Non-profit registry requirements

The most common legal forms for NPOS used in Austria are “registered associations” , foundations, “corporations” and “co-operatives”.

Corporations can be awarded the status of a non-profit corporation (by fiscal authorities), if their statutes codify the non-profitability and if this can be verified in practice. Because the commercial register does not indicate if a corporation is listed as a non-profit corporation, it is impossible to determine their number on the basis of the register.

The Austrian legislation defines two types of foundations in Austria: the federal foundation (or regular foundations) and the private foundation. The laws which govern these entities are the Private Foundation Act-Privatstiftungsgesetz (PSG) 1993 and the law for federal foundations and funds of 1974. Both types of foundations that can be opened in Austria are characterized by the lack of profit shared among the members and no membership. According to the “Law on federal foundations and funds” a regular foundation is established as a result of a notarized deed or testament with funds dedicated to a defined goal with charitable character or for the public interest, accepted by the Office of the President of the State or by a federal ministry (only in certain cases).

The regular foundations created in Austria must be registered in a register supervised by the Minister of Interior. Financial reports must be deposited at the Foundation Authority (Stiftungsbehörde) which is the foundations’ supervising agency. The Foundation Authority has the power to dismiss the members of the foundation’s board if certain regulations are not followed. In case of dismissal, the Authority is appointing a foundation governor that has the role of appointing a new management board for the NGO created in Austria.

A major advantage of holding a regular foundation with public interest in Austria is that it is exempt from corporate income tax and has to pay only a withholding tax on specific types of investment income only, with the rate of 25%. Unlike the majority of the foundations established in many European countries, the majorities of Austrian foundations are private and may pursue a private goal, without contributing to the welfare production.

A private foundation is a legal person with organization and aims established in its declaration of establishment by its donor. This type of legal entity must have its residence in Austria and must be registered in the Commercial Register. A private foundation is incorporated through a declaration of establishment, which consists in a foundation deed and an appendix. These documents must contain the name of the foundation, the assets, the objectives, the location, the structure of the foundation’s boards and the modality of appointing the members, the beneficiaries (last ones are usually included in the appendix).

A foundation is usually formed by the following bodies: the board of directors, the supervisory board and the auditors.

Requirements:

• Deed of foundation
• Minimum contents:
• Name and date of birth/Commercial Register number of founder(s)
• Designation of assets contributed to private foundation
• Purpose of foundation
• Provisions on beneficiaries
• Name and registered office of private foundation
• Term of foundation and rules on agency authority
• Appointment of first foundation board

• The founders may reserve the right in the deed of foundation to modify and (if the founders are natural persons) even revoke the foundation

• Supplemental deeds of foundation may be prepared
• Minimum capital € 70,000 • Bank confirmation on deposit of minimum capital
• Specimen signatures and declaration of the impartiality of all members of the foundation board (in notarised form)
• Application for registration with Commercial Register by all members of foundation board (with notarised signatures)
• Supplemental deed of foundation not available for public inspection
• Minimum number of members of foundation board: three
• Foundation auditor required by law
• As a rule, no supervisory board required
• Advisory board may be set up
• Detailed rules on beneficiaries may be incorporated into supplemental deed of foundation or the right to designate the beneficiary/beneficiaries may be delegated to the foundation board, the founders, the advisory board or some other “official person or body” (individual)
• Basic rule on term of private foundation: 100 years
• Tax on initiating a foundation (Stiftungsseingangssteuer) for Austrian private foundations: generally, 2.5% on assets with which foundation is endowed, 6% of the value of endowed real estate

Costs: €20 for the set-up, no recurring costs.

Add (both optional!) annual audit costs of ~€3000+ for official tax-exempt status (so donations become tax-deductible) and/or ~€500+ for a quality cachet (“Spendengütesiegel”).

For-profit company registry requirements

Formation of a company or subsidiary in Austria

Any Austrian citizen or foreign national may establish a business in Austria. As noted above, a business operated subject to the entrepreneur’s full personal liability (i.e. without any further partners or shareholders) is referred to as a “sole proprietorship. As an alternative, there is also the option of forming a partnership or company through which the business can be operated. At least two partners are required to form a partnership entity or Personengesellschaft. By contrast, one individual is sufficient to establish an incorporated entity or Kapitalgesellschaft (GmbH, AG).

Frequently, foreign business owners wish to establish a subsidiary in Austria. This is legally independent from its parent company, meaning the foreign parent company does not bear direct and unlimited liability for the subsidiary’s obligations. The corporate forms typically chosen for such subsidiaries are the Gesellschaft mit beschränkter Haftung or limited liability company (German acronym: GmbH) and the Aktiengesellschaft or joint-stock company (German acronym: AG). An alternative is the “European Company”(also referred to as “Societas Europaea” or SE).

In terms of partnership entities, the Offene Gesellschaft or general partnership (German acronym: OG) and the Kommanditgesellschaft or limited partnership (German acronym: KG) may be used. Alternatively, business owners may establish a GmbH & Co KG (which is a form of partnership entity that combines the characteristics of each of the two aforementioned entity types).

Austria is also popular as a location for holding companies. In practice, holding companies are usually incorporated entities (i.e. a GmbH, AG or an SE) or in certain circumstances maintain a legal form as private foundations. Even though private foundations cannot issue shares, there are legal structures that may nevertheless make it advantageous to form a private foundation in Austria.

Sole proprietor status

The easiest way to establish a business is to set up as a sole proprietor. What this means is that a natural person forms a business and operates that business as its sole owner. They thus bear full personal liability.

Sole proprietorships can be created by any person holding Austrian or Swiss citizenship, or by anyone who is a citizen of an EEA country. A license will also be issued to any person holding a residency permit for Austria authorising said person to conduct business or a trade. Persons from other countries will only be permitted to conduct a trade in Austria if there are reciprocal agreement in place between the person’s home country and Austria granting such permits. With respect to certain professions (e.g. attorneys, tax advisors and so on) there are, in part, more restrictive rules on professional practice.

Sole proprietors wishing to operate a business covered by the Austrian Trade, Commerce and Industry Regulation Act 1994 (German acronym: GewO) (e.g. sales, commercial sector trade, industry) require a trade licence (on this point, see section IV below), and they are also obliged to notify the Austrian tax office of their commercial activity.

Registration of sole proprietorships in the Austrian Commercial Register (Firmenbuch) is only legally required if, during two successive fiscal years, the sole proprietor generated a turnover of more than € 700,000 per two fiscal years, or more than € 1,000,000 in a single fiscal year. However, sole proprietors may voluntarily register in the Commercial Register, even where these requirements do not apply.

Sole proprietorships not registered with the Commercial Register may calculate their income (profits/losses) by keeping a record of their payments and receipts. If, by contrast, the law requires them to have their business registered on the Commercial Register, then, as a rule, they will be obliged to perform financial accounting in accordance with the accounting rules of the Austrian Commercial Code (German acronym: UGB).

The legal form of an incorporated entity without minimum capital – such as the German “Unternehmergesellschaft haftungsbeschränkt” (company with limited liability) – does not exist in Austria. However, it is possible to form a “privileged GmbH” in Austria. In this case the founding shareholders are only required to deposit € 5,000 in cash and are only personally liable for a further € 5,000 for the first ten years. Because they bear unlimited personal liability for all their business operations, entrepreneurs often seek to limit the risk of liability and for this reason form a GmbH, an AG, an SE or a GmbH & Co KG.

Limited liability company (GmbH)

Requirements:

• Articles of association contractually agreed by shareholders as a notarial deed before an Austrian notary; it is permitted for shareholders to provide a signed power of attorney in notarised form for this purpose.

• Minimum contents of articles of association:
• Name and registered office of GmbH
• Portion of share capital amount to be paid in by shareholder
• Subject matter of the company » Amount of capital

• Reimbursement for costs of formation

• The minimum capital amounts to € 35,000. In principle, contributions in cash or in kind are permitted. Contributions in kind must be provided in full without delay. At least one quarter of the cash contributions must be paid in at the time of the company’s formation. A minimum amount of € 17,500 must be paid in. In the event that a “privileged formation” GmbH is formed, the obligation to make such a contribution shall only extend to € 10,000 for the first 10 years following the GmbH’s registration in the Commercial Register. € 5,000 of this amount needs to be paid in cash immediately at the time of the company’s formation.
• As a rule, if it is agreed that contributions in kind shall comprise more than half of the share capital, an audit of the company’s formation by a court-appointed auditor shall be required.
• Bank confirmation on payment of minimum contributions
• Resolution on appointing at least one managing director
• Specimen corporate signature of managing director (in notarised form)
• Where there are foreign companies as shareholders, evidence of their identity must be provided (e.g. by means of extracts from foreign Commercial Registers or confirmation by foreign Commercial Registers or Chambers of Commerce)
• Application to register on the Commercial Register by all managing directors (with notarised signatures)

In certain circumstances, there may be an obligation to appoint a supervisory board, in particular where, on an annual average, the GmbH employs more than 300 members of staff

• Audit of annual financial statements prescribed by law in the case of „mid-sized“ and „large“ GmbHs and when a supervisory board is required by law
• Annual financial statements for every GmbH must be submitted to the Commercial Register court each year
• Exemption from commercial register registration fees may be possible under the Austrian Promotion of Start-Ups Act (NeuFöG)
• Minimum corporation tax per year: € 1,750. € 500 for new GmbHs in the first five years and € 1000 per year in the subsequent five years

Joint-stock company (AG)

Requirements:

• Articles of association (established as a notarial deed before an Austrian notary)
• Minimum contents of articles of association:
• Corporate name and registered office of company
• Shares to be issued at par value or no-par value shares ɟ In the case of par value shares, the par value and in the case of no par value, the number of shares and the issue price
• Subject matter of the company
• Amount of registered share capital
• Composition of management board, number of directors
• Form of official publications by the company

• Reimbursement for costs of formation • Minimum capital of € 70,000, at least one-quarter of which must be paid in; contributions in kind must be made in full

• Appointment of initial supervisory board (at least 3 persons)
• Resolution on appointment of management board by supervisory board
• Founders’ report (shareholders) on formation of an AG
• Management board and supervisory board’s formation audit report
• In certain cases, additional formation audit by court-appointed formation auditor
• Where there are foreign companies as shareholders, evidence of their identity must be provided (e.g. by means of extracts from foreign Commercial Register or confirmation by foreign Commercial Registers or Chambers of Commerce)
• Specimen corporate signatures of management members (in notarised form)

• Application for registration in Commercial Register by all founders (shareholders), members of the management board and members of the supervisory board (with notarised signatures)

• Supervisory board mandatory in the case of an AG
• Audit of annual financial statements mandatory for every AG
• Annual financial statements must be submitted to Commercial Register. They must also be published in the case of large AGs
• Minimum corporation tax per year: € 3,500

Partnership entities

The legal forms of partnership entities tend, in practice, to play less of a role for foreign entrepreneurs than for local entrepreneurs: in the case of the Offene Gesellschaft or general partnership (German acronym: OG), all of the partners bear immediate and unlimited personal liability to the creditors. In the case of a Kommanditgesellschaft or limited partnership (German acronym: KG), at least one person (the general partner) bears direct, unlimited and personal liability to the creditors of the partnership. By contrast, the limited partners in a limited company bear, as the name suggests, only limited liability

General partnership (OG)

Requirements:

• Partnership agreement (no form prescribed)
• Minimum contents:
• Name and date of birth of partners
• Name and registered office of partnership
• Legal form
• Terms governing agency authority of partners
• Date on which partnership agreement was concluded
• Subject matter of the company

• Specimen signatures of partners (in notarised form)

• Where there are foreign companies as partners, evidence of their identity must be provided (e.g. by submitting extracts from a foreign Commercial Register or confirmation by a foreign Commercial Register or Chamber of Commerce)
• Application for registration in Commercial Register by all of the partners (with notarised signatures)

Limited partnership (KG)

Requirements:

• Partnership agreement (no form prescribed)
• Minimum contents:
• Name and date of birth (if applicable) of general partners and limited partners
  -Name and registered office of partnership » Legal form
• Terms governing agency authority of general partners
• Date on which partnership agreement was concluded
• Contributions of general partners, limited contributions of limited partners
• Subject matter of the company
• Specimen signatures of partners (in notarised form)
• Where there are foreign companies as partners, evidence of their identity must be provided (e.g. by submitting extracts from a foreign Commercial Register or confirmation by a foreign Commercial Register or Chamber of Commerce)
• Application for registration with Commercial Register by all of the partners, including all of the limited partners (with notarised signatures)

GmbH & Co KG

Requirements:

• Formation of a GmbH as a general partner
• Articles of association for general partner GmbH (established as a notarial deed) and further steps: see checklist for formation of GmbH
• Formation of a limited partnership (KG), together with a GmbH as general partner (GmbH & Co KG) - Partnership agreement of KG (no form prescribed) » Minimum contents of partnership agreement
• Name and Commercial Register number of general partner GmbH
• Name and date of birth of limited partners
• Name and registered office of partnership
• Legal form
• Date partnership agreement was concluded
• Subject matter of the company
• Specimen signatures of managing directors of general partner GmbH (in notarised form)
• Where there are foreign companies as partners, evidence of their identity must be provided (e.g. by submitting extracts from a foreign Commercial Register or confirmation by a foreign Commercial Register or Chamber of Commerce)

• Application for registration with Commercial Register by all of the partners, both by general partner GmbH and all of the limited partners (with notarised signatures)

• There is, in certain circumstances, an obligation to appoint a supervisory board for the general partner GmbH when a total of more than 300 members of staff are employed on an annual average
• Audited annual financial statements prescribed by law in the case of “mid-sized” and “large” GmbH & Co KGs and when the law requires a supervisory board.
• Legal requirement to submit annual financial statements to Commercial Register

Branch of foreign business

Foreign entrepreneurs or business entities wishing to perform entrepreneurial activities in Austria may establish a branch office here (Zweigniederlassung)1. The criteria described in Section Team member nationality requirements and apply here in regards to citizenship status as a requirement to obtaining a license for conducting a business or trade.

From a legal perspective, a branch office means that the foreign entrepreneur or business entity is itself the direct holder of all rights and obligations arising from the Austrian branch office’s transactions. Thus, all business transactions by the Austrian branch office will entail personal liability on the part of that entrepreneur or business entity. Where the foreign entrepreneur or business entity wishes to limit their personal liability, then a subsidiary should be formed in Austria for business activities. This could be in the legal form of a GmbH, AG or GmbH & Co KG and so on.

The foreign entrepreneur or business entity will be subject to tax in Austria on the income from the Austrian branch office. Even if the Austrian branch office is not registered with the Commercial Register, the office maintained in Austria can constitute a “branch establishment” for tax law purposes. Potentially, a mere room, e-mail address or fax machine in Austria may suffice for such purposes, providing it can be used for business purposes and transactions may be initiated and carried out from said object.

Requirements:

• Proof of the foreign (legal) entity’s legal existence. This applies to foreign entities with a domestic Austrian branch office (“branch”) wishing to be entered into the Austrian Commercial Register. To be done by submission of a confirmation from the foreign authority (local court, Commercial Register, chamber of commerce or similar). Foreign language documents must be accompanied by a certified German translation.

• For a branch of a foreign partnership, all of the same details must be reported to the Austrian Commercial Register as are required in respect of an Austrian partnership – see the checklists for OGs and KGs above. - Specimen signatures (notarised and accompanied by a certified translation) must be filed for general partners with power of representation and for the „representative(s)“appointed for the domestic branch (who must also be registered as such).

• For a branch of a foreign incorporated entity (GmbH, AG, SE), all of the same details must be reported to the Commercial Register as are required in respect to an Austrian incorporated entity – see the checklists for GmbHs and AGs above.
• A certified German translation of the articles of association/charter must likewise be submitted. - Evidence showing in whom the foreign incorporated entity‘s power of representation is vested (managing director(s), members of the management board) must be furnished in the form of a confirmation from the relevant foreign authorities (local court, Commercial Register, chamber of commerce or similar) – foreign language documents must be accompanied by a certified German translation. - Legal entities whose legal status is not covered by the law of an EU or EEA member state must appoint at least one person with durable agency authority to represent the company both in court and extra judicially. This person‘s normal residence must be located within Austria („representative”). Legal entities from EU or EEA member states may, but are not obliged to, appoint such a person, as well. It is permitted for the company to appoint two or more domestic representatives with collective agency authority.
• Notarised specimen signatures – accompanied by a certified translation – must be furnished by the following persons: The constitutive officers of the foreign incorporated entity (managing director(s), members of the management board) and the „representatives“ appointed for the domestic branch office (who must be registered on the Commercial Register).. • In all cases, the activities of the branch office (objects of the enterprise) and the law governing the legal status of the foreign legal entity must be noted on the Austrian Commercial Register filing for the branch office.

The European Company

The European Company (Societas Europaea or SE)3 is likewise an incorporated entity subject to the same limitations of liability as are applicable to an Aktiengesellschaft. However, as a rule, an SE cannot be formed as easily as a (normal) Aktiengesellschaft because an SE generally requires two or more businesses with registered offices in different European Union/EEA member states. It would only be possible for a single person to establish an SE where this is done by a European Company acting as the parent company. One benefit of an SE is that there are two options in terms of structuring the corporate organisation. The statutes of the SE may either allow a monistic board system (management board) to be set up, as is customary both in the Anglo-American world and in France, or it may opt for the dualistic system of management board and supervisory board corresponding to that of the Aktiengesellschaft in Austria and Germany. In the case of the dual system, the shareholders appoint a supervisory board which, in turn, appoints and exercises oversight over the management board: the supervisory board has no authority to manage the company’s affairs or to represent it vis-à-vis third parties. Overall, however, the formation of a European Company will be substantially more complicated and costly. This is true in particular if employee participation plays a role or might play one in the future. This could be the case if the SE already owned a business when it was founded or if it acquires a business or equity interests in other companies in the future.

Source:

• InvestInAustria

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