Doing Business in Austria

Transcription

1 Doing Business in Austria

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3 Contents 1 Fact Sheet 2 2 Business Entities and Accounting Companies Partnerships Sole Proprietorship Branches Private Foundation Audit and Accounting Requirements Filing Requirements 7 3 Finance and Investment Exchange Control Banking and Sources of Finance Investment Incentives and Restrictions Research and Development (R&D) 9 4 Employment Regulations General Employment Matters Visas 11 5 Taxation Corporate Income Taxes Personal Taxes Employment Related Costs and Taxes Withholding Taxes Value Added Tax (VAT) Other Taxes Tax Incentives for Businesses 16

4 2 1 Fact Sheet Geography Location: Area: Land boundaries: Coastline: Climate: Terrain: Central Europe 83,858km² Time zone: GMT +1 Czech Republic, Germany, Hungary, Italy, Liechtenstein, Slovakia, Slovenia and Switzerland None (landlocked) Temperate climate in the east; alpine climate in central and western regions In the west and south, mostly mountains (Alps); along the eastern and northern borders, mostly flat or gently sloping People Population: 8.42m (2011) Ethnic groups: Religions: Language: Austrian, former Yugoslav, Turk and German Roman Catholic and Protestant German Government Country name: Government type Capital: Administrative divisions: Republic of Austria Federal republic Vienna Nine states: Burgenland, Carinthia, Lower Austria, Upper Austria, Salzburg, Styria, Tyrol, Vorarlberg and Vienna

5 Doing Business in Austria 3 Political situation Austria is a federal democratic republic. The bicameral Federal Assembly (Bundesversammlung) comprises the Federal Council (Bundesrat) and the National Council (Nationalrat). The Federal Council has 61 seats, with members serving fourto six-year terms; members are appointed by state parliaments. The National Council has 183 seats, held by members elected by popular vote for a five-year term. The President is the Head of State, who is elected by popular vote for a sixyear period; the Chancellor is the Head of Government, as selected by the coalition parties forming the majority government, and formally appointed by the President. Economy GDP per capita: US$47,226 (2012) GDP - real growth rate: 0.8% (2012) Unemployment: 4.7% (2012) Currency (code): Euro ( )

6 4 2 Business Entities and Accounting 2.1 Companies Private limited company (GmbH) This is the most common business form in Austria. Shareholders liability is restricted to the unpaid portion of the nominal share value. A GmbH must be formed by at least one person, who may be an individual or a legal entity, resident or non-resident, Austrian or foreign citizen, with a share capital of at least 10,000; the capital contributions of each shareholder must be at least 70. A GmbH comes into legal existence when it is entered into the Commercial Register (Firmenbuch). At least one managing director must be appointed to the board of directors. A supervisory board must also be appointed when certain criteria are met, including: Registered share capital exceeding 70,000 and the number of shareholders exceeding 50 The average number of employees exceeding 300. The distinction between small, medium and large companies is important for the application of accounting and auditing rules (see 2.6 and 2.7). A small company satisfies two of the following three criteria: Balance sheet total of 4.84m or less Revenues of 9.68m or less An annual average of no more than 50 employees. A medium company satisfies two of the following three criteria: Balance sheet total of 19.25m or less Revenues of 38.5m or less An annual average of no more than 250 employees. Large companies exceed at least two of the three last criteria.

7 Doing Business in Austria Public limited company (AG) An AG can have a large number of shareholders. The minimum share capital is 70,000. Shares are easily transferable, the company has its own legal identity, and there is separation between management and ownership. Shareholders can be individuals (including directors) or corporations. Executive decisions are taken by the board of directors, the supervisory board and at shareholders meetings. An auditor must be appointed to inspect the accounts and issue an auditor s report (see also 2.6). 2.2 Partnerships General partnership A general partnership consists of at least two unlimited partners and can be set up for any permitted purpose. Each partner is jointly and severally liable for the partnership s obligations; their liability is unrestricted and unlimited, extending to their entire private assets Limited partnership A limited partnership consists of at least one general partner and at least one limited partner. A general partner has unlimited liability for the partnership s debts. A limited partner is liable only up to their risk capital, which is registered with the Registrar of Companies. A limited partner participates in profits and losses, but is excluded from the management of the partnership. A form of business organisation that is very common in Austria is a combination of a limited partnership and a private limited company the GmbH & Co KG. The limited partnership owns the company assets, and a private limited company participates as the company s general partner. This means that the liability of the general partner is limited to the assets of the GmbH Civil law partnership A civil law partnership is not a legal entity and cannot sue or be sued. It is often used for single joint ventures and terminates on completion of the project.

8 Silent partnership In a silent partnership, a person participates in the business of another person by means of investment. A silent partnership is not a legal entity. There are two types of silent partner: A typical silent partner participates only in the profit and loss of the business, although losses may be excluded An atypical silent partner is entitled to a share in the assets of the commercial business and its goodwill. 2.3 Sole Proprietorship A sole proprietorship, or sole trader, is the simplest form of business undertaking and offers flexibility, little administration and few legal formalities. A sole trader is fully liable for business debts and it may be difficult to raise additional capital. If the sole trader wants to perform a commercial activity, they must apply for a trade licence. 2.4 Branches Foreign corporations can establish a branch office in Austria. The branch must be registered either as a public or a private company, depending on which type of company the foreign corporation most closely resembles. Ministerial consent is required to register a branch and therefore the process can take longer than establishing an Austrian company. 2.5 Private Foundation A private foundation (Privatstiftung) is a legal entity set up by a declaration of establishment, which must be presented to the Commercial Register. The grantor (Stifter) dedicates assets to a defined purpose that is documented by the declaration of establishment. A supplementary declaration of establishment is used to name the beneficiaries and the amount of assets of a private foundation. The minimum capital paid in for a private foundation is 70,000. A private foundation is managed by a board that must have at least three members. Annual financial statements must be audited by a certified public accountant or auditor.

9 Doing Business in Austria Audit and Accounting Requirements Corporations are required to use double-entry bookkeeping and to prepare financial statements according to Austrian accounting standards. Corporations must prepare a balance sheet, a profit and loss account and notes to the financial statements. The financial statements must be audited by a certified auditor, except where the corporation is a small GmbH (see 2.1). Additionally, corporations other than small GmbHs must prepare an annual management report. Groups of companies must prepare consolidated financial statements according to Austrian or International Financial Reporting Standards (IFRS), under the auspices of the EU International Accounting Standards (IAS) Regulation. 2.7 Filing Requirements In the case of large companies, the management of the company must submit audited financial statements, along with other necessary accompanying documents, to the supervisory board within five months of the company s fiscal year end. Once approved by the supervisory board, the financial statements must be approved at the annual shareholders meeting and then filed at the Registrar of Companies; this must occur within nine months of the company s fiscal year end. Smaller companies need only file accounts at the Registrar of Companies, and publish the filing date.

10 8 3 Finance and Investment 3.1 Exchange Control There are no exchange controls on foreign currency or the import or export of capital. Residents and non-residents can hold bank accounts in any currency. 3.2 Banking and Sources of Finance The Austrian banking system is under the broad direction of the Austrian Central Bank (Nationalbank) in co-ordination with the Austrian Financial Market Authority (Finanzmarktaufsicht). Austrian banks offer a full range of services and are organised on a local level. Large credit institutions may offer additional services, such as leasing, factoring, investment funds, real estate property funds, insurance or travel facilities, and credit cards. 3.3 Investment Incentives and Restrictions The investment climate in Austria is generally favourable, with only a few restrictions on foreign investment, such as specific requirements for land acquisition by foreign investors and restrictions on imports and exports outside the EU. Available incentives depend on the type of project, geographic location, technology, or the number of jobs created. Incentives are mainly focused on small and medium sized enterprises. Incentives may be granted at national, federal, provincial, or municipal government level. National government assistance typically takes the form of tax exemptions or allowances (see 5.7). Federal, provincial and municipal initiatives may involve cash awards or subsidies.

11 Doing Business in Austria Research and Development (R&D) A premium (grant) of 10% of expenditure on eligible in-house and outsourced R&D is available. This is in addition to the 100% deductibility for R&D costs. The premium is not dependent on the company s profitability and may be paid in cash where necessary. The premium due is normally deducted from any tax liability, with any shortfall being payable to the taxpayer. Eligible R&D is defined as any inventive activity: Conducted in a systematic and scientific manner For the purpose of increasing knowledge, technological advancement or the development of new applications of scientific knowledge, and Carried out within the EU/EEA. R&D related costs may include: Wage costs Capital expenditure (including buildings), and Finance and indirect costs. There is no limit on in-house R&D costs eligible for the payment. Eligible outsourced R&D costs are limited to 1m (the maximum 10% payment is therefore 100,000). Claims require prior authorisation as to eligibility and may not be claimed before the end of the year in which the expenditure is incurred or after the tax assessment date.

12 10 4 Employment Regulations For employment tax considerations, see General Employment Matters Employment law Austrian labour law derives not only from statutes, but also from collective bargaining agreements (Kollektivverträge) and company agreements (Betriebsvereinbarungen) which contain minimum regulations. In general, employment contracts concluded on an individual basis cannot disadvantage employees. Special protection provisions are in place for certain employees, including adolescents, apprentices, pregnant women, nursing mothers, mothers and fathers on parental leave, and employee representatives. The employment relationship, constituting a so-called recurring obligation, can be terminated only in accordance with certain provisions and certain reasons. Both employer and employee are entitled to terminate the employment. Save for certain exceptions (eg under the Maternity Protection Act) the consent of third parties is not required for a termination Employment contract Employment contracts do not have to be in writing, but as soon as a person starts to work for an employer for a regular wage or salary, a contract of employment is automatically deemed to be in place. All employees must receive, within two months of commencing employment, written terms of employment, which would include the following information: Place of work Job title or nature of work The employment start date The expected duration of the contract if it is temporary Details of salary or wage Hours of work Details of paid leave Details of any applicable collective agreement or operating agreement Notice period to quit by employer or employee.

13 Doing Business in Austria 11 The contract can include a probationary period, and details of whether this can be extended. A national minimum hourly rate of pay applies to most working adults. Generally, the working week is normally 40 hours, and overtime is rewarded with an additional 50% of normal pay. Employees are entitled to annual holiday of five working weeks, increasing to six weeks after 25 years service; annual holiday does not include public holidays (although certain exceptions apply) Work councils A work council (Betriebsrat) represents employees interests. It has significant statutory powers and the right to negotiate with the employer and to obtain information, including financial statements. 4.2 Visas European Economic Area (EEA) and EU nationals do not generally require a permit to work in Austria, although there may be transitional rules in respect of new EU member states. Nationals of other countries are subject to the Employment of Foreign Nationals Act and may only commence employment in Austria after obtaining the necessary permits. The employment of a non-eea national for a period exceeding six months requires an employment permit (Beschäftigungsbewilligung) which must be obtained prior to commencement of employment. An employment permit is granted only if certain legal requirements are met. The permit refers to a particular employment and expires automatically upon termination of the employment, regardless of the length of the original employment contract. It is issued for no more than one year and must be renewed regularly. A work permit (Arbeitserlaubnis) is issued for a term not exceeding two years if the foreigner concerned has been lawfully employed in Austria for a total of 52 weeks during the previous 14 months. A certificate of exemption (Befreiungsschein) may be issued to employees who have: As a general rule, spent at least five of the last eight years in employment in Austria, or Been married to an Austrian citizen for the last five years and have their residence in Austria.

14 12 5 Taxation 5.1 Corporate Income Taxes Resident companies, defined as companies which have their legal seat or their place of strategic management in Austria, are liable to corporate income tax on their worldwide income. Non-resident companies are taxed on their Austrian source income, subject to the terms of any relevant double tax treaty. The rate of corporate income tax is 25%. There is an annual minimum tax for stock companies (AGs) of 3,500 and for limited liability companies (GmbHs) of 500. For other newly incorporated companies, the annual minimum tax is 1,092 applicable to the first four quarters of incorporation (ie equivalent to the first full year of trade). Capital gains are generally taxed at the same rate as other profits. Under the international participation exemption, gains from the disposal of a participation in a non-resident company are tax exempt if certain conditions are met. Losses may be carried forward indefinitely for relief against future profits. The offset of loss carryforwards is generally limited to 75% of taxable income each year. There is no provision for losses to be relieved against the profits of earlier years. Groups of companies, defined as a parent company and subsidiaries in which the parent owns more than 50% of the share capital and voting rights, may elect for consolidated taxation in which all of the profits and losses of the group are pooled for tax purposes. The losses of non-resident members of the group may be included, but only proportionately to the percentage of share capital held. Such losses must be recaptured in certain circumstances, such as when the losses can be offset in the foreign jurisdiction in later years, or when the nonresident member leaves the group. The tax year is generally the calendar year. Another period may be used only with the tax authorities consent, although profits of a deviating accounting year are allocated completely to the calendar year in which the accounting period ends. Tax returns must be filed electronically by 30 June following the tax year (regardless of when a deviating accounting year ends) or, if electronic filing is not technically practical, by 30 April. Filing may be extended if prepared by tax professionals. Companies must make estimated corporate income tax payments in equal instalments in February, May, August and November each year, based on the liability for the previous year plus an adjustment. Any balance of tax due, or any repayment due, is dealt with by way of assessment.

15 Doing Business in Austria Personal Taxes Resident individuals are liable to income tax on their worldwide income. Non-resident individuals are taxed on their Austrian source income, subject to the terms of any relevant double tax treaty. Income tax is charged at graduated rates, and is calculated using formulae. The marginal tax rates are as follows: Taxable Income Marginal Tax Rate up to 11,000 0% 11,001 25, % 25,001 60, % over 60, % In general, gains derived from capital assets sold within one year of acquisition are subject to 25% capital gains tax (usually withheld at source). Gains on assets sold more than one year after acquisition may be subject to taxation, depending on the type of asset. A taxpayer may opt for all gains to be taxed at their marginal income tax rate, but for most this would not be beneficial. Permission to be taxed at the marginal rate by the tax authority will only be given if all capital gains normally subject to the 25% rate are included in the application. There are no inheritance or gift taxes, but lifetime gifts must be reported. There is no wealth tax. 5.3 Employment Related Costs and Taxes Fringe benefits Virtually all cash allowances paid to employees and all non-cash benefits provided by employers (with certain exceptions) are treated as part of the employees salary and are subject to tax deducted at source. Employees are entitled to claim a deduction for expenditure incurred in producing their salary income, although certain costs, including some travel and entertainment, are generally non-deductible. Expenses incurred by employees and reimbursed by their employer are not subject to tax in the employees hands.

16 Social security costs Employers are required to make social security contributions on their employees pay, up to maximum pay of 4,440 per month, at rates from 21.7% to 21.83%, depending on the nature of the employment. For employment contracts concluded from 2003 onwards, there is an additional 1.53% contribution to the employees income provision fund, which compensates employees when employment is terminated (except in the case of summary dismissal). Employees must contribute from 18.07% to 18.2% of the first 4,440 of their pay per month. An additional contribution of 3.4% is payable for family members who are insured with the employee Relocation benefits Relocation costs are tax deductible to an employer without giving rise to any income tax liability on the employee. Typically such costs are incurred by employees and then reimbursed. For employees, relocation costs are tax deductible up to certain limits Payroll tax A payroll tax of 3% of employee remuneration is payable to local municipalities, and 4.5% of remuneration to the tax authorities. 5.4 Withholding Taxes Domestic payments The general withholding tax rate on interest, dividend and royalty payments is 25%. There is no withholding tax on royalty payments made to other resident companies.

17 Doing Business in Austria Payments abroad The general withholding tax rates are as follows: Tax Rate Interest 0% Dividends 25% Royalties 20% Under the EU Parent-Subsidiary Directive, dividends paid to a company in the EU are exempt from withholding tax if that company has owned directly 10% or more of the shares of the paying company for a minimum period of one year. If the shares have been held for less than this period, withholding tax must be deducted, but it may be reclaimed if the shares are still owned at the expiry of the minimum period. Under the EU Interest and Royalties Directive, interest and royalties paid to associated companies in the EU are exempt from withholding and other taxes. Companies are associated if one has owned 25% or more of the share capital of the other for a minimum period of one year. If the shares have been held for less than this period, withholding tax, if due, must be deducted, but it may be reclaimed if the shares are still owned at the expiry of the minimum period. Fees for technical and commercial consulting services and some other services are subject to 20% withholding tax. For payments made to recipients in countries with which Austria has a double tax treaty, the rates of withholding tax may be reduced under the terms of the treaty. 5.5 Value Added Tax (VAT) VAT is levied on the selling price of goods and services and on the value of goods imported into Austria. The standard rate of VAT is 20%. A reduced rate of 10% applies to basic foodstuffs, newspapers and books, and passenger transport. Exports are zerorated. Some supplies are specifically exempt (eg sales of real estate). Businesses, other than those making exempt supplies, can generally recover the VAT with which they themselves are charged.

18 Other Taxes Property taxes Transfers of real estate in Austria are generally subject to transfer tax at the rate of 3.5%. The tax is based on the transaction value or the market value. A registration fee of 1.1% is also due to the real estate register. Owners of real estate located in Austria are subject to a local annual tax on the assessed value of property. The tax rate is up to 2%, multiplied by a coefficient of up to 500% which is determined by municipalities Capital transfer tax Resident companies are subject to a 1% capital transfer tax on share issues. The tax is levied on the amounts received by the company in exchange for the share issue, including premiums. The tax applies to any other shareholder contributions to the company that can increase the value of the participation, including disguised capital. The tax also applies to the supply of capital by a non-resident company to its Austrian branch (except for a company resident within the EU) Excise taxes Excise taxes are imposed on tobacco, alcohol and petroleum products. 5.7 Tax Incentives for Businesses A tax-free cash sum may be claimed equivalent to 10% of a company s qualifying expenditure on research and development (R&D); this is in addition to the 100% deduction permitted for R&D costs. An education allowance of an additional 20% may be deducted from taxable income for qualifying expenditure on staff education.

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