General Information
Incorporation in Austria
Procedure for incorporating
Share capital and shareholders
Company Directors
Annual reports and payments

Taxation of Austrian companies

General Information

Republic of Austria is located in southern Central Europe, north of Italy and Slovenia. It covers an area of 83,858 sq. km and has a population of 8,188,207 (July 2003 est.). The capital city of Austria is Vienna with a population of more than 1,5 million people. The official language is German. Austria has a literacy factor of 98%.

Once the centre of power for the large Austro-Hungarian Empire, Austria was reduced to a small republic after its defeat in World War I. The State Treaty signed in 1955 ended the occupation by the Allies (which existed from 1945) and recognized Austria's independence. A constitutional law that same year declared the country's "perpetual neutrality".

Austria is a federal republic of nine provinces. Head of State is the President of Austria elected by direct popular vote for a six-year term. Head of Government is the Chancellor (Prime Minister), traditionally chosen by the President from the plurality party in the National Council. Executive arm of the Government is the Cabinet of Ministers chosen by the President on the Chancellor’s advice. Legislative power is vested in the bicameral Federal Assembly or Bundesversammlung consisting of the Federal Council or Bundesrat (64 members; members represent each of the provinces on the basis of population; members serve a four- or six-year term) and the National Council or Nationalrat (183 seats; members elected by direct popular vote to serve four-year terms). Judicial power is represented by the Supreme Judicial Court, Administrative Court and Constitutional Court.

Austria has a well-developed market economy and a high standard of living. The foremost industries are foodstuffs and luxury commodities, mechanical engineering and steel construction, chemicals and vehicle manufacturing. As with most other industrialised countries, the service industry and particularly financial services have grown considerably over the last few years, with agriculture, forestry, and also tourism declining. Austria's domestic market is relatively small and thus foreign trade is of major importance. In January 1995 Austria became a full member of the EU. Austria is one of the wealthiest and most stable of the EU member countries. Austria is also a member to the IMF, OECD, FATF, WTO. Currency of Austria is euro (EUR).

Austria’s legal system is based on civil law, the country has accepted compulsory ICJ jurisdiction. Principal corporate legislation is the Commercial Code and the Financial Reporting Act.

 Incorporation in Austria

There are various types of companies operating in Austria. The most common ones are the Stock Corporation (AG - AktienGesellschaft) and the Limited Liability Company (GmbH – Gesellschaft mit beschrenkter Haftung). The latter is the most widely used form for foreign investment and international business.

There are certain restrictions on the activities conducted by Austrian companies, and namely this refers to certain industries such as banking and insurance, as well as industries where the state retains the monopoly, i.e. broadcasting, tobacco importation and production, and gambling. Real estate acquisitions by foreigners are subject to approval by state authorities.

All companies registered in Austria must have a Registered office there.

Procedure for incorporating

Gesellschaft mit beschrenkter Haftun g or GmbH is governed by the Act on Companies with Limited Liability (GmbHG) of 1906 (with amendments). Companies come into existence upon registration in the commercial register (Firmenbuch) kept by the commercial court (Handelsgericht).

The first step in formation of a company is for the Notary to go to the Chamber of Commerce and check if the name is available. The company’s name can’t be too similar or identical to any already existing company’s name, can’t suggest banking and insurance businesses, businesses within the financial services industry as well as include the term "Austria".

Then a deposit of 50% of the company’s share capital is transferred to the banking account, the bank issues a relevant statement which the Notary takes to the Registrar together with the company’s Articles of Association. The Articles of Association must be adopted in the form of a notarial deed (Notariatsakt) and must contain the name, seat (registered office) of the company, objects of its business, amount of its share capital (Stammkapital) and share interests (Stammeinlagen) of the shareholders.

AktienGesellschaft or AG is governed by the Stock Corporation Act of 1965 (AktG). The legal existence of an AG begins with its entry in the commercial register. The procedure for incorporation is basically the same as for a GmbH, except that all founders need to sign the company’s Articles of Association before a Notary.

Within a month after starting the business, the company must contact the local fiscal authority and apply for a tax number (Steuer nummer). Also any company established in Austria needs a VAT number.

All Austrian companies are members of the Chamber of Commerce. Membership is compulsory. It should be noted that the Chambers of Commerce do not run the commercial register; the competent courts do this.

When setting-up a company a capital transfer tax (Gesellschaftssteuer) equivalent to 1% of the share capital must be paid up. The commercial court also charges a fee when entering a new company in the business register. Additional costs are incurred for legal services, production of the notarial deed (Notariatsakt) and publication of the company’s registration.

If the company intends to be engaged in trading, it must obtain a Business license for trading from the Chamber of Commerce before commencing its operations. Special manager or a trade representative acting in the capacity as a commercial director is allowed to receive this license. Trade license is not needed if trading is carried out outside of Austria. Though if the company has no license, it may attract attention of the police. The cost of the Business license for trading is 1500 EURO.

Share capital and shareholders

Authorised share capital of a GmbH must be equal or more than EURO 35,000. 50% of the share capital must be paid up prior to the company’s registration. GmbH has no shares, it is based upon participations. Shareholders in a GmbH may be natural persons or legal entities, residents of Austria or not. Minimum number of shareholders is one. Shareholders’ details appear in the government register.

Authorised share capital of a AG must be equal or more than EURO 70,000. 50% of the share capital must be paid up prior to the company’s registration. Upon formation, the company must have at least two shareholders. After registration, all the shares may be held by one shareholder (one-person company). AG permits ordinary and bearer shares, voting or non- voting, preference shares. Unlike the GmbH, the shares of an AG can be transferred without a notarial deed (Notariatsakt). Shareholders’ details do not appear in the government register.

Company Directors

Both GmbH and AG can have one or more directors who must be natural persons, residents of Austria or not. The company’s residency is based on the residency of the Executive body (for double tax treaty purposes). The Executive Bodies of the GmbH include the general meeting of shareholders, the managing director(s) and supervisor, if one exists. Directors are appointed by the shareholders at the general shareholders’ meeting in GmbH or supervisors meeting at AG. Minimum 3 supervisors are requested at AG and will be elected at the shareholders’ meeting. Director’s details appear in the government register.

Annual reports and payments

Each year companies registered in Austria must prepare and submit their annual financial reports. This requirement is obligatory irrespective of whether the company had any dealings or not. In such case, dormant accounts must be prepared. Annual reports for GmbH do not include annual return, only accounts must be submitted. GmbHs are audited annually only when they:

  • have assets of at least 2,5 mil EUR or
  • have a turnover of 300,000 EUR or
  • have a staff of 50 persons.

2 criteria have to be fulfilled within 2 years.

AG have to be audited annually, they submit their annual returns 6 month after the end of the financial year together with the balance sheet and profits and loss account.

Shareholders’ meetings must be held at least once a year anywhere in the world, provided that notary services are not required. It should be noted that for AG it is always compulsory to have all actions taken at the shareholder’s meetings notarised. For GmbH it is generally not so, only such corporate actions as increase or reduction of the capital, amendments to the charter or change of directors require notary certification. Written decisions may be adopted and circulated amongst shareholders if all shareholders agree to this method of voting in GmbH.

Taxation of Austrian companies

Pursuant to the Corporate Income Tax Act corporate income tax rate in Austria is 34%. This rate will be reduced at 25% within 2004. Resident corporations which have their registered office or the place of management in Austria are subject to unlimited tax liability. Non-resident corporations are taxed only on their income from Austrian sources.

There is a minimum corporate income tax regardless of whether the company is profitable or not. This minimum tax amounts to EURO 1,750 for GmbH and EURO 3,500 for AG. Minimum tax is levied on a quarterly basis; for the first four quarters after the foundation of a newly established corporation the minimum tax amounts to EUR 273 per quarter. Capital gains are treated as regular corporate income.

Dividends paid by an Austrian company to its shareholders are subject to taxation at the rate of 25% (withholding tax). This rate may, however, be reduced subject to Double Taxation Treaties. It should be noted that only resident companies are allowed to enjoy the benefits of tax treaties. Austria has tax treaties with 57 countries including a treaty with Russia.

Austria has a regime for holding companies. Under the international participation exemption, dividend income received from foreign subsidiaries or capital gains realised from the sale of the same are exempt from Austrian tax provided that the Austrian holding company owns at least 10 % of the share capital of its subsidiary abroad for at least 12 months. In order to enjoy this tax treatment, certain additional criteria have to be met, i.e.:

  • subsidiary must not be subject to tax of less than 15 % in its home country
  • subsidiary has active business (trading or the like and does not only receive passive income, i.e. dividends, royalties or interest, in which case the affiliation privilege does not work).

Standard VAT rate in Austria is 20%, though a reduced rate of 10-12% is applicable for some categories of goods and services.



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What is offshore?

The word "offshore" has no precise legal dictionary definition, it simply means "situated or operating in a foreign country or at some distance from the shore" and reflects the fact that most low tax jurisdictions are islands.


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