Credit Management magazine April 2018

COUNTRY FOCUS
AUTHOR – Adam Bernstein
THE World Bank data suggests
that Austria appears to be
a mixed bag when it comes
to doing business in the
country. While it’s ranked
22nd overall (according
to the 2018 rankings), starting a business
puts Austria at 118th, getting credit leaves
Austria ranked 77th, yet enforcing contracts
elevates Austria to ninth place and trading
across borders puts it in pole position.
Firms wanting to set up in Austria have a
number of options open to them including
establishment which doesn’t mean creating
a separate legal entity but instead, using an
extension of the overseas parent company.
This route offers no limited liability, profits
are liable to Austrian corporation tax,
and annual statements must be prepared
in German and lodged at the Austrian
commercial register.
Another option is to form a limited
company to provide limited liability and
give an air of being a local business.
Companies must pay corporation tax on
profits and file annual statements with the
Austrian commercial register. Accounts
have to be audited if defined turnover,
assets and employee criteria are met. There
are a number of variants – the ‘standard’
limited liability company (GmbH), the
larger joint stock corporation (AG), the
European company (SE) which has the
same law applied to it throughout Europe,
and the Foundation (Stiftung).
A third option is to use a limited (KG)/
unlimited liability partnership (OG)
where members (partners) have limited
liability (limited companies) or unlimited
liability (individuals). Profits are allocated
to members who then pay income (or
corporation) tax on these profits.
Those wanting to work in Austria on
a self-employed basis need to heed the
requirements of the Gewerberecht –
trade regulation legislation. In essence,
certificates of qualification are mandatory
for certain trades and crafts and generally
a business that can only trade after
registration with the Austrian authorities.
The net effect of this means that in certain
sectors, such as telecommunications,
engineering and construction, it is often
easier to have a head of the business who is
an Austrian national with the appropriate
qualifications rather than bring someone
in who has to meet the legal requirements
before they can work. Bureaucracy can
make it a lengthy process for other nationals
to obtain the correct qualifications.
Where companies need to protect
their intellectual property (IP), the UK
Government warns that IP law, especially for
patent protection, is not totally harmonised
within the EU. Those with concerns here
would do well to make contact with the
Austrian Patent Office (ÖPA) whose website
is at patentamt.at/ as it has responsibility
for IP legislation in Austria. It also makes
sense to seek professional legal advice.
TAXING MATTERS
In terms of taxation, Austria currently
operates a flat 25 percent rate of
corporation tax. Income tax is paid
according to which of the seven tax bands
that applies – zero percent (to €11,000), 25
percent (€11,001 to €18,000), 35 percent
(€18,001 to €31,000), 42 percent (€31,001 to
€60,000), 48 percent (€60,001 to €90,000),
50 percent (€90,001 to €1 million) and 55
percent (over €1 million). The income tax
rules apply if an individual is resident in
Austria and residency is triggered if the
individual has an Austrian domicile or his
habitual residence (more than half of the
year) in Austria.
The Austrian tax regime permits
tax loss carry forwards. While this is
limited to 75 percent of taxable income
for limited companies, it’s unlimited for
individuals. One of the reasons that many
internationally active firms choose to
headquarter in Austria is that losses can be
carried forward in Austria, or offset against
profits of the foreign parent company.
There are, as might be expected,
employee related social security charges
to be paid which cover health insurance,
accident insurance, unemployment
insurance and pension insurance. These
can be seen in more detail at home.kpmg.
com/xx/en/home/insights/2011/12/austriaother-taxes-levie.html,
but in essence they
mean a 21.48 percent charge for employers,
and 18.12 percent for employees.
Being a member of the EU, Austria also
operates Value Added Tax (VAT) and applies
a standard rate of 20 percent (reduced rates
of 13 percent, ten percent or zero percent
may apply to some supplies). Registration is
compulsory for any Austrian business that
makes taxable supplies in excess of €30,000
in any 12 months period. Where supplies
from foreign businesses to Austrians
exceed €35,000 per year, they become
subject to Austrian VAT. Most services
provided in Austria to private customers
are subject to VAT.
As in the UK, there are different types of
supply: taxable where VAT must be charged
on supplies and input tax can be reclaimed;
exempt where the supplier cannot charge
VAT nor reclaim input VAT; and outside the
scope where the supply is not within the
Austrian VAT system.
SMALL TALK
Doing business in a foreign land is as much
about understanding people as it is the
market. Understandably, when engaging
in business small talk it’s advisable not to
Admont Abbey in Styria, Austria
mention the role of the Austrians in World
War II, and conversations about money or
religion should also be avoided. Indeed,
it’s important not to assume Austrians are
like Germans. While they speak the same
language, Austria is a country with a great
sense of history and a unique culture.
English is widely spoken in business circles.
Despite post-World War II cut backs
in state involvement and a series of
privatisations, there is a still a legacy of
bureaucracy and hierarchy that dominate
the Austrian business place today. Austrian
businesses tend to have a hierarchical
management structure, with respect
being granted to those in senior positions.
Business culture in Austria is not very
consensus-driven and managers are
expected to be experts in their field.
Lastly, and on a higher level, Austrian
business culture is based on what is
known as Sozialpartnerschaft, or social
partnership, the essence of which aims
to cultivate industrial harmony, dialogue
and cooperation. It’s quite apparent to
the outside eye that many sectors, trades
and professions in Austria have their own
overarching organisations that work to
promote good working relations.
Adam Bernstein is a freelance
business writer
The Recognised Standard / www.cicm.com / April 2018 / PAGE 33