Austria is one of the most lucrative and attractive markets for business. Its geographical location is an excellent investment center providing access to the local market. Furthermore, the country’s GDP per Capita (current US$) has been on a sharp rise since the 1970s, yet another factor that attracts overseas businesses.
If you plan on expanding business in this country, the first step is setting up a subsidiary in Austria. This guide will walk you through Austrian subsidiaries' benefits, setting up, and taxation.
What are the Types of Subsidiaries in Austria?
A subsidiary business in Austria can be of the following types:
Private limited liability company or GmbH
A private limited liability company is perhaps one of Austria's most popular company structures. The minimum share capital amount required for the incorporation is €10,000, half of which you must pay in cash before the process begins.
Joint-stock company (AG)
A joint-stock corporation or company is limited by share ownership, and its shares are eligible for trading in the stock market. This type of company can be established by either one shareholder or more if they have a minimum of EUR 70,000 as their primary investment.
General Partnership (OG)
Also related to the term ‘open partnership,’ a general partnership in Austria operates when two legal organizations join together and function as a single entity. In a general partnership, every partner is liable individually and wholly. One of the partners must provide competence proof before entering the trade register.
Silent Partnership (stGes)
Only one partner assumes the company's full liability, while the other partners are silent members. The silent partners have signed the company agreement but do not have any responsibilities.
Limited Partnership (KG)
In a limited partnership, the company is set up by two organizations or more. One feature distinguishing a KG from the others is that in the former, at least one partner will be a general partner. The general partner will assume full responsibility for the company management, its obligations, and its rights, while the other partners are responsible only for their investments.
Austria Civil Law Partnership (GesnbR)
If your company is looking forward to being a part of any short-duration project, then a civil law partnership is ideal. Although this partnership is not a legal entity, it has a simple incorporation procedure.
How to Set Up a Subsidiary in Austria?
Incorporating a foreign subsidiary in Austria should always start with operation and location. Austria can pose a few operational challenges because the subsidiary laws vary significantly by region.
For setting up a subsidiary company in Austria, you can follow these simple steps:
- ~First, you need a visa or residence permit because only legal residents are eligible for business registration in Austria
- ~Obtain the Economic Chamber’s confirmation that your subsidiary business in Austria is an entirely new venture
- ~Notarize your articles of association statutes
- ~For every business in Austria, there is a minimum investment amount. Deposit this amount in the local bank
- ~Visit the local court to register your company in Austria
- ~Collect your VAT number
- ~Register your business with the trade authority and collect your trade license
- ~Hire and register your employees for social security
- ~Register your company with the municipal corporation
Benefits of Setting Up an Austria Subsidiary
Now that you know how to set up your subsidiary in Austria and about its tax regime, here are a few benefits of a subsidiary company in Austria:
Attractive location for business
- ~Its outstanding geographical location provides access to the local markets and the entire EU market
- ~Excellent infrastructural development
- ~Among all EU countries, Austria is the fourth richest
- ~Corporate tax rates are as low as 25%
- ~The double tax treaty with more than 70 countries
- ~Added benefits due to the group tax scheme
- ~Incentives are given to research promotion
- ~Trade tax and wealth tax are NIL
Labor and productivity
- ~Low labor cost, which is currently 113.90 points
- ~Skilled workforce
Security and stability
- ~Currently, Austria is both economically, socially, and politically stable
- ~The legal system is reliable
- ~Personal security is high
- ~The strike rate is low
- ~The social peace level is high
Documents to Prepare When Opening a Subsidiary in Austria
For the incorporation of a foreign subsidiary in Austria, submission of proper documents to the authorities is an essential step.
Here is a checklist for incorporating a foreign subsidiary in Austria.
Documents required from the shareholders and directors:
- ~Notarized passport/ID
- ~Residence permits
- ~Contact details
Apart from these personal documents, you’d also require:
- ~Statutory documents of the company
- ~The lease contract mentions the company’s local address in Austria
- ~Details of your Austrian bank account
- ~Share distribution details amongst the shareholders
Before incorporating a wholly-owned subsidiary in Austria, you need a Certificate of Incorporation for your company. For this certificate, you must submit the documents mentioned above to the Trade Register. If the documents are in English, you need to translate the same into German.
Here is a timeline on how long it will take to register your company in Austria:
What Business Forms can Austria Subsidiaries Take?
For the incorporation of a foreign subsidiary in Austria, the overseas parent company holds 100% shares. These companies are termed subsidiaries if the shares are 50% or above. Austrian subsidiaries are mostly private limited liability entities However, they can also include silent, general, and limited partnerships.
Be it any type of business, any subsidiary system in Austria is an entirely separate legal entity from its parent organization and functions according to the local laws. So, before setting up a subsidiary in Austria, you should visit the official website and look for applicable business registration forms.
Austria Subsidiary Laws
For subsidiary company formation in Austria, you must follow the domestic laws as follows:
For private limited companies
- ~EUR 35,000 to be the minimum capital investment amount
- ~50% of the investment must be deposited in the bank before company registration
- ~EUR 7000 is the minimum investment for each shareholder
- ~For shareholders, no requirement is mentioned regarding their residency or nationality
For joint-stock companies
- ~EUR 70,000 to be the minimum capital investment amount
- ~Must possess one supervisory board with at least three members
Post Incorporation Compliance
Post-registration compliance for a foreign subsidiary in Austria covers the following:
- ~Social security registration of your employees
- ~Display the company seal
- ~File for tax registration
- ~File the company title with the municipality
- ~For business transactions, apply for a bank account
- ~Provide share certificates to the shareholders
Taxes on Subsidiaries in Austria
Austria provides affordable tax schemes to its foreign companies. Here are the details about the taxation of foreign subsidiaries in Austria.
Austrian companies are subjected to a 25% corporate tax. This tax is levied on a company’s total income and net profit. For the limited liability companies, the minimum amount is EUR 3,500, while for the joint-stock corporations, it is EUR 1,750.
Value-added tax/Income tax
Every Austrian company is subjected to a 20% Value Added Tax or VAT. However, for sole traders and partnerships, there is a threshold of EUR 30,000. Those traders earning less than EUR 30,000 are subjected to a 23% to 50% income tax instead of VAT. VAT grouping can be possible if the subsidiary system in Austria is not entirely free of the control of its parent organization.
Withholding tax is levied at 25% for interest earnings of a company, along with any income sourced from security earnings.
Tax Incentives for Businesses Setting Up a Subsidiary in Austria
Austria places increased significance on foreign investments and ensures that any subsidiary business in Austria doesn’t have to bear double taxes. Before a subsidiary company forms in Austria, you should know the various tax incentives provided by the Austrian government.
Group corporate taxation
In Austria, two or more organizations are eligible to form a tax group and can also incorporate foreign members. The only condition for formation is that the parent company must hold beyond 50% of its subsidiary’s shares. The domestic group’s profits and losses, including the foreign subsidiary’s losses, are offset. This reduces the corporate tax calculation basis significantly.
Austrian companies which provide research premiums are entitled to a tax incentive. Austrian R&D tax credit was initially 12%, revised to 14% in 2018.
Double tax treaties
Austria signed this treaty with over 70 countries to avoid double taxation of profits and incomes. A company can avail of this provision by either the relief at source method or a tax refund. You can avail of the former by filing the payment receipts, and the latter can be availed if your paying agent has already deducted the tax amount.
Other Important Considerations
Being compliant with the local laws is vital to setting up a subsidiary in Austria. So, to stay on top of the taxation of foreign subsidiaries in Austria, you should consider hiring a lawyer or consultant. If neither of these two is an option, then before setting up a subsidiary company in Austria, make sure to appoint a company executive to ensure your organization stays compliant. Moreover, incorporating a foreign subsidiary in Austria comes with high costs. Thus, plan your incorporation process according to your budget.
How can Multiplier's Employer of Record Help You Hire and Expand in Austria?
Incorporating a subsidiary of a foreign company in Austria offers multiple advantages. The country is located in Europe’s heart and gives you access to the whole EU market in the long run. Expanding your business in a foreign land can come with tons of tedious paperwork, religiously following the norms, learning about the local tax structure, and so on. A better alternative is to opt for a professional EOR service, like Multiplier.
Our in-house experts can help you onboard talent from across the world without requiring you to establish a subsidiary in Austria. We also offer payroll and international employee management services to our clients. So, if this interests you, connect with our experts today to know more about our services.
Frequently Asked Questions
Is a local company address mandatory for subsidiary registration in Austria?
Yes, it is mandatory for company registration in Austria to provide a local address. In addition, this address must be registered to the municipality.
Is there any minimum investment to start a subsidiary business in Austria?
Yes, you need to make a minimum amount of investment before setting up a subsidiary company in Austria. For the limited liability corporations, this amount is EUR 35,000, and for the joint-stock companies, the amount is EUR 70,000.
Will Austria be an ideal location for setting up a subsidiary?
Yes, Austria is considered an attractive location for setting up new ventures. It currently has one the most stable economies in Europe and offers affordable tax rates.