- 25%Tax rate
- 4 weeksTime of establishment of the company
- 35 000€Minimum capital
Austria is both a thriving and sophisticated business center, and has long been a commercial gateway to Eastern Europe and the Balkans. It’s the fourth richest country in Europe. Moreover, Austria actively welcomes foreign investors by strong export growth and the ease with which one can create a company. Austria sports among the best economic indicators in the euro area and ranks fourth in the ranking of EU countries in terms of per capita income. Its industrial base, which includes an important sub-contracting sector is very diverse (metal industry, mechanical engineering, electrical and electronics industry, chemicals, food processing, high tech…). The Austrian economy depends heavily on foreign trade, which continues to rise as share of the GDP. The main partner of Austria is the European Union, which accounts for almost 2/3 of total trade flows, but the share of Central and Eastern European countries is on the rise.
Types of companies
There are several types of businesses for foreign investors:
- Limited liability company (GmbH)
- Public limited company (AG)
- Cooperative society
- Representative Office
- Holding company
Limited liability companies (GmbHs) are the most common corporate status of medium and large businesses.
The Austrian system offers beneficial succession and asset security mechanisms – combined with the absence of inheritance tax, this makes Austria one of the most interesting jurisdictions in terms of tax planning for high net individuals. The entity used in the process is the Austrian foundation.
- A private foundation requires at least EUR 70,000 in equity capital;
- The Foundation’s Board is obliged to keep the accounts of the entity and publish the financial statements;
- a private foundation may be established for purposes which are not in the public interest.
Company registration procedure
Registration of the company:
- Writing down the articles of association in the form of a notarial deed and simultaneous appointment of the management board and the supervisory board if provided for in the agreement or the act.
- It is also required to provide the court with specimens of notarized signatures of all members of the supervisory board and confirmation of payment of the capital.
- Notification of the company by the board of managing directors to the Business Register (Firmenbuch), assigned to a commercial court or district court.
- The company is registered at the appropriate court for its location (Handelsgericht) and is registered in the Commercial Register (Handelsregister).
- It is also necessary to register the company with the relevant tax office. After verification of the documents provided, the Registry Court decides on the registration.
- On the day of obtaining the entry, which must be made public, the company acquires legal personality.
A shareholder may be either a natural person or a legal person. Minimum one partner. Foreign shareholders are also allowed. Shareholders may issue binding instructions to the board of managing directors by simple voting. Anyone with a minimum of 10 % capital may request a special audit, request a shareholders’ meeting and add items to the agenda.
The supervisory board of directors is only required in special cases, such as registered companies with more than 70,000 Euro and more than 50 shareholders and companies with more than 300 employees. In other cases, the appointment of the supervisory board is optional. The board must have a minimum of 3 members and must meet at least 4 times a year.
A minimum of one board member is required. A member of the board may or may not be a shareholder. No origin or residence requirements. Management board members may not sit on the supervisory board. Management board members are entitled to represent the company externally.
It is advisable to have a stationary office.
Time to set up a company:
The time to set up the company is about 4 weeks.
Its minimum amount is € 35000, of which a minimum of 50% must be paid into the company account before registration. However, it is possible to take advantage of the founding privilege at which the capital is € 10000 (payment of € 5000 is sufficient). By choosing this option, the partners have to supplement the capital within 10 years to the required minimum (€ 17500).
Taxes and finances
Austria has been and still is attractive to investors due to its location and a friendly and precise tax system. The corporate tax is 25%. The standard VAT rate is 20%, reduced to 10%. In principle, there is no donation and inheritance tax. Foreign investors in Austria are offered a wide range of tax reliefs. Attractive investment deductions and research allowances are available. Potential losses can be recognised in subsequent tax years without any time limit.
Company tax residence
A company is resident if it is registered in Austria or is managed and controlled from Austria. Residents pay tax on income from both domestic and non-resident activities. Non-residents pay tax only on income earned in Austria. It is levied on the company’s revenues from its activities, passive income and capital gains.
25% If the company does not make any profits, it must pay a minimum tax of 1750 Euros. Normal business expenses can be deducted. Only a straight-line depreciation method is allowed, the costs are spread evenly over the period of using the asset (usually between 4 and 10 years). Accelerated depreciation is allowed for some subjects. The rate for buildings is 2.5%, for cars 12.5%. Losses can be carried forward indefinitely and can be deducted at any time in the future, however they can usually only be offset against 75% of the profits of a given year (for CIT payers). In some cases 100% compensation is allowed. Retrospective loss relief is not permitted. Capital gains are usually taxed in the same way as income (25% rate).
Austria is a party to a number of treaties that provide businesses with an exemption from double taxation.
Counteracting tax avoidance
Austria has implemented a transfer pricing system and their guidelines in a great manner follow those issued by the OECD. There is full competition rule and standard documentation. In case of failure to comply with the requirements concerning it, penalties of up to 50000 Euro are imposed. There are no specific rules on thin capitalization. According to case law, interest may in some cases be classified as dividends. Tax offices usually agree on a debt to equity ratio of 4:1 at the time of the audit. In the light of the general principle of counteraction, the tax office may make adjustments if there has been abuse of legal forms and methods in order to obtain tax benefits.
Tax year is a calendar year. A different model of the year may be adopted if the tax authorities give their consent, but it must always be 12 months. Declarations are submitted electronically by 30 June. The tax is paid in advance in quarterly installments. Companies in Austria can set up capital groups. In order to file a consolidated tax return, the parent company must have more than 50% of the shares in its subsidiary. The time limitation for tax liabilities is 5 years (from the end of the tax year). In some cases this period may be extended. The maximum limitation period is 10 years (15 in special situations).
- Dividends paid to another Austrian company are exempt from taxation. Dividends paid to non-residents are subject to 27.5% tax unless national or EU regulations reduce it.
- Interest – Payments to a silent non-resident partner are taxed at 27.5% (25% if the partner is a company).
- Royalties – 20% rate, unless national or EU regulations reduce it
- Consultancy services (technical, commercial) – 20%.
The standard rate is 20% (13% and 10% respectively). Entrepreneurs with a turnover in excess of €30000 per year are obliged to register for VAT. Non-residents supplying taxable products and services are also obliged to register. VAT returns are electronically stored monthly or quarterly. The annual tax return must be submitted by 30 June of the year following the tax year.
- Real estate tax – administrative districts levy a real estate tax of 0.2% or even 5 times the estimated value of the property each year.
- Real estate transfer tax – the tax is levied on transactions resulting in a change of ownership of the property. The rate is 3.5% (the basis is the value of the property), in some cases it may be lower.
- Stamp duty is imposed on many transactions (e.g. assignment of receivables, lease or rental agreements). The rate ranges from 0.8% to 2%.
- Customs and Excise – Customs duty is levied on products originating outside the EU. Excise is levied on tobacco, alcohol and fuel.
- 5% – tax on promotion
- 3% – payroll tax
- Other local taxes / fees – e.g. dog ownership tax – may be levied by the administrative district.