. The Vienna Stock Exchange showed a return to form in 2012 after a poor performance in the two years preceding, with the leading index, the ARC of the Vienna Stock Exchange, rising by around 28%. The most commonly used business form is the Limited Liability Company, although a number of other structures exist, including the Sole Proprietorship, the Association, the Commercial Cooperative, and the European Joint Stock Company. Corporate income tax is imposed at a rate of 25% (and capital gains tax at the same rate). The standard rate of VAT is 20%. Austria has 83 tax treaties in place at the time of writing.
- Headline tax rates: CIT 25%, PIT 20.44%-50%, VAT 20%
- Treaty Jurisdictions: Albania, Algeria, Armenia, Australia, Azerbaijan, Bahrain, Barbados, Belarus, Belgium, Belize, Bosnia and Herzegovina, Brazil, Bulgaria, Canada, China, Croatia, Cuba, Cyprus, Czech Republic, Denmark, Egypt, Estonia, Finland, France, Georgia, Germany, Greece, Hong Kong, Hungary, India, Indonesia, Iran, Ireland, Israel, Italy, Japan, Kazakhstan, Korea, Republic of, Kuwait, Kyrgyzstan, Latvia, Liechtenstein, Lithuania, Luxembourg, Macedonia, Malaysia, Malta, Mexico, Moldova, Mongolia, Morocco, Nepal, Netherlands, New Zealand, Norway, Pakistan, Philippines, Poland, Portugal, Qatar, Romania, Russia, San Marino, Saudi Arabia, Serbia, Singapore, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Switzerland, Tajikistan, Thailand, Tunisia, Turkey, Turkmenistan, Ukraine, United Arab Emirates, United Kingdom, United States, Uzbekistan, Venezuela, Vietnam
- TIEA Jurisdictions: Andorra, Gibraltar, Guernsey, Jersey, Monaco, Saint Vincent and the Grenadines
LLC’s have the option of applying to be eligible for different tax regimes including:
- Tax exempt regime where no taxes are imposed. Qualifying companies are passive investments, financing, holding companies, and licensing intellectual property rights.
- Transparency regime where the ownership and shareholders’ identities are public so the LLC is taxed as a partnership with no corporate tax, but shareholders pay income taxes;
- Free Zone location regime with corporate tax rate of 2%.
- Imputation payment regime for hotels, shipping, aviation, insurance, financing, investments companies paying a corporate tax rate of 10%; and
- Normal tax regime with corporate tax rate of 25%.
An initial capital transfer tax of 1% of the share capital is paid when incorporating the GmbH.
The GmbH is exempt from the dividends tax when receiving dividends from a foreign subsidiary. This benefit derives from the European Union (EU) Parent-Subsidiary Directive where a holding company owning a minimum of 25% of the shares in an EU subsidiary can receive dividends paid by a subsidiary without being subject to the withholding tax.
Numerous double tax treaties exist with numerous countries to reduce the tax burden of the shareholders.
Note: U.S. taxpayers and all others subject to taxation of world income must report all income to their tax authorities.
- Suitable for: Wealth Management, Treasury Management, Banking, Fund Management, Shipping, Yachting, E-commerce, Property Ownership
- Company Types: Limited companies, sole proprietorships, branches, general partnerships, limited partnerships and civil law partnerships
- Formation Cost: 5000 – 11000 USD
- Formation Time: 11 – 18 days
- Maintenance cost: 1000 – 4000 USD
It is allowed to set up a business in Austria, provided they it is necessary to be citizens of the EU, the EEA, Switzerland, or to hold an Austrian residence permit. In any case, it is mandatory to apply for a trade license. This can be accomplished at the local authority (municipal or district council, Magistrat or Bezirkshauptmannschaft).
Each of these business forms has distinct advantages and disadvantages, as well as differing scope of business activities, registration requirements and minimum capital requirements. In most cases it will depend on the degree of commitment a company has to Austria and the planned business activity.
Limited Liability Company (GmbH)
The GmbH is a legal entity and has its own legal personality. The shareholders are not personally responsible for the liabilities connected to the company.
Exceptions, however, exist considering the payment of the shareholders’ own capital contribution and a joint liability for the contribution of the other shareholders, the refund of the contribution and in case of gross undercapitalisation in case of insolvency.
Obtain the confirmation from the Economic Chamber that the start-up company is really a new enterprise
The NeuFö2 form, which is available electronically on the homepage of the Austrian Ministry of Finance, must be filled in and be confirmed by the Economic Chamber. It applies to the company formation and to the transfer of businesses. If certain requirements are met, the following fees and taxes will be waived:
- Stamp duties and certain administrative fees.
- Real estate transfer tax.
- Charges for registration in the commercial register and the cadastral register.
- Capital transaction tax (1% of nominal capital).
- For 1 year, certain ancillary wage costs borne by the employer in addition to social security contributions.
Depending on the requested exemptions, companies must obtain confirmation by certain public bodies (Chamber of Commerce or Social Security Organization) that the application form has been completed, after receiving counseling by that body concerning the scope and applicability of the law.
Notarize the statutes/articles of association or the declaration of establishment
The articles of association, executed before a notary by notary deed, must include the following:
- Scope of activities
- Capital and initial contribution by each shareholder.
Notarization time can vary from 2 to 5 days, but usually takes 2 days. Cost will depend on the authorized share capital and are subject to negotiation with the notary public.
Deposit the minimum capital requirement in the bank.
The confirmation fee depends on the bank, ranging from EUR 0 to about EUR 30.
Register the company at the local court (Handelsgericht).
The application for registering an Austrian limited liability company requires the following documents:
- declaration of establishment notarised;
- articles of association;
- a declaration (accompanied by a banker’s confirmation) that the demanded amount of primary deposit, to be paid in cash, has been paid;
- evidence that the free disposability of the paid primary deposit by managing directors is not restricted by counterclaims;
- specimen signatures of the managing directors;
- confirmation by the tax authorities that the capital transaction tax on the formation has been paid or is guaranteed.
If the court has doubts about the company name, it may request an opinion from the Chamber of Commerce. A GmbH comes into legal existence upon registration in the commercial registry.
The fixed application fee is EUR 32; individual service fees, depending on the information to be registered, apply.
Tax Office registration (obtain a VAT number)
The commercial register automatically notifies tax authorities of the registration of new companies. Consequently, tax authorities respond by requesting that the company file for tax registration, which is not online and several forms must be printed, filled out, and sent by postal mail together with the articles of association, the opening balance sheet, an excerpt of the company register, an identification card of a managing director, and a specimen signature sheet of the representatives.
The VAT number is usually provided simultaneously with the tax identification number. The statutory deadline to obtain a tax number is 1 month. Frequently tax authorities extend an introductory visit to those companies intending to engage in business activities that are eligible for the filing of VAT returns.
Register trade (Gewerbeanmeldung) with the trade authority (Bezirksverwaltungsbehörde)
If permission is mandatory, completion of procedures takes longer, depending on the requirements and authorities involved (e. g., the production of hazardous goods requires proof of special qualifications of management and approval and control of the production site). Companies can register in person, by postal mail, or online.
Register employees for social security
Upon registering in the commercial register, companies with employees are required to apply for an employer’s account number (Dienstgeberkontonummer) electronically using ELDA, the data transmission interface of the statutory health insurance office. In practice, the employer applies for a new account number via ELDA before a new employee is registered with the statutory health insurance office.
Health insurance is obligatory: every new employee must be electronically registered with the statutory health insurance office prior to and no later than the day of employment. Unless the company does not own a computer, the employee must be registered via ELDA. Otherwise, this may be done by mail or by fax. Moreover, the employer must automatically extend obligatory health insurance upon entry. On being registered with the statutory health insurance office, the employee is automatically registered for accident insurance and retirement insurance as provided by law. No further registration is needed.
Register with the municipality
Municipalities levy community taxes on all businesses. In addition, particular activities (e.g., organizing a public event) may trigger municipal stamp duties or other minor duties and taxes.
Costs: € 450 although foundation costs can amount to 10 – 15 % of the share capital.
Public Corporate (Aktiengesellschafta – AG)
Like the GmbH, the AG is a legal entity limiting the liability of its shareholders. Unlike the GmbH, the shares of an AG can be transferred without a notarial deed. The transfer of shares is not required to be noted in the register of commerce.
The minimum capital stock is EUR 70,000, at least EUR 35,000 have to be contributed. The structure consists of a supervisory board (Aufsichtsrat) and the executive board (Vorstand).
Pre-clarification to prepare the information and documents required
This pre-clarification process requires to check the availability of the name envisaged for the AG.
Preparation of commercial register application and incorporation documents
It is possible to prepare the necessary documents yourself or have a fiduciary, lawyer or a bank do it for you. The costs amount to between CHF 2‘000 and CHF 5‘000.
In the first case, it is advisable to submit these for pre-inspection to the Commercial Registry Office (HRA). This usually costs between CHF 200 and CHF 300 and takes about seven work days.
If the share capital is paid in cash, the amount required needs to be deposited in an escrow account at a bank and confirmation provided that the cash deposit has been made.
If the capital of the AG is paid up in the form of contributions in kind a written contribution-in-kind agreement must be drawn up between the transferor (contributor in kind) and the AG in formation.
Notarial certification of the incorporation
It is advisable to get in touch with the notary public as soon as possible and supply the information and documents required beforehand so that the notary can prepare the deed of incorporation.
All founders, or their legal representatives, are required to be present at the incorporators‘ meeting before the notary public. Legal representatives must also produce appropriate identification, as well as an officially certified power of proxy. The notary public notarizes the deed of incorporation and certifies all signatures.
Registration in the commercial register (HR)
At this stage, it is required to personally submit or send the notarized deed of incorporation, together with the signed commercial register application and the other required documents, to the Commercial Registry Office (HRA).
Provided the documents are complete and in keeping with the law, the business entity will be registered in the commercial register within seven work days (the costs are usually between CHF 800 and CHF 1’000).
Value Added Tax (VAT) registration
Costs: Approx € 1000
There are four forms of partnerships available in Austria, namely:
Offene Gesellschaft (OG) (General Partnership)
General partnerships are managed under an own name in case of which the partners are jointly and severally liable. The partners are liable, with their entire assets, towards the creditors of the company without restriction. OGs have legal capacity and their purpose can include, among others, freelance and agricultural and forestry activities.
The company name has to be suitable for identifying the partnership and must have a distinctive character and must not contain any information suitable for being misleading regarding business conditions which are material for the relevant public. What is mandatory is the term “Offene Gesellschaft” or a generally understandable abbreviation.
Offene Gesellschaften come into existence upon entry in the company register.
Kommanditgesellschaft (KG) (Limited commercial partnership)
A Kommanditgesellschaft is a company managed under an own name where the liability towards the creditors of the company is limited to a certain amount for a certain part of the partners, but where the liability is unlimited for the other part. The name of a KG has to meet the same prerequisites as the name of an OG with the requirement that the legal form affix “Kommanditgesellschaft” or a generally understandable abbreviation of this term, especially “KG”, is used. Management and representation of the company are incumbent on the general partners.
Stille Gesellschaft (Silent Partnership)
A silent partner participates with a capital contribution in a company operated by another person. The silent partnership neither has a legal personality nor a company name and does not appear as a company towards third parties. The management and the representation are solely incumbent on the owner of the company. The silent partner has a share in the profit and loss of the company. The loss sharing may be excluded.
GmbHs and AGs with the registered office abroad may establish branches in Austria.
Few rules apply to the establishment of a foreign branch and in particular:
- The foreign company is entered in the company register, namely in the company register competent for the registered office of the branch.
- Companies establish under a jurisdiction which is not the jurisdiction of a member state of the European Union or a contracting state of the Treaty on the Creation of the European Economic Area (EEA) have to appoint at least one person for the entire business operation of the branch who is allowed to represent the company permanently in and out of court and has his usual place of abode in Austria.
Companies established under the jurisdiction of a Member State of the European Union or the European Economic Area may appoint such permanent representative. A publicly certified copy of the articles of association/memorandum of association in the register´s version and, if the memorandum of association is not drafted in German language, a certified translation into German are to be attached to the application. The duty of separate accounting applies to the branch.