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Facilitiations and financial reliefs for foundation of companies with limited liability

Austria

This article was republished in Bloomberg BNA's Tax Planning International, September 2013

Under current legislation in Austria, the minimum stock capital of an Austrian company with limited liability (“GmbH”) is the highest within the EU where the average minimum stock capital amounts to approximately EUR 8,000. After years of discussion, the amendment of the Austrian “Limited Liability Companies Act” will enter into effect on 1 July 2013. The primary objective is to facilitate the establishment of “companies with limited liability” as well as to reduce start-up costs. Existing companies with limited liability are also allowed to reduce their minimum share capital. Taxand Austria explores these new developments and their consequences for global businesses.

The key amendment to Austrian legislation reduces the current minimum share capital of EUR 10,000 (at least half of which must be contributed in cash). This reduction in turn affects the minimum corporate tax (which is due even if no income is generated) by reducing it from EUR 1,750 to EUR 500. 

Other changes include the reduction of start-up costs related to the mandatory execution of articles of association via a notarial deed. Until now, notarial fees were based on the amount of share capital. But the new changes indicate that the fee for the notarial deed will be established on a uniform assessment basis of EUR 1,000, if the following conditions are met:

  • The shareholders are individuals who establish an entirely new company with a share capital below EUR 35,000 and 
  • The shareholders provide articles of association, which don’t require any additional amendments by the notary public (savings of EUR 580)

In addition, the publication of the registration of the newly founded company in the official gazette is no longer required (average savings of EUR 150). 

The duty of the managing director(s) to convene a shareholders’ assembly was extended. This extension is applicable where an equity ratio is below 8%, and if a notional debt repayment period is more than 15 years. This step was necessary as the former provisions were based on a loss equal to half of the share capital, whereas now that figure is lower. 

The amendment also entitles and obliges a shareholder who holds more than 50% of the company’s share capital, to request the opening of insolvency proceedings in the event that no representatives are appointed by the corporation.

As mentioned, existing companies with limited liability are also allowed to reduce their minimum share capital. This should be considered as a potential alternative to the distributions of profits; the capital reduction mentioned above is not subject to a withholding tax at a rate of 25%.


Your Taxand contact for further queries is:
Herta Vanas
T. 0043 1 533 86 33 800
E. herta.vanas@taxand.at

This article was republished in Bloomberg BNA's International Tax Strategies, September 2013

Taxand's Take

The changes of the Austrian “Limited Liability Companies Act” are designed to facilitate the establishment of companies with limited liability in financial and administrative terms.

Establishing companies with limited liability is now easier and less expensive than before and should therefore increase the attractiveness of the Austrian market, particularly for newly founded companies with low funding

Taxand's Take Author

Herta Vanas
Austria

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