Austria may be a small country, but it is one of the highest and most economically stable countries in the European Union (EU). It is known as a prime spot for making investments and launching or expanding businesses. Located in the heart of Europe (bordering Germany, Czech Republic, Slovakia, Hungary, Slovenia, Italy, and Switzerland), the quality of life ranks one of the best in the world.
The low crime rate, cool climate, friendly and hospitable people, and high level of legal certainty attract many foreigners and foreign businesses to Austria. Here are the things you need to know if you plan to setup a company in the country.
Doing Business in Austria
Since the end of the Iron Curtain, Austria has become a lucrative center of business operations between foreign countries that seek a central location to cater to Western, Eastern, and South-Eastern Europe. Austria has no significant trade barriers, making it an attractive destination for companies looking to introduce new products to Europe. To date, more than 350 foreign companies have subsidiaries or franchises in Austria.
The country also holds strong relations with trade partners as a member of the EU since 1995 and a part of the Economic and Monetary Unions. Additionally, it is a member of the World Trade Organization (WTO) and the Organization for Economic Cooperation and Development (OECD).
Moreover, Austria boasts effective economic and social partnerships between management and trade unions. These partnerships lead to high satisfaction for both employers and employees, and contribute to a relatively low unemployment rate.
In terms of business practices in Austria, work and personal life are kept distinctly separate. Citizens subscribe to the idea that there is a proper place and time for everything. Observing proper business etiquette is vital. It is a nation that holds privacy, personal space, and respect to high standards.
Overall, businesses and investors are attracted to Austria because of its low corporate tax rate and group taxation, transparent laws, security, and business-friendly environment.
Legal System in Austria
Austria is a parliamentary, democratic republic. The president primarily functions as the head of state and only influences the actions of the state. The National Council and the Federal Council comprise the two chambers of the parliament. They represent the interests of the federal states.
Business Entities in Austria
There are 12 different business entities available when planning to launch a business in Austria. You can start a business through sole proprietorship (Einzelunternehmen). Otherwise, there are several partnerships or company structures you can consider:
- Open Partnership (offene Gesellschaft)
- Limited Partnership (Kommanditgesellschaft)
- Silent Partnership (stille Gesellschaft)
- Private Limited Company (Gesellschaft mit beschränkter Haftung)
- Public Limited Company (Aktiengesellschaft)
- Cooperative (Genossenschaft)
- Civil Law Association (Gesellschaft bürgerlichen Rechts)
- Association (Verein)
- European Company (Societas Europaea)
- Private Trust (Privatstiftung)
The most common form of business entity, aside from the sole proprietorship, is the Private Limited Company. Here, partners can reduce investment risk. For those entities who do not wish to start an entirely new business or establish a new entity, they may opt for a branch office instead, which has its own set of restrictions.
Taxation in Austria
There is a progressive rate of income tax that ranges from zero to 55%, depending on your taxable income. Residents are taxed on worldwide income. Meanwhile, non-residents are subject to income tax only on sources of income made in Austria. Double Taxation Agreements exist between countries like Canada, Japan, UK, and the US with Austria to ensure that entrepreneurs or employees do not get taxed twice.
Meanwhile, value-added tax (VAT) is set at 20%, but 13% for certain products and services such as transportation, food, and cultural events. Corporate tax in Austria is fixed at a rate of 25%.
Working Hours in Austria
The standard working time is eight hours a day or 40-hours a week. Note that there are collective agreements for some industries like trades that reduce the workweek to 38.5 hours.
Austrian working time is flexible, and hours can changed based on the agreement between an employer and employee.
The maximum number of hours an employee can work in a day is 12 hours, as long as the added hours will be reduced on another workday. A maximum of 20 hours of overtime work is allowed per week. Overtime will earn the employee 1.5 times their hourly rate.
Paid Vacation Leave
Employees have a five-week worth of paid annual leave per year. After their 26th year of working, their holiday entitlement increases to six weeks every year, not including the national holidays. Employees need to inform the employer and have these dates agreed upon before taking personal leave.
Employees are entitled to 12 weeks of sick leave due to sickness or injury. They can take an additional four weeks at half pay. If the employee is still unable to work due to illness or injury, the Austrian Health Insurance System will provide partial pay for up to 52 weeks.
Public Holidays in Austria
- New Year’s Day
- Easter Monday
- Labor Day
- Ascension Day
- Whit Monday
- Corpus Christi
- Assumption Day
- National Day
- All Saints’ Day
- Immaculate Conception Day
- Christmas Day
- St. Stephen’s Day
Austria has good quality public and private healthcare systems, overseen by the Ministry of Social Affairs, Health, Care, and Consumer Protection. Both employee and employer fund these contributions through insurance.
Private healthcare is available for those who prefer no waiting times or a more varied choice of physicians. There are several private health insurance providers, all regulated by the government.
Partner with INS Global
With more than 15 years of providing companies around the world with HR solutions, INS Global can help your business seamlessly enter the Austrian market. Our consultants have expertise in local regulations and processes ensuring that we can assist you with any administrative queries that may arise. Our services include PEO, which allows you to begin operations without the need of setting your own legal entity, recruitment, payroll and tax administration and, many more. Get in touch with us today and let us assist your business in its expansion into Austria or anywhere around Europe.