PORTFOLIO

Business Operations in Austria (Portfolio 952)

Tax Management Portfolio, Business Operations in Austria, contains general information to enable foreign businesses to determine the best method of conducting their operations in Austria from both a tax and a general legal perspective.

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DESCRIPTION

The Portfolio analyzes the forms of doing business in Austria and provides a detailed analysis of the tax rules applicable to corporations, individuals, partnerships and other legal entities. In addition to providing a detailed explanation of the Austrian system of income and corporate income tax, the Portfolio discusses value added tax, real property transfer tax, capital transfer tax, inheritance and gift tax and special provisions relating to multinational corporations.

The Worksheets include the most important tax returns and questionnaires for corporations subject to unlimited as well as limited tax liability and individuals. Forms for the creation of a business, the VAT return and useful information for customs duties purposes also are included.


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AUTHORS

Business Operations in Austria was authored by the following experts.
MICHAEL SEDLACZEK
Michael Sedlaczek, Universities of Vienna and Innsbruck, Master of Laws (1988), Doctor of Jurisprudence (1992); member, Austrian Bar; member, International Academy of Estate and Trust Law, International Fiscal Association and International Bar Association.

HERBERT BUZANICH
Herbert Buzanich, University of Vienna, Master of Laws (1998), Doctor of Jurisprudence (2001); LL.M. International Tax (NYU 2004); member, Austrian Bar; member, New York State Bar; member, American Bar Association; member, International Fiscal Association.

TABLE OF CONTENTS

Detailed Analysis

I. Austria -- An Overview

A. Austria -– the Country, its People and Economy

1. Population

2. Political Organization

3. Economic Structure

B. Sources of Law

1. Basic Principles of the Constitution

2. Statutes

a. Constitutional Law

b. Ordinary Statutes

3. Regulations (Verordnungen)

4. Historical Background

5. Court System

II. Operating a Business in Austria

A. Foreign Investment Regulations

1. Opportunities

2. Incentives

3. Trade License

B. Currency and Exchange Controls

1. Currency - Austria's Transition to the Euro

2. Exchange Controls

a. Foreign Trade Act

b. Foreign Exchange Act

C. Trade and Commerce Regulations

1. Imports and Exports

a. Licenses and Quotas

b. Customs Duties and Other Taxes

c. Documentation

2. General Regulations of Business

a. Antitrust

(1) General

(2) Cartels

(3) Dominant Position

(4) Austrian Merger Control

(5) EC Antitrust Law

b. Unfair Trade Practices

c. Public Procurement

d. Price Controls

e. Securities Regulations

(1) Securities Supervision Act

(2) Stock Exchange

3. Notification Requirements and Takeover Rules

4. Licensing and Franchising in Austria

a. General

b. Protection Afforded to Intangible Industrial Property Rights

(1) Patents - General

(2) Employees’ Inventions

(3) European Patent

(4) Trademarks

(5) Models (Designs)

(6) Utility Models

(7) Copyrights

D. Employment of Alien Individuals in Austria

1. Residence Requirements

2. Employment Requirements

E. Labor Legislation

1. Individual Employment Contract

2. Collective Bargaining Agreements

3. Co-determination - Labor Participation on Corporate Boards

a. Employee Representation on Supervisory Board

b. Works Council (Betriebsrat)

c. Plant Agreement

F. Banking and Finance

1. Financial Markets

a. Stock Exchange

b. Insider Trading

c. Participation Bonds (Genussscheine)

d. Investment Funds

2. Banking

a. Banking Secrecy

b. Money Laundering

III. Forms of Doing Business in Austria

A. General

1. Commercial Code versus Corporate Code

2. Commercial Register

B. Principal Business Entities

1. Sole Proprietor

2. Partnership

a. Civil Law Association

b. General Partnership

c. Limited Partnership

d. Silent Partnership

3. Limited Liability Company

a. General

b. Formation

(1) General

(2) Company Name

(3) Founder(s)

(4) Object of the Business

(5) Stated Share Capital, Shares

(6) Incorporation Procedure

(7) Costs of Incorporation

c. Operation

(1) License

(2) Amendment of the Articles of Association

(3) Increase in Stated Capital

(4) Reduction of the Stated Share Capital

(5) Voluntary Shareholder Contributions

(6) Transfers of Share Quotas and Disclosure of Identity of Shareholders

(7) Management

(8) Supervisory Board - Advisory Board

(9) Shareholders' Meetings

(10) Financial Statements

(11) Books and Records

(12) Shareholders and Their Rights

d. Dissolution and Liquidation

4. Stock Corporation

a. General

b. Formation

(1) Company Name

(2) The Founders

(3) Articles of Association

(4) Stated Share Capital

(5) Incorporation Procedure

(6) Costs of Formation

c. Operation

(1) License

(2) Amendment of Articles of Association

(3) Increase of Stated Capital

(4) Reduction of Stated Share Capital

(5) Acquisition of Corporation's Own Shares

(6) Board of Directors

(7) Supervisory Board

(8) Shareholders' Meetings

(9) Books and Records

(10) Financial Statements

d. Dissolution and Liquidation

5. European Company - Societas Europaea

a. Formation

(1) Company Name

(2) Formation

(a) Formation of a Holding Societas Europaea

(b) Formation of a Subsidiary Societas Europaea

(c) Formation by Merger

(d) Formation by Conversion

b. Organization of a Societas Europaea

(1) Two-Tier System

(2) One-Tier System

c. Transfer of Registered Office of a Societas Europaea to Another Member State

6. Branch Office of a Foreign Legal Entity

7. Private Foundation

a. Establishment

b. Assets

c. Purpose

d. Bodies of Private Foundations

e. Accounting

f. Revocation or Amendment of Declaration of Establishment

g. Special Tax Regime for Foundations

(1) Estate Duty and Gift Tax

(2) Corporate Tax

(3) Taxation of Distributions to Beneficiaries

(4) Taxation on Dissolution of Private Foundation

IV. Austrian Tax Law –– An Overview

A. Principal Taxes

1. Income Tax

2. Corporate Income Tax

3. Net Worth Tax, Trade Tax

4. Value Added Tax

5. Inheritance and Gift Tax

6. Municipal Taxes

B. Recent Tax Reforms

V. Taxation of Resident Corporations

A. What is a Resident Corporation?

B. Corporate Income Tax

1. Taxation of Worldwide Income

2. Corporate Income Tax System

a. Status of Branch Offices

b. Shareholder Contributions, Use of Income, Capital Decrease and Repayments of Capital

(1) Shareholder Contributions

(2) Use of Income (Overt and Hidden Distribution of Profits)

(3) Capital Decreases and Repayment of Equity

3. Accounting

a. General

b. Accounting Period

c. Accounting Methods

d. Methods of Valuation

(1) Depreciable Fixed Assets

(2) Other Assets

(3) Liabilities

(4) Provisions

(5) Contributions in Kind

(6) Distributions in Kind

e. Consolidated Returns

4. Calculation of Gross Income

a. General

b. Capital Gains

(1) General Rule

(2) Rollover Relief

(3) Reorganizations

(4) Transfer of Assets Abroad

(5) Capital Gains from Sale of Shares in Foreign Subsidiaries

c. Dividend Income

(1) In General

(2) Domestic Participation Exemption

(3) International Participation Exemption

(4) Depreciation of Equity Interest to Lower Going Concern Value after Distribution of Dividends

d. Income from Foreign Sources

e. Income from Shares in Domestic and Foreign Investment Funds

f. Exclusions from Income

(1) Contributions to Capital

(2) Premiums on Share Issues

(3) Rehabilitation Gains

5. Business Expenses and Other Allowable Deductions

a. General

b. Expenses Incurred in Achieving Corporate Purpose

c. Travel and Entertainment Expenses

d. Donations in Cash or in Kind

e. Donations to Nonprofit Organizations

f. Taxes

g. Payments to Supervisory Board Members

h. Repairs and Maintenance

i. Expenses Directly Connected to Tax Exempt Income

j. Amortization of Fixed Assets

(1) General

(2) Basis and Methods of Depreciation

(3) Rate of Depreciation

(4) Accelerated Depreciation

(5) Other Assets

(6) Investment Allowance

k. Obsolete Equipment

l. Reserve Accounts

(1) Liability Reserves

(2) Contingency Reserves

(3) Reserves for Loss Contingencies

m. Bad Debts

n. Casualty Losses

o. Salaries and Other Compensation

p. Employer's Social Welfare Expenses, Reserves for Severance Payments, Pension Reserves and Jubilee Reserves

q. Inter-company Charges

6. Capital Expenditure

7. Fictitious Interest Expenses with Respect to Increases of Equity

8. Loss Carryforward and Carryback

a. In General

b. Anti-loss Trafficking Rules

9. Tax Credits

a. Foreign Tax Credits

b. Incentive to Promote Investment

10. Consolidation of Profits and Losses of More Than One Entity

a. Use of Atypical Silent Partnership Agreements

b. Organschaft

c. Group Taxation Regime

11. Tax Rates

12. Assessment and Filing

a. Tax Returns

b. Payment of Tax

c. Minimum Corporate Income Tax

d. Audits

e. Statute of Limitations

f. Interest

g. Rulings

13. Reorganizations

a. The Reorganization Tax Act

b. Liquidation of a Corporation

VI. Corporate Income Tax - Nonresident Corporations

A. What Is a Nonresident Corporation?

B. Determination of Taxable Income

1. Business Profits

2. Capital Gains from Sale of Shares in Resident Corporation

3. Income from Capital Investment

a. General

b. Dividends

c. Interest

4. Rentals and Royalties

5. Sale of Domestic Property

C. Method of Assessment - Tax Rate

1. Assessment

2. Tax Rates

D. Subsidiary Versus Branch

VII. Taxation of Partnerships

VIII. Taxation of Resident Individuals

A. Scope of Taxation

B. Residence

1. Residence Defined

2. Elective Status as Resident Taxpayer

C. Determination of Gross Income

1. Business Income

a. Agricultural and Forestry Income

b. Income from Independent Services

c. Income from a Trade or Business

(1) Definition

(2) Termination of a Business

(3) Business Expenses and Other Allowances

2. Income from Dependent Services

3. Income from Capital Investment

a. General

b. Final Taxation (Capital Income Tax)

4. Capital Gains

a. General

b. Capital Gains Derived in Connection with Trade or Business

c. Speculative Transactions

d. Sale of Qualified Shareholdings

D. Income from Shares in Domestic and Foreign Investment Funds and Real Estate Investment Funds

1. Austrian Investment Funds

a. Capital Gains

b. Distribution of Dividends

c. Distributions of Interest Payments

d. Commercial Investor as Unit Holder

2. Non-Austrian Investment Funds

a. Distribution of Capital Gains

b. Distribution of Dividends and Interest Payments

c. Commercial Investor as Unit Holder

d. Security Tax

3. Sale of Units in Investment Fund

4. Austrian Real Estate Investment Funds

a. Definition

b. Taxation of the Investors in Austrian Real Estate Investment Funds

c. Sale of Units in Austrian Real Estate Investment Funds

5. Non-Austrian Real Estate Investment Funds

a. Definition

b. Taxation of Investors in Non-Austrian Real Estate Investment Funds

c. Security Tax

d. Sale of Units in a Non-Austrian Real Estate Investment Funds

E. Calculation of Taxable Income

1. Losses

2. Special Expenses

3. Extraordinary Burdens on Taxpayers

4. Revitalization Profits (Sanierungsgewinne)

5. Tax Credits

a. Sole Earner Credit

b. Sole Educator Credit

c. Tax Credit for Dependent Children and Alimony Payments

d. Tax Credit for Employees

e. Retirement Credit

f. Retirement Credit

F. Tax Rates

G. Assessment and Filing

H. Taxation of Employees Working Abroad

IX. Taxation of Nonresident Individuals

A. General

B. Business Income

1. Agriculture and Forestry

2. Independent Professional Services

3. Trade or Business

C. Income from Dependent Personal Services

D. Investment Income

E. Rental Income and Royalties

F. Capital Gains

G. Method of Taxation

X. Value Added Tax

A. Development and System

B. Entrepreneur

C. Taxable Events

1. Supply of Goods

2. Supply of Services

a. Situs of Real Property

b. Place of Transportation

c. Place Where Activity Is Carried Out

d. Location of Recipient

e. Lease of Means of Transportation

f. Procurement Services

g. Telecommunications Services

3. Self-Supply

a. Withdrawal of Goods

b. Withdrawal of Services

c. Expenses That Are Not Deductible for Income Tax Purposes

d. Services Abroad

4. Importation of Goods from Non-European Union Countries

5. Supply of Goods within European Union

D. Tax Base

E. Tax Rates

F. Tax Exemptions

1. Zero-rated Supplies

2. Exempt Supplies

G. Deduction of Input Tax

H. Assessment of Value Added Tax

I. Special Regime for Small Entrepreneurs

J. Special Rules for Non-Austrian Entrepreneurs

1. Value Added Tax Refund Procedure for Foreign Entrepreneurs

2. Special Exemption for Non-Austrian Entrepreneurs

3. Reverse Charge System

4. Fiscal Agent

XI. Transfer Taxes

A. Real Property Transfer Tax

1. Taxable Events

2. Tax Rate

3. Refund of Real Property Transfer Tax

B. Capital Transfer Taxes

1. General

2. Taxable Events

3. Tax Rate

XII. Inheritance and Gift Tax

A. General

B. Exemptions and Reliefs

C. Valuation

D. Tax Rates

E. Procedures

F. Impact of Tax Treaties

XIII. Special Provisions Relating to Multinational Corporations

A. Attribution of Foreign Base Company Income to Resident Taxpayer

1. General

2. Predominant Object of the Business

3. Tax Comparable to Austrian Corporate Income Tax

B. Exchange of Information

1. Double Taxation Conventions

a. General

b. Limitations on Exchange of Information Requirements

c. Maintenance of Secrecy

2. Bilateral Conventions on Legal and Administrative Assistance

3. Law on intra-European Union Administrative Assistance

a. General

b. Maintenance of Secrecy

4. Value Added Tax Information Exchange System

XIV. Avoidance of Double Taxation

Introductory Material

A. Unilateral Measures

1. Section 48 of the Fiscal Code

2. Section 6(3) of Inheritance and Gift Tax Act

3. Section 103 of Income Tax Act

B. Double Taxation Agreements

1. Austria's Tax Treaty Policy

2. Application of Double Taxation Agreements

a. Personal Scope

b. Taxes Covered

c. Methods of Eliminating Double Taxation

3. Main Principles of Austria's Tax Treaties, in Particular 1996 Austria - United States Tax Treaty

a. Taxation of Business Profits

b. Taxation of Investment Income

(1) Dividends

(2) Interest

(3) Royalties

c. Capital Gains

d. Treaty Shopping

4. 1982 Austria-United States Gift and Inheritance Tax Treaty

a. Taxable Events

b. Special Tie-Breaker Rule

c. Attribution of Taxing Rights and Methods for Elimination of Double Taxation


WORKING PAPERS

Working Papers

Table of Worksheets

Worksheet 1 Corporate Income Tax Return for Corporations That Are Subject to Unlimited Tax Liability and Have Accounting Obligations

Worksheet 2 Corporate Income Tax Return for Corporations That Are Subject to Unlimited Tax Liability and Do Not Have Accounting Obligations

Worksheet 3 Corporate Income Tax Return for Corporations That Are Subject to Limited Tax Liability

Worksheet 4 Income Tax Return for Individuals

Worksheet 5 Income Tax Return for Individuals Who Are Subject to Limited Tax Liability

Worksheet 6 [Reserved]

Worksheet 7 Income Tax Return of an Employee

Worksheet 8 Annual Value Added Tax Return

Worksheet 9 Monthly Value Added Tax Return

Worksheet 10 Claim for the Refund of Value Added Tax to Nonresident Entrepreneurs

Worksheet 11 Request for a Value Added Tax Identification Number

Worksheet 12 Certificate Regarding the Existence of a Permanent Establishment

Worksheet 13 [Reserved]

Worksheet 14 [Reserved]

Worksheet 15 [Reserved]

Worksheet 16 Inquiry for Binding Information Regarding the Applicable Customs Duty Tariff

Worksheet 17 Declaration of the Initial Founding of a Business

Worksheet 18 Tax Clearance Certificate

Worksheet 19 [Reserved]

Worksheet 20 List of Comprehensive Double Taxation Agreements and Related Protocols Signed By Austria As of February 1, 2008

Worksheet 21 Table of Withholding Tax Rates

Worksheet 22 1996 Austria-United States Income Tax Treaty and Memorandum of Understanding

Worksheet 23 1982 Austria-United States Estate, Inheritance, Gift and Generation- Skipping Transfer Tax Treaty

Worksheet 24 Certificate of Residence (ZS-A)

Worksheet 25 Declaration by Individuals for the Purpose of Tax Treaty Relief at Source (ZS-QU1)

Worksheet 26 Declaration by Legal Entities for the Purpose of Tax Treaty Relief at Source (ZS-QU2)

Worksheet 27 Claim for Repayment of Austrian Withholding Tax (ZS-RE1)

Worksheet 28 Sheet A with Regard to Form ZS-RE1 (Dividends) (ZS-RE1A)

Worksheet 29 Sheet B with Regard to Form ZS-RE1 (Royalties) (ZS-RE1B)

Worksheet 30 Sheet C with Regard to Form ZS-RE1 (Other Income Subject to Withholding Tax) (ZS-RE1C)

Bibliography

OFFICIAL

Selected Laws

Other Laws

UNOFFICIAL

Treatises

National Periodicals