Founding a GmbH (Ltd.) in Austria
- Drawing up and signing of the shareholders’ agreement, in case of a one-man company a “declaration of establishment” (notarial deed)
- Appointment of managing director(s) (shareholders’ resolution with notarised signature(s))
- Cash contribution/non-cash capital contribution (minimum nominal capital € 35,000, at least € 17,500, to be paid in cash upon formation)
- Opening of the company’s bank account and payment of the cash contribution
- Payment of capital transfer tax: since 1.1.2016 no longer applicable
- Application according to the Business Startup Promotion Act (“Neugründungs-Förderungsgesetz”), if applicable
Entry in the Companies’ Register
Application to the Company Register Court
- Application for entry in the Companies Register, signed by all managing directors with signatures attested, including:
- Shareholders’ agreement, notarized copy
- Shareholders’ resolution on the appointment of the managing director(s), in attested form (unless the appointment was made in the shareholders’ agreement
- Specimen signature statement(s) by the managing director(s), in attested form
- Evidence of payment of the cash contribution (declaration by the managing directors pursuant to Section 10 GmbHG and bank certificate)
- Evidence on the payment of the capital transfer tax
Registration of the Trade Announcement of the Appointment of the Managing Director under the Trade Law
Notice to the District Administration
- Extract from the Companies’ Register
- Declaration(s) on the non-existence of reasons for exclusion from the trade or forbearance of the exclusion from the trade:
- Section 13 GewO (Industrial Code) Declaration for legal entities (also for a parent company holding an interest of more than 50%)
- Section 13 GewO (Industrial Code) Declaration for natural persons (managing directors under commercial law and persons with significant influence).
- Section 39 GewO Declaration for managing directors under trade law (adequate occupation in the enterprise, authority)
- Identity document of each managing director under commercial law and trade law, for inspection (residence registration certificate when the usual residence is outside Austria; police certificate from the home country)
- Accurate designation of the trade
- Exact location where the trade is exercised (place, street name, house number)
- Evidence of citizenship of the trade-law managing director
- Residence permit of the trade-law managing director (unless EEA or Swiss citizen), and evidence of the residence in Austria or in an EEA contracting state
- If required: evidence of employee status of the trade-law managing director (registration with the regional health insurance fund)
- If required: certificate of professional competence of the trade-law managing director
Notice of Business Operations to the Revenue Authorities and Registration of Employees
A private limited company is subject to corporate income tax and value added tax. After registration in the Companies Register, the company has to apply for a tax identification number.
Corporate tax payable by a private limited company: 25% on taxable profits, regardless of whether the profit is distributed to the shareholders
In the absence of profits, a minimum corporate income tax of € 437.50 per quarter has to be paid
Taxation at shareholders’ level: total taxation of profits distributed to shareholders up to 25%
- Social security: Registration of the employees with the competent social insurance institution is required prior to the commencement of their work.
- Start of Business Operations
INVEST IN AUSTRIA
Tip 1: Focus on strategy first
Some companies expand without focusing enough beforehand on their strategy and the choice of the right foreign business location. What should you consider in advance?
Whoever takes the step to locate in Austria needs more than just a good product and the wish for corporate growth. Above all, a business plan is required to ensure that the initiative is successful. In addition, a good business plan offers the basis for convincing potential investors and keeping track of how things develop.
“Whoever wants to be well prepared should be ready for future eventualities” is the advice given by Birgit Reiter-Braunwieser, Director Central and Eastern Europe and Russia at ABA – Invest in Austria. “The business plan should cover at least three potential scenarios. Small companies in particular frequently underestimate this.” It is also important to specify the nature and scope of the business activities planned for the new business location. What will be done at the headquarters in the company’s home country and what will be carried out by the new foreign subsidiary? Sales, production, marketing, R&D? In this regard, expanding to Austria should be considered in the same way as setting up a new business.
Tip 2: Get a comprehensive market overview
In addition to a business plan, a comprehensive market overview is necessary in order to successfully manage the expansion.
Prepare yourself before locating in Austria: In general the following applies: the more prepared a company is when it enters a new market, the quicker and more successfully it will gain a foothold there. A good market overview focusses on several crucial factors: market size and potential, market trends and above all, a detailed analysis of competitors.
Other important questions are: how high are the local labor costs, property prices and ongoing operating costs? Which industry clusters and educational facilities exist to facilitate the recruitment of skilled employees? What funding schemes and research promotion incentives are available? Moreover, small markets can be more lucrative than they initially seem, depending on their respective purchasing power. “We frequently see that companies primarily want to locate their operations in the capital city”, says Hans Nagl, ABA Director for the North America Region. “It often happens to be the right strategic decision, but not always. In addition, it is a good idea to select the right district within a city on the basis of market intelligence and ‘hard facts’, and not by hearsay. For example, if one wants to open up a popular restaurant, it would be better to find a site near an underground station than locate it on the outskirts where it is less accessible.”
Tip 3: Negotiate annual salaries
If you intend to hire employees for your Austrian subsidiary, it is recommended in any case to negotiate salaries with them on an annual basis.
Adapt your salary negotiations and job advertisements to Austrian conditions. If you intend to hire employees for your Austrian subsidiary, it is recommended in any case to negotiate salaries on an annual basis with them and not on a monthly basis. Due to valid labor laws, the annual gross salary in Austria is divided into fourteen parts which are taxed at different rates. Twelve installments are paid as monthly salary and taxed at the prevailing rate. The Christmas bonus (13th salary) and the Holiday bonus (14th salary) are so called “special payments” (Sonderzahlungen). These two parts of the annual salary enjoy a tax advantage. The respective collective bargaining agreement or individual employment contract regulates the entitlement, amount and date of these special payments.
“Employees in Austria are used to referring to the total annual salary in job announcements and negotiations. This is an important aspect to consider when successfully designing job advertisements”, says Friedrich Schmidl, Director for Northern Germany at ABA-Invest in Austria.
Tip 4: Statutory manager – a must in Austria
In contrast to Germany, for example, a company in Austria definitely requires a statutory manager.
Appointing a statutory manager is the pre-requisite for obtaining a business license in Austria. This regulation applies to sole proprietorships, registered business partnerships (general partnerships – OG and limited partnerships – KG) and legal persons, for example corporations (limited liability companies – GmbH, joint stock companies (AG), and cooperatives (Genossenschaft). What is important for countries outside of the EU is that the statutory manager not only has to have the requisite professional qualifications but also a valid residence permit in Austria.
“Entrepreneurs should get precise information as to what the statutory manager may decide and what responsibilities he has”, says Friedrich Schmidl, Director for Northern Germany at ABA-Invest in Austria. In any case he or she is responsible to the relevant trade authority for ensuring the company’s compliance with trade law regulations including ancillary laws (e.g. opening hours, price labeling and training). The statutory manager bears responsibility to the company for ensuring that his job is done professionally and properly. Tip from Friedrich Schmidl: “With the appropriate qualifications, the managing director under commercial law can also serve as the statutory manager.”
Tip 5: Consultants must know both sides
When establishing a company in Austria, let yourself be advised by experts who can demonstrate both their professional know-how about Austria and your country of origin.
When setting up a company in Austria, you should be exclusively advised by specialists whose professional know-how encompasses both Austria and your country of origin. This particularly applies to areas such as tax law, labor regulations, administrative law and landlord-tenant laws.
In any case, your tax consultant, lawyer and property consultant in Austria should also have a solid understanding of the legal situation in your home market and be familiar with the specialized terminology. In this way you can ensure that you will benefit from sound and objective consulting services with prospects for success. One more thing to remember is that specialized terminology, for example in Austrian administrative law, is frequently used only in Austria. For this reason, an experienced “translator” is necessary.
Tip 6: NoVA (standard fuel consumption tax) must be paid in Austria
The so-called Normverbrauchsabgabe – NoVA (standard fuel consumption tax) must be paid in Austria when first registering a car, regardless of whether this involves a private or company vehicle.
Different permit and tax regulations for registering cars apply in Austria than in other European countries. The Normverbrauchsabgabe – NoVA (standard fuel consumption tax) must be paid once when first registering a car in Austria. It is important to note that this tax also has to be paid when a car is relocated from abroad. The tax is levied depending on the level of CO₂ emissions, and calculated as a percentage of the net vehicle value.
When purchasing a new vehicle, the NoVA is paid to the seller (e.g. car dealership). In turn, the dealership is required to pay the tax to the respective tax office in the country.
Tip 7: Consider Austrian commercial law
Some individual trades in Austria are defined and regulated differently than in other countries.
In Austria a distinction is generally made between regulated and unregulated trades. Please be aware of the fact that some individual trades in Austria may be defined and regulated differently than in your own domestic market. For example, an unregulated trade in Germany may be regulated in Austria. Regulated trades are those which require a certificate of competence, for example carpenters, metal technology and engineering firms.
The Liste der reglementierten Gewerbe (List of Regulated Trades) for trades requiring a certificate of competence, provides a complete overview, and the Liste der freien Gewerbe (National List of Unregulated Trades) contains a comprehensive list of trades for which no certificate of competence is needed.
The regulations relating to every regulated trade stipulate the precise access requirements. Generally speaking, the pre-requisites needed to justify being granted a business license are Austrian citizenship or citizenship in an EEA/EU member state, legal capacity (minimum age of 18), the lack of any reasons for exclusion (e.g. fiscal law felonies, court conviction) as well as the designation of the business site and an operating license.
It is important to determine the following points in a timely manner before you enter the Austrian market: which trade will I be operating in with my company, and what steps must I take? “By precisely describing the planned business activities, we clarify for interested investors which business license they will need, what pre-requisites have to be fulfilled and what documents are required for submitting the application”, recommends Bernhard Bachleitner, ABA Director Southern Germany.
Please also note that in contrast to many countries, no trade tax is levied in Austria.
Tip 8: Consider Austrian Labor Laws – Severance pay
In your role as employer, you should be aware of several special features of labor laws in Austria. This includes the right to severance pay.
All employees whose employment contracts in Austria took effect after January 1, 2003 are entitled by law to severance pay (“Abfertigung”), even if they resign.
This right to severance pay should not be mistaken for the negotiated termination benefits (“Abfindung”) employees receive in other countries.
Starting in the second month of an employment relationship, employers in Austria are required to pay 1.53% of the employee’s gross salary including bonus payments each month into a severance payment fund (“Abfertigungskasse”). This fund manages a severance pay account for each employee.
If the employment relationship is terminated, the employee has several possibilities in addition to (after three years of employment) receiving the accrued severance pay contributions. For example, the employee can decide to reinvest in the same pension insurance fund, or transfer the sum to which he or she is entitled to the pension insurance fund of the new employer.
Tip 9: Consider Austrian Labor Laws – notice period
As an employer in Austria you should be aware of the key attributes of Austrian labor law. Austria boasts a considerable degree of flexibility when it comes to terminating employment relationships.
As an employer in Austria you can terminate employment without stipulating the reasons for the decision. The notice period for the employer generally depends on the length of the employment relationship, and is regulated in different ways for salaried employees and workers. The notice period for salaried employees can be anywhere from six weeks and five months. The notice periods for workers are regulated in the individual collective bargaining agreements according to the duration of the respective employment.
The notice period for an employee is one month if he or she gives notice, independent of the duration of employment. This can be extended to half a year upon agreement, however.
If applicable, the employer and prospective employee can agree on a trial month. During this time both contractual partners can terminate the employment relationship at any time without providing any reasons.
“Flexibility in terminating employment contracts reduces obstacles to hiring new employees. In Austria, this is accompanied by the relatively short length of time in which people remain unemployed in a European comparison”, explains Friedrich Schmidl, Director Northern Germany at ABA-Invest in Austria. Austria boasts the fifth lowest proportion of long-term unemployed people in the EU.
Tip 10: Engage in Networking
“Build your network, before you need it” – a guiding principle which is of particular importance for a small country like Austria.
In a smaller market such as Austria, personal relationships built up over a long period of time are of immense importance, and can have a significant influence on business success. “In Austria’s clearly overseeable market environment, the personal presence of business people counts a lot, considering that every single one is visible”, says Martina Hölbling, Director Western Europe at ABA-Invest in Austria.
The optimal approach would be to invest time at the Austrian business location before actually entering the market in order to establish the right relationships. “We recommend that foreign investors cultivate contacts with the Austrian Federal Economic Chamber and their trade association as well as with ABA and the regional investment promotion agencies, and make use of the outstanding industry clusters that exist in Austria.”
It is also advisable to establish links to networks one might not initially consider, such as the economic affairs and trade departments of the home country´s embassy in Austria, or the community of expatriates, which is organized as the Expat Center of the Vienna Business Agency.
According to Martina Hölbling, there is another important point international entrepreneurs should be aware of if they want to strike the right note. “Austrians send more messages between the lines, and generally communicate more indirectly than the Germans do, for example. This is something one has to know to in order to correctly understand others and avoid offending them.”
Tip 11: Business in Austria – Consider Austrian Mentality
If you are aware of the special features and peculiarities of the Austrian mentality and take them into account, you will have an initial advantage for your business in Austria. On the other hand, ignoring national characteristics can adversely impact business opportunities. What is typically Austrian when it comes to business life?
The Austrians are generally considered to be “gemütlicher” (easygoing, less hurried) than their German-speaking neighbors. This is a characteristic which also affects business life. Austrian business partners are less “deal focused” than their American or German counterparts, and more interested in building up a relationship based on trust. In a restaurant, business people one talk about business when having dessert. Before one engages in small talk about the weather, culture and sports. Too blunt criticism of Austria is not appreciated very much.
Austrians are rather discrete also when voicing criticism themselves. Negative developments are not often stated bluntly. Here one should learn to read between the lines and to recognize a “no” or “yes” even if it is not stated openly. An overly direct, outright expression of opinion can be perceived as being tactless. People in Austria attach great importance to being on time, and correctly greeting one another. Official tiles are taken very seriously, and are also used. All titles and positions usually appear on business cards.
Tip 12: Take Advantage of Top-Notch E-Goverment Services
If you intend to establish a branch office of your company in Austria, it is recommended to optimize administrative procedures by making use of Austria’s top-notch E-Government services. The initial point of contact and service center with respect to E-Government services is the multiple award-winning online portal HELP.gv.at. More than 90% of all companies in Austria already utilize E-Government services. The corporate service portal (USP) of the Austrian Federal Government at is especially tailored to the needs of companies in Austria. The platform offers access to company-relevant E-Government applications with only a single electronic identifier. For security reasons, only identified user accounts are permitted. The registration in the USP portal as well as its use are free of charge. Registration is particularly simple for sole proprietorships.
For company founders, the corporate service portal USP includes information on issues to be taken into consideration before companies are set up, the different types of companies, trades, operating facilities, a start-up guide for sole proprietorships and companies as well as a large variety of forms for downloading, for example for business registration and various administrative procedures with public authorities throughout Austria.
The most important E-Government portal of Austria’s financial authorities is FinanzOnline. All business people whose companies are based in Austria can register with FinanzOnline at every tax office. The entire process, from submitting the tax declaration via an online form to the actual tax assessment and notification, is carried out electronically. The entire tax account is available all the time for inquiries. Accordingly, FinanzOnline is a service at the highest level in the hierarchy of E-Government services.
Tip 13: Consider that construction laws are subject to regional legislation
If you plan to build, modify or adapt operating premises when expanding your business to Austria, keep in mind that the construction sector in Austria is subject to regional legislation. Therefore each one of the nine federal regions has its own building regulations. For this reason, it is strongly recommended to hire a regionally experienced architect or builder to draw up the construction permit plans and put his stamp on it. Building Meetings or “Bausprechtage” are held regularly at the regional district administrative office, the “Bezirkshauptmannschaft” (general administrative authority of a political district), which is responsible for the respective municipality. Prospective builders should take advantage of this service together with the construction experts they have hired as a means of simplifying the approval and licensing procedures and thus to have them processed more quickly.
The purchase of Austrian properties is generally subject to a real estate transfer tax amounting to 3.5% of the consideration involved (e.g. purchase price and debt assumption). In addition, a 1.1% land registration fee calculated on the same assessment base is levied to enter the new owners in the land register.
Tip 14: Ensure timely planning when hiring foreign employees
If you plan to hire foreign employees when expanding to Austria, inform yourself early enough about the specific pre-requisites for individual countries and consider the “Employment of Foreign Nationals Act” (Ausländerbeschäftigungsgesetzes – AuslBG).
The Employment of Foreign Nationals Act does not apply to employees from the European Union or EEA due to the fact that they enjoy freedom of movement and the right to work in Austria within the context of the fundamental European freedoms. However, there are still restrictions to Croatian nationals in line with the transitional provisions governing its EU membership.
Employees from countries outside of the EU and EEA basically require a residence permit and work permit. A businessperson in Austria is allowed to employ these persons when a work permit or posting permit is granted for the employee, or in cases where an EU posting confirmation or confirmation authorizing employment is issued, or when the foreign national is in possession of a valid work permit or exemption certificate for this employment. The responsible authority in Austria is the regional administrative office of the Public Employment Service Austria (Arbeitsmarktservice – AMS).
Tip 15: Take advantage of the Red-White-Red – Card for key employees
If you plan to hire employees from countries outside of the European Union or EEA (third-country nationals) within the context of your expansion to Austria, inform yourself early enough about the possibility of obtaining the Red-White-Red – Card.
On the basis of Red-White-Red – Card, Austria has established a new, flexible immigration system for employees from countries outside of the European Union or EEA (third-country nationals). This is particularly designed for highly qualified skilled personnel in understaffed professions, other key qualified salaried employees, self-employed key personnel and foreign graduates of universities in Austria. The underlying objective is to enable the controlled and long-term immigration of qualified employees who are third country nationals and their family members in accordance with specific personal and labor-market related criteria. The most important criteria are qualifications, professional experience, age, language skills, minimum salary and an adequate job availability.
Two varieties of the Red-White-Red – Card are issued. The Red-White-Red – Card entitles third-country nationals to fixed-term settlement and employment with a specified employer. The Red-White-Red – Card Plus entitles third-country nationals to fixed-term settlement and unlimited labor market access (self-employment and gainful employment) which is not limited to a specific employer.
“The Red-White-Red – Card scheme makes Austria even more attractive for talents from all over the world“, says ABA International Director Wilfried Gunka. Oriented to labor market needs, the card offers clear-cut advantages to companies in that highly qualified employees become quickly available.