Service overview

Start-Up Subsidy Law (Neugründungsförderungsgesetz)

There are certain fees that are required in order to found a company. However, if a start-up meets a number of requirements according to the so-called Neugründungsförderungsgesetz (start-up subsidy law) certain fee exemption might be applicable.

A start-up might be exempt from the following fees:

• Stamp Duty (Stempelgebühren),
• Administrative Fee (Bundesverwaltungsabgaben),
• Property Acquisition Tax (Grunderwerbsteuer),
• Court Fee (Gerichtsgebühren),
• Corporate Tax (Gesellschaftssteuer),
• Payroll Costs (Lohnnebenkosten).

Industrial Law (Gewerberecht) 

In Austria there are trades for which you need some sort of certificate of qualification. Especially, if the nature of work requires skilled labour (e.g.: a mechanic or a carpenter) you will need a business licence. The qualification which is needed depends on the type of business.

General requirements for a business licence:

• Austrian or EU/EEA citizenship
• Natural person, 19 years of age or older
• No reasons for exclusion (e.g.: financial offence, court sentence)
• Business location and, if required, industrial equipment licence (Betriebsanlagengenehmigung)

If you establish a corporation or a partnership, there must be one managing director who holds the right to pursue this trade (i.e.: a carpentry must have at least one fully qualified carpenter as its managing director).

Sole proprietors need to have a licensed managing director if they do not fulfil the requirements themselves.

There are a lot of unrestricted trades for which you do not need any qualifications, for example any kind of trading. 

In Austria there are a number of legal forms according to which a company can be established:

• Sole Proprietor
• Corporations:
  • Limited Liability Company (GmbH)
  • Joint Stock Corporation (AG)
  • Societas Europaea(SE)
  • Public or Private Foundations(Öffentliche oder Private Stiftungen)
• Partnerships:
  • General Partnership (Offene Gesellschaft)
  • Limited Partnership (Kommanditgesellschaft)
  • Civil Law Partnership (Gesellschaft Bürgerlichen Rechts)

Sole Proprietors (Einzelunternehmer)

Sole proprietors are fully liable for all the debts of the company, including business assets as well as private property.

The law does not require a specific starting capital.

Corporate Forms

In Austria legal corporate forms are: Joint Stock Corporation (AG), Company with Limited Liability (GmbH) or a European Company (Societas Europaea – SE).

All corporate forms have some facts in common:

The company itself is a legal entity and has its own legal identity. The proprietors are not personally liable for the debts of the company. Their liability is limited to the amount of the contribution. The law requires some starting capital in which the extent depends on the chosen legal form. After the entry into the commercial register (called Firmenbuch) a corporation comes into legal existence.

Company with Limited Liability (GmbH - LLC)

In Austria the most popular corporation is the limited liability company, called GmbH. Proprietors can be individuals as well as legal entities. It can also be established by only one shareholder. Each Shareholder is obligated to bring capital into the company. “Gesellschaft mit beschränkter Haftung” or “GmbH” has to be added at the end of the name.

The capital contribution of a limited liability company is € 35,000. Half of this amount € 17,500.00 has to be incorporated in cash at the time of the formation. New founders can take advantage of a founding privilege. In that case the capital contribution for the first 10 years after incorporation is just €10,000.

Joint Stock Corporation (AG)

A Joint Stock Corporation called “Aktiengesellschaft (AG)”, can be established either by natural or legal establishers. “Aktiengesellschaft” or “AG” has to be added at the end of the name. This legal form is typical for larger business companies.

The legal entities of the company are the general meeting of shareholders (Hauptversammlung), the Supervisory Board (Aufsichtsrat) which consists of at least three people and the Board of Directors (Vorstand). The shareholders elect the Supervisory Board, and the Supervisory Board appoints the Board of Directors.

Founding a Joint Stock Corporation requires a capital stock of €70,000. In contrast to the Limited Liability Corporation, the stock capital of the AG is split into shares. Similarly to the Limited Liability Company, the Joint Stock Corporation has to be entered in the commercial register. At the time of registration, at least 25 percent of the capital has to be paid.

European Company (SE)

The European Company (Societas Europaea, SE) is based on the European law. The advantage of this corporation is that it is covered by uniform law across Europe. This can be accomplished through a reorganization of an existing company like for example the merger of the transformation of an AG. This is the reason why start-ups normally are not established as a SE. The capital stock must be at least €120,000.

Foundation (Stiftung)

There are two forms of foundations: public (e.g.: a charity) or private. Foundations have to be registered in the commercial register and operate as holding companies. They do not perform any trade or commercial activity themselves.

The minimum capital of a private foundation must be at least €70,000. In contrast to other forms of corporations, the private foundation does not have proprietors. The foundation itself is owner of the property.

Partnerships

Partnerships are: General Partnership (Offene Gesellschaft), Limited Partnership (Kommanditgesellschaft), Civil Law Partnership (Gesellschaft Bürgerlichen Rechts)

Commonality:

All partnerships have in common that there must be at least one partner with unlimited liability. There are no formal requirements prescribed to the article of partnership.

The corporate structure (i.e.: Offene Handelsgesellschaft OG, Kommanditgesellschaft KG) has to be added after the name of the company.

General Partnerships (Offene Handelsgesellschaft, OG)

The establishers of a General Partnership must be two or more natural or legal persons. They are personally liable for the company’s liabilities. That means that a proprietor is not only liable with his business assets but also with his private assets.

There is no minimum capital stock required. The proprietors do not have to bring in any cash. Each of them can assume the business management.

Partnerships are legalized with the entry in the commercial register.

Limited Partnerships (Kommanditgesellschaft, KG)

A “Limited Partnership” (Kommanditgesellschaft or KG) has a similar structure as the General Partnership (OG). It also has to be entered into the commercial register.

The main difference is that in addition to the partners with unlimited liability (Komplementäre), there are proprietors who are liable just with their liability deposits. The personally liable partner can also be a corporation, usually a GmbH, which is then called a “GmbH & Co KG”.

Civil Law Partnerships (Gesellschaft Bürgerlichen Rechts)

A civil law partnership does not have its own legal identity; therefore it cannot be entered into the commercial register. It is not a company on its own. All the partners must fulfil the necessary qualifications according to industrial law and have unlimited liability. This form is mostly used for short-term projects. 

The most important taxes are:

• Income Taxes: income tax (Einkommenssteuer) and corporate tax (Körperschaftssteuer), withholding tax on investment income (Kapitalertragssteuer)
• Value-Added Tax, also known as sales tax (Umsatzsteuer)
• Property Acquisition Taxes (Grunderwerbsteuer)

Taxation of Income

Income Tax (Einkommenssteuer)

Natural persons, whose domestic residence (Wohnsitz) or habitual residence (gewöhnlicher Aufenthalt) is in Austria, have to pay income tax. Basically, they are subject to income tax for their worldwide income. Non-resident taxpayers are only liable to income tax for their Austrian income. Generally earnings are subject to income tax if they fall into one of seven categories of income under fiscal law, which are as follows:

• Income from agriculture and forest economy
• Income from independent services
• Income from trade and business
• Income from employment
• Income from capital investments
• Income from rent and leasing
• Other earnings

First, the sum of these seven items of income must be calculated. After subtracting some special and extraordinary expenses, the basis for the income tax calculation arises. It is a progressive tax from 0 to 555 percent.

An annual amount of up to €11,000 of income does not require any payment of income taxes.

In Austria employees receive a monthly salary including a 13^th and 14^th payment. These earnings enjoy tax privileges.

Companies and Income Tax
Sole proprietors and the partners of partnerships are also subject to income tax.

Taxation of partnerships:
The partnership itself is not subject to pay the tax. The profit will be directly attributed to the partners and they are subject to the income tax.

Corporate Tax (Körperschaftssteuer)

The profits of corporations are subject to corporate tax. The corporate tax is 25 percent (non-progressive).

Corporate tax payers have to pay a minimum amount of taxes regardless of whether a profit was earned or not. Companies with Limited Liability (GmbH) have to pay € 1,750 a year. New founders pay € 500 a year for the first five years, € 1,000 a year for the following five years and € 1,750 a year thereafter.

Joint Stock Corporations pay a minimum amount of taxes of € 3,500.

Withholding Tax on Investment Income (Kapitalertragssteuer)

Withholding tax on investment income is kept from dividends and interest from bank deposits as well as from bonds. 27,5 percent are withheld at source. So individuals have no other taxes to pay.

Value-Added Tax or Sales Tax (Umsatzsteuer)

The rate is 20 percent. In some special cases the tax is reduced to 10 or 13 percent.

Property Acquisition Taxes (Grunderwerbssteuer)

The purchase of land is subject to the property acquisition tax of 3.5 percent of the purchase price.

The basis of the social security system in Austria is the obligatory insurance (Pflichtversicherung). It contains an accident insurance (Unfallversicherung), retirement pension insurance (Pensionsversicherung) and a health insurance (Krankenversicherung).

Both the employer and the employee have to contribute to social security. The employee’s insurance contribution is deducted by the employer from the total monthly earnings.

The maximum monthly assessment base (Höchstbeitragsgrundlage) is € 4,650 (2015).

Accounting principles under tax law expand on the general accounting obligations (Buchführungspflicht) according to the commercial law (Unternehmensgesetz). Thus all taxpayers subject to the obligation to keep accounts under commercial law are also obliged to keep accounts for tax purposes at the same time.

Corporations have to comply with bookkeeping in accordance with general accounting principles. This also applies to sole proprietors and partnerships that have an annual profit of more than €700,000.

All companies that are not subject to the general accounting obligations can either do a statement of revenues and expenditures (Einnahmen/Ausgaben-Rechnung) or a consolidation into a lump sum (Pauschalierung).

A few facts about business culture in Austria:

A typical working day in Austria runs from 8:00 am to 5:00 pm.

Important elements of Austrian business culture are hierarchy and status. Make sure that you have any titles (professional, academic) you hold on your business card. When meeting business partners you should always formally address them by their titles followed by their family names.

If you want to establish a strong business relationship, punctuality is very important. You should arrive to meetings well prepared.

During business small talk you should not mention the role of the Austrians in World War II and you should better not talk about money or religion. Make yourself familiar with facts that distinguish Austria from Germany because Austrians are proud of the unique features of their country. They think of themselves as a “skiing nation” and are very proud of their successful skiers.