Austria Tax & Business Guide - Deloitte

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Basic facts
Population 8.3m Inflation 1.4% (2006)
Main languages German GDP per head US$38,863*
Currency Euro (ƒ) GDP growth 3.2% (2006)*
Economic communities European Economic Area, EU, OECD, WTO
GDP sources 1.9% agriculture, 30.6% industry, 67.5% services
*Economist Intelligence Unit estimates.
Political environment

Austria is a federal republic. The head of state is the federal president, currently Heinz Fischer of the Social Democratic Party (SP˜), and the government is led by the federal chancellor, currently Alfred Gusenbauer of the SP˜. A general election took place in October 2006 but the outcome was inconclusive. As a result, in January 2007 the two main parties, the SP˜ and the Austrian People's Party (˜VP), reached an agreement to form a new "grand coalition" government.
Foreign trade and investment
Exports US$139.0bn (2006)* Imports US$134.8bn (2006)*
*Economist Intelligence Unit estimates.

Leading export markets: Germany, Italy and the US.

Austria welcomes all foreign direct investment (FDI) that does not have a negative impact on the environment, particularly in high-tech, capital-intensive and export-oriented industries. Investment based on research and development (R&D) is eligible for tax incentives.

Trade is governed by EU rules and the rules of the World Trade Organisation (WTO). The EU has a single external tariff and a single market within its external borders. Restrictions on imports and exports apply in areas such as dual-use technology, protected species and some sensitive products from emerging economies.
Business and financing
Business forms Limited liability company, joint stock company

Most foreign investment is carried out through the limited liability company (GmbH); the rest is divided evenly between the joint stock form (AG) and various partnerships. The main advantages of a GmbH over an AG are that minimum capital requirements are lower, managers can be replaced more easily, shareholders have more control over managers, voting rights can be freely regulated and publication of annual business reports is not mandatory for smaller firms.
Labour environment
Unemployment rate 4.8% (2006)* Minimum wage No minimum wage
*Economist Intelligence Unit figure.

Although there is no government-set minimum wage, nationwide collective-bargaining agreements set minimum wages by job classification for each industry.

Industrial relations are good owing to a history of co-operation among government, industry and trade unions, even though the governmentÌs 2003 pension reform, which phases out early retirement by 2014 and unifies different occupational schemes, sparked the countryÌs biggest strikes in 50 years.

Social insurance is compulsory and comprises health insurance, old-age pension insurance, unemployment insurance and accident insurance.
Taxation
Corporate tax
Main rate 25%

A company is considered resident in Austria if its effective management is in Austria or it is incorporated in Austria. Resident companies are taxed on worldwide income; non-resident companies are taxed on Austrian-source income only. A flat rate of 25% applies for both distributed and undistributed profits. General and limited partnerships are transparent for tax purposes and the profits are taxed at the level of the partners.
Individual tax
Progressive rates up to 50% on income exceeding ƒ51,000

Residents are taxed on their worldwide income. A resident is defined as an individual whose home is in Austria or who has been in Austria for more than six months. Non-residents are subject to tax only on certain Austrian-source income, and are generally ineligible for personal deductions. There are four tax bands ranging from 0% to 50%.
Capital gains
Taxed as income; there is a participation exemption

Capital gains of companies are taxed as ordinary income and subject to the normal corporate tax rate. Gains on the sale of shares in non-resident companies are exempt where the parent company holds 10% for at least one year. Tax on gains from the sale of movable or immovable property may be deferred, subject to certain conditions. Corporations, however, are not eligible for this tax deferral. Some capital gains of individuals are taxed as income. Reduced rates or exemptions apply to some gains on shares.
Indirect tax
Standard rate (VAT) 20% Other rate 10%

Value-added tax (VAT) is levied on most goods and services. The lower rate of 10% applies to foodstuffs, agricultural products, rents, tourism and entertainment. Banking transactions are exempt, and a zero rate applies to exports.

The registration threshold is ƒ22,000 annual turnover.
Tax administration and compliance
Tax year Corporations: corporate year; Individuals: calendar year

Companies and individuals whose income is not subject to tax deduction at source make quarterly prepayments of tax, based on liability in the previous year. Prepayments are credited against the final tax liability, and excess prepayments are refunded. Wages and salaries are taxed by deduction at source.
Additional tax information
Withholding taxes Dividends 25%, Interest 0%, Royalties 20%.
Tax treaties Austria has more than 65 tax treaties.
Dividends Taxable, with a participation exemption.
Revenue protection Transfer-pricing legislation and an abuse-of-law doctrine. There is no thin-capitalisation legislation but case law applies.
Groups Financially integrated companies eligible for group relief from January 1st 2005; economic integration not a prerequisite.
Incentives Invention allowance; deductions for holders of newly issued shares; and research and development (R&D).
Other taxes Excise duties, Real estate transfer tax, Import duties, Real estate tax, Municipalities levy, Payroll tax.