SUBSIDIARY ENTITY SET UP IN AUSTRIA

Corporations planning to extend operations beyond their borders and shores can open a subsidiary overseas to establish a foothold for “testing the market”. This can be a risky business venture – costly both in time and money – with no guarantee of success from the effort and financial investment. The strength of Austria’s stable and developing economy sees it inside the world’s top 20 countries for per capita Gross Domestic Product – and the sixth richest in the European Union. Landlocked Austria’s infrastructure and superb logistics capitalize on its ideal location in Central Europe with trading corridors stretching north, south, east and west, plus six international airports.

Foreign companies must establish a subsidiary in Austria to hire staff and operate their payroll. The most popular choice is to open a private limited liability company, a GmbH. It is incorporated through the Commercial Register, operates under the Austrian Company Act and follows the Code of Corporate Governance, which sets out the management rules. Warning! Expanding overseas is a significant step. If the move fails, companies face the added costs and bureaucracy of closing their operation, selling property and paying off employees. These are unwanted distractions while also concentrating on building a business in your home country.

The sensible alternative is to use a Professional Employment Organisation (PEO) and Employer of Record (EOR), such as Bradford Jacobs, to find the best local talent and administer your payroll in Austria. Your company will be up-and-running in days rather than weeks or months without any risks.

How to Set Up an Austrian Subsidiary?

Before taking the first steps into the Austrian economy, foreign companies must decide which business structure best suits their plans. The most popular choice is to launch a subsidiary as a private limited liability company, a GmbH, which offers protection to both its shareholders and the parent company. The company is incorporated through the Commercial Register, operates under the Austrian Company Act and follows the Code of Corporate Governance, which sets out the regulations for management. Incorporation requirements and procedures include:

  • Filing application form to open a subsidiary at the appropriate office of the Commercial Register, with notarized signatures of the company directors or managers, shareholders’ declaration of intent to set up the subsidiary
  • To comply with the Company Act, the unique company name must reflect the nature of the business and be verified by the Chamber of Commerce
  • Registering with the Association of Austrian Social Insurance Institutions (HVB) via ’ELDA’, the electronic data exchange
  • Registering with the appropriate local municipality office of the Tax Authority Austria (TAA) and for Value Added Tax, which can be delayed until the turnover threshold is reached. Foreign companies must be registered at the start of operations
  • Filing notarized Articles of Association and the contribution of each shareholder with the Commercial Register
  • Legally register a business address in Austria with the Commercial Register
  • The corporate bank account must be opened as part of the incorporation process
  • Generally, the minimum capital for the GmbH is €35,000 (US$34,895), with €17,500 (US$17,447) paid into the bank account
  • Confirmation from the bank that the share capital has been deposited
  • A GmbH ‘privileged at foundation’ GmbH helps start-ups with limited financial resources and can have a minimum share capital of €10,000 (US$9,970) with €5,000 (US$4,985) paid in cash into the bank account. After ten years the share capital must comply with the regulations at the time

Once incorporated, the company must follow other procedures before they can operate payroll for the staff of their subsidiary, including:

  • Obtaining a contributions account number with the HVB via ’ELDA.’
  • Registering employees with the HVB to obtain or verify, their social security number (SV) and designate their category of employment, such as white-collar or manual
  • Registering employee’s date of birth, start date, level of insurance (full or partial), occupational pension plan start date, if there is a formal contract
  • Employees must be registered with the relevant local office of the Tax Authority Austria (TAA)

Note: Nationals from the European Union (EU) and those from the European Economic Area (EEA) nations of Iceland, Norway and Liechtenstein, plus Switzerland, have free access to the Austrian employment market and do not require authorization from labour market authorities.

Benefits of Setting Up an Austrian Subsidiary

The foreign-owned subsidiary in Austria operates under the Company Act as a separate legal entity independent from the parent company. It follows the management regulations of the Code of Corporate Governance. As a private limited liability company, a GmbH, the subsidiary protects from liabilities to the foreign parent company and the shareholders, who are generally liable only to the value of their share contribution.

Additionally, the subsidiary can ‘test the market’ in Austria by following its business ideas and entering into different areas of operation for the owning company. The subsidiary can also draw up its contracts and agreements with clients. Other benefits for a subsidiary:

  • Easier to obtain potential benefits and incentives and enter into contracts with other Austrian and European Union companies
  • Subsidiaries will have more impact on clients and suppliers, as they imply more permanency than branches
  • Employees feel there is more stability and job security than from being with a branch

However, there is a more straightforward option to the risks and costs of setting up a subsidiary in Austria and working with Bradford Jacobs in Austria. Using a global Professional Employment Organisation (PEO) such as Bradford Jacobs means staff can be sourced, placed in their roles, and be up and running within days rather than months. All the payroll, taxation and compliance difficulties are under control thanks to our Employer of Record (EOR) services.

Subsidiary Laws in Austria

A subsidiary set up in Austria as a private limited liability company (GmbH) is incorporated through the Commercial Register, operates under the Austrian Company Act and follows the Code of Corporate Governance regarding the regulations for management. Incorporation requirements and procedures include:

Registration and Documentation:

  • Filing application form to open a subsidiary with the Commercial Register, with notarized signatures of the company directors or managers and shareholders’ declaration of intent to set up the subsidiary
  • Register the company name, unique to Austria, with the local Chamber of Commerce
  • Register with the Association of Austrian Social Insurance Institutions (HVB) via the electronic data exchange, ’ELDA.’
  • File notarized Articles of Association and resolution on appointment of directors and the contribution of each shareholder with the Commercial Register
  • Business address legally registered in Austria

Accounts and Taxation:

  • Register with the local municipality office of the Tax Authority Austria (TAA)
  • The corporate bank account must be opened as part of the incorporation process
  • Generally, the minimum capital for the GmbH is €35,000 (US$34,895), with €17,500 (US$17,447) paid into the bank in cash. Reduced minimum capital requirements apply to a GmbH ‘privileged at the foundation.’
  • The subsidiary is liable for Corporation Tax, while profits distributed to shareholders are liable for income tax (withholding interest tax)
  • Corporate tax returns must be filed annually.
  • Depending on the balance sheet, turnover and number of employees, annual financial statements may need to be audited by a registered auditor and lodged with the Commercial Register
  • Shareholders’ contributions must be lodged with Commercial Register

Management:

  • Unlimited number of shareholders, limited only by the number of shares as each must equal €70
  • Appoint a managing director
  • Management is responsible for running the company, with a supervisory board, if any, to oversee management and sanction certain business transactions
  • An annual shareholders meeting and quarterly supervisory board meetings, if the supervisory board is in place.
  • Directors’ meetings need only be held if management decisions are required.

LOOKING TO EXPAND INTO AUSTRIA?

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