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Doing Business in Austria

Doing Business in Austria

Britische Flagge

Business Start-Up

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. 

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Taxation

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 13th and 14th 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.

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Social Security System

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.

Contribution of the Employee Contribution of the Employer
Hourly Wage (Arbeiter) 18.12 percent 21.58 percent
Salaried (Angestellte) 18.12 percent 21.58 percent

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

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Accounting Principles / Reporting Requirements

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).

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Austrian Business Culture

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. 

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Stand: 11. Jänner 2016

Despite conscientious data compilation we are unable to guarantee full correctness of the information provided. Should you have any further questions, please contact us at any time.

 
Ditachmair & Partner Beratungsunternehmen
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