Under Austrian tax law, each business is required to notify the competent tax office of its commercial or business activities, including cases where such activities are in the form of a branch office or permanent establishment. The entrepreneur will receive a questionnaire that he or she is required to complete and return to the tax office (this is usually dealt with for them by the firm’s legal or tax advisor). However, tax liability for entrepreneurial activities in Austria will arise even where such notification is not made to the Austrian tax office.

Austria (like most Western countries) has a robust and comprehensive tax system. Major forms of tax to be considered here are value-added tax (VAT) on goods and services, tax on profits including income tax (for natural persons) and corporation tax (for corporate entities). There are also municipal tax (for wages paid to employees), insurance tax, electricity tax, natural gas tax and coal levies, motor vehicle tax, real estate tax and public fees and duties.

Profit tax

Profits of incorporated entities (GmbHs, AGs, SEs) are subject to a 25% rate of corporation tax (flat tax) in Austria. Losses attract a minimum tax, which is € 1,750 in the case of a GmbH and € 3,500 in the case of an AG. The minimum tax is credited against corporation tax in subsequent years. A newly established GmbH shall be subject to a minimum corporate tax of € 500 for the first five years and € 1,000 for the following five years.

Exemptions on dividends: Distributions of profits received by an Austrian incorporated entity from equity interests held in domestic or foreign “corporations” (these are incorporated entities and co-operatives) are, as a rule, exempt from corporation tax at the level of the recipient. If a registered office is in a third country or is located in a country with no bilateral administrative assistance agreement, then this exemption from corporation tax for dividends will only apply on the condition that the equity holding equals at least 10% of the foreign corporation’s total share capital and has been held for at least one year.

Withholding tax on profit distributions by an Austrian GmbH, AG or SE

As a general rule, distributions of profits by an Austrian incorporated entity to its shareholders are subject to a 27.5% rate of withholding tax. This is charged at source, i.e., the incorporated entity must withhold the tax and remit it to the Austrian tax authorities (tax office).

Foreign entities are, as a rule, subject to taxation in the country in which they have their registered office or their headquarters (“country of domicile”). Furthermore, foreign entities are, in certain circumstances, subject to limited tax liability in Austria on the income derived by them in Austria. Income from commercial operations is, as a rule, only subject to taxation in Austria where a branch establishment is maintained within Austria. Income from self-employment and regular employment is only subject to taxation in Austria where the activities are performed within Austria.

Where there is no double taxation treaty between Austria and the country of domicile, double tax liability may arise with respect to the foreign entity. Where a double taxation treaty is in place, the foreign entity’s profits may only be taxed in one of the two countries. As a general rule, profits will be subject to taxation in the country of domicile, while Austria only has a right of taxation on aliens where there is a branch establishment within Austria.

Taxes for employment – ancillary wage costs

The following main ancillary wage costs will arise for business entities which employ members of staff within Austria:

• 3% municipal tax on gross salaries
• 4.5% employer contribution to the Family Compensation Fund or Familienlastenausgleichfonds
• 0.5% supplement to employer contribution Approx. 22% rate of employer contribution to social insurance

These ancillary wage costs are deductible business expenses; they thus reduce the profits of the business and the tax base for the corporation tax or income tax.

VAT

Austrian value-added tax (VAT) applies to turnover generated by profit-oriented business entities within Austria, irrespective of whether the entrepreneur is domiciled in Austria or not. The rate of VAT is, as a general rule, 20%, and in certain circumstances a reduced rate of 10% or 13% will apply. There are also cases of complete exemption from VAT (“true” and “non-true” VAT exemption, such as in the case of banks and insurance providers).

Purchase Property

Acquisition of property in Austria is generally subject to real estate transfer tax at a rate of 3.5% on the consideration exchanged (purchase price, assumption of debt, and the like). In addition, a 1.1% registration fee (using the same assessment basis) applies when the new owner submits their application to the land registry.

Auditing & Reports:

The annual financial statements and management report (and, where applicable, the consolidated financial statements and consolidated management report) for every AG must be audited by an independent chartered accountant. The annual financial statements must be submitted to the Commercial Register within a nine month period (at the latest) after the end of the AG’s fiscal year. In the case of a “large AG”, annual financial statements must also be published in the official gazette of the Wiener Zeitung (Vienna newspaper).

Branch offices are obliged to keep separate books and to file tax returns in Austria. Branch offices of foreign incorporated entities are required to submit and disclose their annual financial statements to the Austrian Commercial Register court. They are also required to submit and disclose said statements in German. The accounts must be prepared, audited and disclosed under the law governing the foreign incorporated entity (headquarters).

Source:

• InvestinAustria