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. To view this Portfolio,
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Tax Management Portfolio, Business Operations in Austria, No. 7020, 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. 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 provide links to the most important tax returns and questionnaires for corporations subject to unlimited and limited tax liability and individuals, as well as to forms for the creation of a business, the VAT return and useful information for customs duties purposes also are included.
This Portfolio may be cited as Sedlaczek and Buzanich, 7020 T.M., Business Operations in Austria.
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, 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 — the Country, Its People and Economy A. Geography, Population B. Political Organization C. Austria and the European Union D. Economic Structure E. 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 4. Land Transfer Restrictions B. Currency and Exchange Controls 1. Currency 2. Exchange Controls C. Trade and Commerce Regulations 1. Imports and Exports a. Licenses and Quotas b. Customs Duties and Other Taxes 2. General Regulations of Business a. Antitrust (1) General (2) Cartels (3) Dominant Position (4) Austrian Merger Control (5) EU Antitrust Law b. Unfair Trade Practices c. Public Procurement d. Price Controls 3. Licensing and Franchising in Austria a. General b. Protection of Intangible Industrial Property Rights (1) Patents (2) Employee Invention (3) European Patent (4) Trademarks (5) Models (Designs) (6) Utility Models (7) Copyrights D. Employment of Foreign Nationals in Austria 1. Employment Requirements 2. Residence Requirements, Naturalization a. Residence Requirements (1) EEA and Swiss Citizens (2) Third-Country Citizens b. Naturalization E. Labor Legislation 1. Individual Employment Contract 2. Collective Bargaining Agreements 3. Co-determination — Employee Participation at Company Level and on Corporate Boards a. Works Council (Betriebsrat) b. Plant Agreement (Betriebsvereinbarung) c. Employee Representation on the Supervisory Board F. Banking and Finance 1. Financial Markets a. Financial Market Authority b. Vienna Stock Exchange c. Takeover Rules, Notification Requirements with Respect to Shareholders and Issuers d. Insider Trading 2. Banking a. Regulation of Banks and Investment Firms b. Banking Secrecy c. Money Laundering III. Forms of Doing Business in Austria A. General 1. Business Code 2. Commercial Register B. Principal Business Entities 1. Sole Proprietor 2. Partnerships 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 and Reduction of Stated Capital (4) Transfers of Share Quotas and Disclosure of Identity of Shareholders (5) Management (6) Supervisory Board — Advisory Board (7) Shareholders' Meetings (8) Financial Statements (9) Shareholders and Their Rights d. Dissolution and Liquidation 4. Stock Corporation a. General b. Formation (1) Company Name (2) Founder(s) (3) Articles of Association (4) Stated Share Capital (5) Incorporation Procedure (6) Costs of Formation c. Operation (1) License (2) Amendment of the Articles of Association (3) Increase and Decrease of Stated Capital (4) Acquisition of Own Shares (5) Board of Directors (6) Supervisory Board (7) Shareholders' Meetings (8) Books and Records (9) Financial Statements d. Dissolution and Liquidation 5. European Company — Societas Europaea a. General b. Formation (1) Company Name (2) Formation c. Organization of a Societas Europaea (1) Two-Tier System (2) One-Tier System d. Transfer of the Registered Office of a Societas Europaea to Another European Union 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. Revocation or Amendment of Declaration of Establishment f. Accounting and Disclosure Requirements IV. Austrian Tax Law –– An Overview A. Sources of Authority in Tax 1. Legislative a. Statutes b. Regulations c. Legislative Process d. Constitutional Challenge 2. Administrative 3. Courts a. Organization of Court System in Tax Matters b. Procedure for Tax Controversies B. 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 C. Recent Tax Reforms V. Taxation of Resident Corporations A. Definition of 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 e. Valuation of Particular Kinds of Assets (1) Depreciable Fixed Assets (2) Nondepreciable Assets and Current Assets (3) Liabilities (4) Contributions in Kind (5) Withdrawals in Kind (6) Provisions 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 (6) Capital Gains from Sale of Real Property c. Dividend Income (1) General (2) General 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) Premium on Share Issues 5. Business Expenses and Other Allowable and Non-allowable Expenses a. General b. Amortization of Fixed Assets (1) General (2) Basis and Methods of Depreciation (3) Rate of Depreciation (4) Depreciation of Buildings (5) Depreciation of Other Assets (6) Accelerated Depreciation c. Provision Accounts (Rückstellungen) d. Bad Debts e. Casualty Losses f. Salaries and Other Compensation g. Investment Allowance h. Expenses for Achieving Corporate Purpose i. Travel and Entertainment Expenses j. Donations in Cash or in Kind k. Donations to Nonprofit Organizations l. Taxes m. Payments to Supervisory Board Members n. Repairs and Maintenance o. Expenses with Direct Economic Connection to Tax-Exempt Income or Income Subject to Final, Flat Withholding Tax p. Debt Financing Cost for Dividend Distributions and Repayment of Equity q. Payments Subject to Court Penalties and Fines r. Intra-group Interest and Royalty Payments Subject to Low Taxation 6. Capital Expenditure 7. Fictitious Interest Expenses with Respect to Increases of Equity 8. Loss Carryforward and Carryback a. 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. Group Taxation Regime b. Use of Atypical Silent Partnership Agreements 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. Tax Neutral Reorganizations b. Liquidation of a Corporation VI. Taxation of Nonresident Corporations A. Definition of 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. Rents and Royalties 5. Sale of Domestic Property C. Method of Assessment and 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. Income from Agricultural and Forestry Business b. Income from Professional, Self-Employed Activity c. Income from a Trade or Business (1) Definition (2) Termination of a Business (3) Business Expenses and Other Allowances 2. Income from Employment 3. Income from Capital Investments a. General b. Subsidiarity c. Income from the Investment of Capital d. Capital Gains from Capital Investments and from Derivatives e. Final Taxation (Capital Income Tax) 4. Capital Gains Other Than Capital Gains from Capital Investments and Derivatives a. General b. Capital Gains Generated by the Sale of a Business c. Capital Gains from the Sale of Real Property (1) Privately Held Real Property (2) Real Property Held as a Business Asset d. Speculative Transactions D. Income from Shares in Austrian and Non-Austrian Investment Funds 1. Austrian Investment Funds a. General b. Distribution of Capital Gains c. Distribution of Dividends d. Distribution of Interest e. Distribution of Income Other than Income from Capital Investment f. Sale of Units in Austrian Investment Funds 2. Non-Austrian Investment Funds a. General b. Distributions and Deemed Distributions of Non-Austrian Investment Funds (1) Reporting Funds (2) Nonreporting Funds 3. Austrian Real Estate Investment Funds a. Definition b. (Deemed) Distributions from Austrian Real Estate Investment Funds c. Sale of Units in Austrian Real Estate Investment Funds 4. Non-Austrian Real Estate Investment Funds a. Definition b. Distributions and Deemed Distributions from Non-Austrian Real Estate Investment Funds (1) Reporting Funds (2) Nonreporting Funds c. Sale of Units in Non-Austrian Real Estate Investment Funds E. Calculation of Taxable Income 1. Total Adjusted Income a. Loss Adjustment b. Tax-Exempt Amounts 2. Special Expenses 3. Extraordinary Burdens on Taxpayers 4. Revitalization Profits 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. 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. Professional, Self-Employed Activity 3. Trade or Business C. Employment Income D. Income from Capital Investments E. Rental Income and Royalties F. Capital Gains G. Method of Taxation 1. Taxation by Way of Withholding 2. Taxation by Way of Assessment H. Tax Incentives for Moving to Austria X. Value Added Tax Introductory Material A. Development and System B. Taxable Person C. Taxable Events 1. Supply of Goods a. Definition b. Place of Supply of Goods 2. Supply of Services a. Definition b. Place of Supply of Services (1) Procurement Services to a Nontaxable Person (2) Situs of Real Property (3) Place of Transportation (4) Place Where Activity Is Carried On (5) Leasing of Means of Transportation (6) Electronic Services (7) Certain Services Rendered to a Nontaxable Person Outside the EU (8) Certain Services Rendered by a Taxable Person Conducting Business Outside the EU (9) Regulation Authority of the Federal Ministry of Finance 3. Self-Supply 4. Importation of Goods from Non-European Union Countries 5. Supply of Goods within the European Union D. Taxable Amount E. Tax Rates F. Tax Exemptions 1. Zero-rated Supplies 2. Exempt Supplies G. Deduction of Input Tax 1. Proper Invoice 2. Supply or Service for the Business of the Taxable Person 3. Payment of Value Added Tax H. Trigger and Due Date of Value Added Tax and Assessment 1. Trigger and Due Date of VAT 2. Assessment I. Special Regime for Small Taxable Enterprises J. Obligation of Receiving Taxable Person to Pay Value Added Tax K. Reverse Charge System L. Special Rules for Non-Austrian Taxable Persons 1. Value Added Tax Refund Procedure for Foreign Taxable Persons 2. Reverse Charge System 3. Fiscal Agent XI. Transfer Taxes A. Real Property Transfer Tax 1. Taxable Events 2. Tax Exempt Transactions 3. Tax Rate 4. Refund of Real Property Transfer Tax B. Capital Transfer Taxes 1. General 2. Taxable Events 3. Tax Rate XII. Inheritance and Gift Tax A. Repeal of the Inheritance and Gift Tax B. Notification Obligation 1. Notification Events 2. Exemptions from Notification Obligation 3. Consequences of Noncompliance with Notification Obligation C. Transfers to Private Foundations 1. General 2. Tax Rates and Tax Liability 3. Exemptions from Foundation Entry Tax D. Double Taxation Treaties E. Overview of the Inheritance and Gift Tax Regime Under the ErbStG 1. General 2. Tax Rates 3. Exemptions and Reliefs XIII. Special Provisions Relating to Multinational Corporations A. Foreign Base Company Income B. Exchange of Information 1. Double Taxation Agreements a. General b. Limitations on Exchange of Information Requirements c. Maintenance of Secrecy 2. Bilateral Conventions on Legal and Administrative Assistance 3. Administrative Assistance Execution Act 4. Law on Intra-European Union Administrative Assistance a. General b. Exchange of Information on Request and Refusal of Exchange of Information c. Automatic Exchange of Information d. Spontaneous Exchange of Information 5. Value Added Tax Information Exchange System 6. Intergovernmental Agreement Pursuant to FATCA 7. Common Reporting Standard XIV. Avoidance of Double Taxation Introductory Material A. Unilateral Measures 1. Section 48 of the Fiscal Code 2. Section 6(3) of the Inheritance and Gift Tax Act 3. Section 103 of the Income Tax Act B. Double Taxation Treaties 1. Austrian Tax Treaty Policy 2. Application of Double Taxation Treaties a. Personal Scope b. Taxes Covered c. Methods of Eliminating Double Taxation d. Treaty Relief at Source 3. Main Principles of Austria's Tax Treaties, in Particular the 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. Introductory Comment b. Taxable Events c. Special Tie-Breaker Rule d. Attribution of Taxing Rights and Methods for Elimination of Double Taxation
Table of Worksheets Worksheet 1 List of Countries with Which Austria Has In Force Income Tax Treaties and Other Tax-Related Agreements as of August 15, 2017 Worksheet 2 [Reserved.] Worksheet 3 1996 Austria-United States Income Tax Treaty and Memorandum of Understanding Worksheet 4 1982 Austria-United States Estate, Inheritance, Gift and Generation- Skipping Transfer Tax Treaty
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