ENTERING THE AUSTRIAN MARKET

Companies planning on entering the Austrian market, either with investment or by establishing their corporate presence in the country, can enjoy many opportunities.

Austria is situated in the heartland of Europe and is part of the Single Market. It has easy access to the other 27 countries of the European Union, plus Iceland, Liechtenstein, Norway and Switzerland, for the free movement of people, capital, goods and services. It is one of Europe’s wealthiest countries with a stable economic and political landscape. It also provides companies using Austria as a foothold for further expansion into Europe, with around 450 million consumers to target. Its highly developed and steadily growing economy is built on a firm manufacturing base topped by a thriving tourism sector. A key statistic highlights the attraction for foreign companies: the per capita income of US$53,973 is the 13th in the world and makes Austria the sixth-richest nation in the EU.

Manufacturing industries include food production, mechanical engineering, steel construction, chemicals and the automotive sector. The luxury goods market includes hand-crafted articles, costume jewellery, ceramics and glassware. Manufacturing features basic processes and complex, labour-intensive production processes combining technological know-how and operational expertise. Incoming companies can draw on a highly-skilled, well-educated workforce with comparatively low unemployment. Tourism is another strong pillar of the Austrian economy; through 2021-22, Austria was on the fringe of the world’s top 10 most-visited tourist nations.

Starting a business in Austria

Foreign companies entering the Austrian market for their International Expansion plans must establish a legal entity before hiring staff and operating their payroll. The typical choice is to open a subsidiary as a private limited liability company, known in Austria as a GmbH. It incorporates through the Commercial Register, operates under the Austrian Company Act and follows the Code of Corporate Governance regarding management regulations.

Procedures for incorporation include the following steps:

  • File application form to open a subsidiary at the local office of the Commercial Register, with notarized signatures of the company’s directors or managers and the shareholders’ declaration of intent to set up the company
  • Under the Company Act, the unique company name must reflect the nature of the business and be verified by the Chamber of Commerce.
  • Register with the Association of Austrian Social Insurance Institutions (HVB) via’ ELDA’, the electronic data exchange
  • Register with the appropriate local municipality office of the Tax Authority Austria (TAA)
  • File notarized Articles of Association with the Commercial Register, plus resolution on appointment of directors and managing director
  • Register the individual contribution of each shareholder with the Commercial Register
  • Open a corporate bank account as part of the incorporation process
  • Generally, minimum capital is €35,000 (US$34,895), with €17,500 (US$17,447) paid into the bank in cash
  • Confirmation from the bank that the share capital has been deposited
  • Register a legal business address necessary to be considered a legal entity

Expanding your business into Austria

Opening a subsidiary when entering the Austrian market can create challenges. Moving staff across the world involves complications surrounding immigration documentation and work permits. When employees are in place, who will handle payroll? How will your company deal with regulations on taxation, entitlements and benefits, termination and severance? Drawing up an expansion blueprint is not enough. By partnering with a Professional Employment Organisation (PEO) and Employer of Record (EOR) such as Bradford Jacobs, companies can plot a time-efficient and cost-effective route to locating and employing staff in Austria.

Austria is an attractive target for foreign investment, with many incentives. Still, there are always considerations regarding compliance with relevant legislation, including the General Civil Code (AGBG) and various employment statutes that lay down the obligations of employers and protect the rights of their employees. There are other issues, too. Where will you find manufacturers, offices and distributors?

Where to locate within the country?

There are nine regions within Austria, all offering opportunities to go-getter entrepreneurs in the business community:

Vienna is Austria’s capital, economic hub and research centre, housing over 200 multinational headquarters. It is a hive of commercial activity for foreign businesses with more than 100,000 employees and an estimated investment of €75 million. This city provides routes to the CEE (Central and Eastern Europe) countries, top-quality international airports and universities with excellent infrastructure.

Lower Austria offers science, technology, medical research locations and Business Clusters for food, plastics, mechatronics and the green construction industry, with 16 state-of-the-art business parks throughout the area with over 1,100 domestic and international companies, employing nearly 24,000 staff.

Burgenland is an essential route to Slovakia, Slovenia and Hungary, has premium road and rail networks, and is within 100 km of three international airports. It boasts six technology centres.

Styria is the place for launching new products. It enjoys a dynamic education system, several research institutions and an innovative community with five Business Clusters in mobilities, materials, eco-world, wood and human technology with 18 Competence Centres.

Considerations when locating your office in the midst of what Austria has to offer:

  • What government funding, grants, subsidies, or tax benefits exist for start-ups?
  • Are the premises near wholesalers, manufacturers, and distributors offering ‘just-in-time’ inventory management?
  • What business hubs or clusters offer networking opportunities, improved supply chains, research, and development opportunities with appropriate office space?
  • How active and vibrant is the locale, with a healthy business environment providing proximity to commercial services?
  • Does it have good facilities for staff, make the right impression on clients, and provide suitable transport links?
  • Is it fit for purpose but within budget … and still has room for expansion?
  • Does it have good infrastructure with appropriate services such as WIFI, internet etc.?

As of 2022, Austria does not have any Free Trade Zones.

Some Austrian Facts

  • Capital – Vienna.
  • Population – 8.97 million (2021).
  • Regions – Vorarlberg, Tyrol, Salzburg, Upper Austria, Lower Austria, Vienna, Styria, Carinthia, Burgenland.
  • Official language – German (Croatian, Slovene and Hungarian are recognised as official languages of autonomous groups in some regions).
  • Economy – US$481.21 billion, 28th (2021).
  • Leading sectors by GDP – (approx.) Service 70%, industry 28%, agriculture 1%.
  • Primary exports include –Machinery inc. computers, electrical Machinery and equipment; pharmaceuticals, plastics; iron and steel; wood; optical and medical apparatus; paper products.
  • Leading imports include Machinery, computers, vehicles, mineral fuels, inc. ,oil; pharmaceuticals; plastics.
  • Main trading partners – Germany, Italy, US, Switzerland, Poland, Slovakia, France, Hungary, Czech Republic, China, UK, Slovenia.
  • Government – Federal parliamentary republic
  • Currency – Euro (EUR)

Advantages and Challenges when entering the Austrian Market

Some advantages of entering the Austrian market include the following:

  • Consumers: As the sixth-richest economy in the EU, Austrian consumers have above-average purchasing power.
  • Employment: Good working relationship and cooperation between employers, employees and workers’ councils.
  • Security: Stable and peaceful society with a strong sense of safety and a relatively low crime rate.
  • Taxation: Corporate rates are due to decrease through 2023 and beyond.
  • Business: Foreign investors have access to funding for SMEs, start-ups and R&D.
  • Infrastructure: Heavy investment in road and rail links, optimizing Austria’s trade with surrounding European nations, plus transportation along the Danube River and six international airports.

Some challenges of entering the Austrian market include:

  • Population: Relatively small population of under nine million limits domestic market opportunities.
  • Labour: Costs are among the top 30% of European Union members.
  • Regulation: A combination of company registration procedures and multi-layered employment laws can deter investors.
  • Economy: Dependence on German and Central and Eastern Europe economies.

LOOKING TO EXPAND INTO AUSTRIA?

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