Accountancy in Austria

>> Choice of Legal Form in Austria

Limited liability company

This is the most common and very flexible form of a corporation in Austria. In Austria, it is called Gesellschaft mit beschränkter Haftung (GmbH). The minimum statutorily required capital is € 35,000 of which 50%, or at least € 17,500, must be paid in (if share capital is being contributed in cash). The cost of establishing a simple GmbH with a stated capital of € 35,000 is about € 5,000. The formation of a GmbH requires only one shareholder. A shareholder can be an individual, a partnership or a legal entity. The managing directors are either appointed by a shareholder’s resolution or are appointed in the articles of associations. A supervisory board must be appointed by the shareholders if the stated capital exceeds € 70.000 and the company has more than 50 shareholders or the average number of employees exceeds 300.

With the Corporate Law Amendment Act 2013, the statutory minimum share capital for limited liability companies was reduced from € 35,000 to € 10,000. However, as of 1 March 2014 the minimum share capital again increased to € 35,000.

In view of the fact that the limited liability company is a legal entity separate from its shareholders, assets are held in the corporation’s name. The company may sue and may be sued under its own name. Shareholders are not liable for obligations of the company.

General partnership

The name of this partnership in Austria is Offene Gesellschaft (OG).

The general partnership is a partnership, the object of which is to conduct a commercial business under a common firm name, where the liability of none of the partners towards the creditors is limited. The partners can be either natural persons, legal entities, or other partnerships. The partnership agreement is not subject to any formal requirements. Whether – and to what extent – the partners are to make contributions is determined by the partnership agreement. Unless agreed differently every partner has the right and the obligation to manage the business. The partners are jointly and severally liable for the obligations of the partnership and any agreement to the contrary is ineffective as towards third parties. Such liability of the partners for the debts of the partnership is unrestricted.

Limited liability partnership

The name of this partnership in Austria  is Kommanditgesellschaft (KG).

A limited partnership is a partnership, the purpose of which is to conduct a commercial business under a common name, where the liability of one or several partners is, in respect of the partnership’s creditors, limited to a specific amount of contribution (limited partners) whereas the remaining partners have unlimited liability (general partners). The limited partners are excluded from management of the partnership unless there is an agreement which allows limited partners to participate in management.

Civil law partnership

The civil law partnership is defined as an agreement between two or more partners which combine their efforts or funds (or both) for a common purpose. There are no formal requirements for the partnership agreement. It may be formed by written or oral agreement. Unlike the previously mentioned partnerships, the civil law partnership is not registered with the Commercial Register. The partners’ contribution to the civil law partnership may be money, a working commitment or assets. The partners are directly liable to creditors.

Branch

The procedure to establish branches in Austria is rather tedious (especially depending upon the location of the foreign company), therefore foreign companies prefer to do business in Austria by means of subsidiaries rather than branches. To be registered in Austria as a branch of a limited liability company, the foreign company must be similar to an Austrian limited liability company (for example German and Swiss GmbHs, French societé á responsabilité limitée etc.; US-companies are generally considered to be similar to stock corporations).

Subsidiary

Many commercial partnerships in Austria take the form of limited partnerships. Another option is the establishment of a public limited company (Aktiengesellschaft). By far the most common and flexible legal form for subsidiaries of foreign countries operating in Austria is the “limited liability company” Gesellschaft mit beschränkter Haftung or GmbH. The obvious advantage of a GmbH over a branch is that the liability of the parent is limited to the amount of the share capital of the GmbH.

Sole trader

A sole trader conducts their business without any partners or shareholders. They contribute the original capital all by themselves and are is subject to unlimited liability. They may have employees.

Public limited company

The name of this company in Austria is Aktiengesellschaft (AG). The public limited company (stock corporation) is designed as the corporation business form for larger business enterprises. At present, there are only a few hundred public limited companies in Austria. In comparison, there are around 100 thousand GmbH in Austria. The minimum capital is € 70,000. € 17,500 must be paid in cash upon formation. The shareholders may be individuals or corporations. Because public limited companies are designed for the general public, various provisions assure the protection of such general public. Therefore, formation of a public limited company is more stringently regulated than the formation of the limited liability company (GmbH).

Shareholders are not liable for obligations of the company.

Foundation

The foundation is called Privatstiftung (Stiftung) in Austria.

The Stiftung is a legal entity, the internal organisation and purpose of which is largely determined by the founder (grantor), who provides the assets necessary to achieve the aim of the Stiftung. The Stiftung is bound to execute the intentions of the grantor as documented in the declaration of establishment.

The Privatstiftung is an interesting instrument to avoid the splitting up family business and property as well as inheritance and gift tax levied on such property when it is passed on to the next generation. The legal basis is the Privatstiftungsgesetz which came into force in 1993. The main objective of the Austrian Parliament was to avoid the outflow of capital to other countries and at the same time to encourage foreign investors to set up a Privatstiftung for their family property in Austria.

Setting up and organisation

A Privatstiftung is set up by a declaration of establishment and comes formally into existence upon entry in the register of firms. The declaration must include (among other things) the contribution of assets, the purpose, beneficiaries, duration, and may specify that the founder can under certain circumstances dissolve or revoke the Privatstiftung at any time.

The founder (grantor) must endow the

Privatstiftung with assets of at least € 70,000. The founder appoints the first board of trustees. If there are no rules in the declaration, the court will appoint

Trustees as necessary. The founder can also be a Trustee. The board must have at least three members, two of whom must be resident in Austria.

A supervisory board is mandatory, but only if the number of employees of a Privatstiftung exceeds 300.

The Privatstiftung has to prepare financial statements which should be audited by a certified public accountant.

Taxation

The contribution of assets made by the founder to a Privatstiftung is subject to 2.5 % gift tax + 3.5 % additional fee when real estate is donated. This is calculated based on the Einheitswert (unit value), which is currently significantly lower than the market value.

A Privatstiftung is a legal entity and therefore subject to 25% corporation tax. Income from investments and capital gains are subject to 25% intermediary taxation. This tax can be credited against the withholding tax of 25% that may be due to the beneficiary for payments from the Stiftung.

Austrian beneficiaries do not have to pay gift tax on income distributed by a Privatstiftung but they must pay a withholding tax of 25% on payment as final taxation. Beneficiaries do not have to file tax returns or pay income tax on such gifts. If they are non-resident, the rate of withholding tax will be lower if double taxation agreements are in place.


Latest version updated 13th October 2017

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