In Austria, there are the following possibilities to carry out a business activity:
Through a registered branch office
A branch office is not a legal entity in its own right, but it nevertheless enables a foreign legal entity to participate in economic life in Austria. The profits attributable to the branch must be recorded in a corporate income tax return. Any VAT obligations must also be taken into account.
The establishment of a branch office in Austria must be carried out as follows:
- Application for registration at the Commercial Court, submitting the following required documents
- Application signed by the managing director and certified by a notary
- Articles of association of the foreign company notarized and translated by court interpreter
- Resolution of the shareholders on the establishment of the branch office
- Extract from the commercial register of the foreign company (or comparable proof of the legal existence of the company in the home country)
- Certificate of the actual establishment of the branch office (lease agreement or by inspection and confirmation by the Chamber of Commerce)
- Specimen signatures of all persons representing the foreign company and the branch office in Austria
- Evidence of regular business activities of the foreign company (only for non-EU companies).
- If applicable, a business registration under trade law is also required if the business activity is subject to the Trade Regulation Act. However, the branch office may only operate under trade law if it has a corresponding trade license. In the case of regulated trades, a certificate of competence is also required. Furthermore, a managing director under trade law must be appointed. The managing director under trade law is liable to the trade owner and the regional administrative authority for the proper conduct of the trade and for compliance with the trade regulations.
- Registration with the tax office and registration of employees
- An Austrian branch of a foreign company is liable to tax with regard to corporate income tax and VAT. It must therefore apply for a tax number.
- Registration of employees with the competent social security institution prior to commencement of operations. In principle, the legal employer is the parent company, especially since branches do not have their own legal personality.
Through a permanent establishment
A permanent establishment is a fixed business facility through which the activities of an enterprise are carried out in whole or in part. The difference to the branch office is that it is not entered in the commercial register. As with the branch office, VAT and corporate income tax aspects must also be taken into account for the permanent establishment.
- Only registration with the tax authorities required (no entry in the AT commercial register!)
- Limited tax liability with regard to profits attributable to the permanent establishment.
- Registration of employees working at the permanent establishment with the competent health insurance institution prior to commencement of activities.
- If applicable, business registration under trade law
Through a sole proprietorship
The operator of a sole proprietorship is always a natural person who has unlimited liability with his private assets. The company has no legal personality. The income is subject to the standard tax rate (progressive up to 50%).
The sole proprietorship is established by commencement of operations. A business registration under trade law must usually first be made. If a regulated trade is practiced, a certificate of competence is required. Registration in the commercial register is voluntary up to a turnover of EUR 700,000, but is mandatory if the turnover exceeds EUR 700,000 twice or EUR 1,000,000 once. The addition of the legal form “registered entrepreneur” or “eU” is then mandatory.
Profits are determined by accounting on a cash basis or, if the turnover limits are exceeded, by means of double-entry bookkeeping. In addition, sole proprietors are subject to social Security of Self-Employed Workers in Industry and Craft Trades (GSVG). Tax registration with the tax office is required if the taxpayer is not already registered. An income tax return and, if applicable, a VAT return must be filed. A sole proprietorship is the most popular form due to its low-cost administration. This is quick and easy to set up.
Through a legal entity (e.g. limited liability company)
The advantage of founding a limited liability company as opposed to a sole proprietorship is primarily the economic risk of the partners, which is limited to the respective capital contribution. On the other hand, however, there is the obligation to keep double-entry accounts, the duty to disclose information to the commercial register and the obligation to make declarations (VAT and corporate income tax). Depending on the size, an audit of the annual financial statements may also be mandatory.
- Conclusion of articles of association in notarial form (simplified foundation possible for single-member companies without notarial deed).
– Minimum content:
- Name and registered office of the company
- Object of the company
- Amount of the share capital
- Capital contribution of the individual partners
- Minimum share capital for a limited liability company: EUR 35,000 (public limited company: EUR 70,000), of which EUR 17,500 must be paid in cash at the time of incorporation (possibility of applying for incorporation privilege: EUR 10,000, of which EUR 5,000 must be paid in cash at the time of incorporation, it must be increased to the regular cash contribution of EUR 17,500 within 10 years)
- Opening of a bank account and payment of the share capital
- Resolution on the appointment of the managing director
- Application for registration with the Commercial Court, enclosing the following documents:
- Notarial certification of the signatures of all managing directors
- Articles of association in notarial form
- List of shareholders
- List of managing directors
- Resolution of the appointment of the managing directors
- Sample signatures of the managing directors
- Bank confirmation of the cash contributions made (at least 50% of the minimum share capital, i.e. EUR 17,500) in accordance with § 10 GmbHG (Limited Liability Companies Act)
- Possible expert opinion of the Chamber of Commerce on the company name
- If necessary, obtain authorization to carry out a specific activity according to the Trade Regulation Act and appoint a managing director under trade law.
- Registration with the tax office (VAT and corporate income tax) and registration of employees
By a partnership
A partnership has at least two partners who conclude a partnership agreement with each other, which can also be concluded orally. The name/company name can be freely chosen. Companies that are to be entered in the Commercial Register must bear an appropriate legal form suffix (such as OG, KG or GmbH & Co KG).
A distinction is made between the following partnerships:
- General partnership (OG)
- Limited partnership (KG)
- GmbH & Co KG
- Partnership under civil law (GesbR)
The OG, KG and GmbH & Co KG only come into existence upon registration in the commercial register. The partners are all personally, jointly and unlimitedly liable (exception: the limited partner in the limited partnership is only liable with the liable capital contribution).
The trade license is obtained by registering with the trade authority. Further necessary steps are the notification of the commencement of business at the tax office, the application for a tax number to be able to fulfill tax obligations and the registration of any employees with the social insurance fund. Profits are allocated proportionately to the partners. They must be included in the partner’s personal tax return and are subject to the progressive tax rate.
In the end, the choice of how a business in Austria is carried out, will depend on the expected income, the desired influence on the management, the possibility of financing through participation and the extent of liability. Basically, the formation of a legal entity will be more appropriate if profits of more than EUR 300.000 are expected, not least because of the higher formation costs and for tax reasons (taxation of profits at 25% and taxation of distributions at 27.5%).
We work together with notaries and lawyers and can therefore, together with our labor law expert, cover the entire package from the formation (preparation of contracts, registration with the commercial register) to the notification to the tax office, the registration with the health insurance institution and the preparation of employment contracts.
We would be happy to advise you on this topic (email@example.com).
PS: Please note, that we are no native speakers and that our blogposts were translated with the help of google translate.