Policies Towards Foreign Direct Investment

The Austrian government welcomes foreign direct investment, particularly when such investments have the potential to create new jobs, support advanced technology fields, promote capital-intensive industries, and enhance links to research and development.

There are no specific legal, practical or market access restrictions on foreign investment.  American investors have not complained of discriminatory laws against foreign investors. Corporate taxes are relatively low (25 percent flat tax), and the government plans to reduce them further in a tax reform to be implemented by 2022. U.S. citizens and investors have reported that it is difficult to establish and maintain banking services since the U.S.-Austria Foreign Account Tax Compliance Act (FATCA) Agreement went into force in 2014, as some Austrian banks have been reluctant to take on this reporting burden.

Potential investors should also factor in Austria’s lengthy environmental impact assessments in their investment decision-making.  The requirement that over 50 percent of energy providers must be publicly-owned creates a potential additional burden for investments in the energy sector.  Strict liability and co-existence regulations in the agriculture sector restrict research and virtually outlaw the cultivation, marketing, or distribution of biotechnology crops.

Austria’s national investment promotion company, the Austrian Business Agency (ABA), is the first point of contact for foreign companies aiming to establish their own business in Austria.  It provides comprehensive information about Austria as a business location, identifies suitable sites for greenfield investments, and consults in setting up a company. ABA provides its services free of charge.

Austrian agencies do not press investors to keep investments in the country, but the Federal Economic Chamber (WKO), and the American Chamber of Commerce in Austria (Amcham) carry out annual polls among their members to measure their satisfaction with the business climate, thus providing early warning to the government of problems investors have identified.

Limits on Foreign Control and Right to Private Ownership and Establishment

There is no principal limitation on establishing and owning a business in Austria. A local managing director must be appointed to any newly-started enterprise.  For non-EU citizens to establish and own a business, the Austrian Foreigner’s Law mandates a residence permit that includes the right to run a business. Many Austrian trades are regulated, and the right to run a business in many trades sectors is only granted when certain preconditions are met, such as certificates of competence, and recognition of foreign education.  There are no limitations on ownership of private businesses. Austria maintains an investment screening process for takeovers of 25 percent or more in the sectors of national security and public services such as energy and water supply, telecommunications, and education services, where the Austrian government retains the right of approval. The screening process has been rarely used since its introduction in 2012, but could pose a de facto barrier, particularly in the energy sector. In April 2019, the EU Regulation on establishing a framework for the screening of foreign direct investments into the Union entered into force.  It creates a cooperation mechanism through which EU countries and the EU Commission will exchange information and raise concerns related to specific investments which could potentially threaten the security of EU countries.

Other Investment Policy Reviews

Not applicable.

Business Facilitation

While the World Bank ranks Austria as the 26th best country in 2019 with regard to “ease of doing business” (www.doingbusiness.org), starting a business takes time and requires many procedural steps (Austria ranked 118 in this category in 2019).

In order to register a new company, or open a subsidiary in Austria, a company must first be listed on the Austrian Companies’ Register at a local court.  The next step is to seek confirmation of registration from the Austrian Federal Economic Chamber (WKO) establishing that the company is really a new business.  The investor must then notarize the “declaration of establishment,” deposit a minimum capital requirement with an Austrian bank, register with the tax office, register with the district trade authority, register employees for social security, and register with the municipality where the business will be located.  Finally, membership in the WKO is mandatory for all businesses in Austria.

For companies with sole proprietorship, it is possible under certain conditions to use an online registration process via government websites in German to either found or register a company: https://www.usp.gv.at/Portal.Node/usp/public/content/gruendung/egruendung/269403.html  or www.gisa.gv.at/online-gewerbeanmeldung . It is advisable to seek information from ABA or the WKO before applying to register a firm.

The website of the ABA contains further details and contact information, and is intended to serve as a first point of contact for foreign investors in Austria: https://investinaustria.at/en/starting-business/ .

According to the World Bank, the average time to set up a company in Austria is 21 days, well above the EU average of 12.5 days.

Outward Investment

The Austrian government encourages outward investment.  There is no special focus on specific countries, but the United States is seen as an attractive target country given the U.S. position as the second biggest market for Austrian exports.  Advantage Austria, the “Austrian Foreign Trade Service” is a special section of the WKO that promotes Austrian exports and also supports Austrian companies establishing an overseas presence. Advantage Austria operates six offices in the United States in Washington, DC, New York, Chicago, Atlanta, Los Angeles, and San Francisco.  The Ministry for Digital and Economic Affairs and the WKO run a joint program called “Go International,” providing services to Austrian companies that are considering investing for the first time in foreign countries. The program provides grants in form of contributions to “market access costs,” and also provides “soft subsidies,” such as counselling, legal advice, and marketing support.

Transparency of the Regulatory System

Austria’s legal, regulatory, and accounting systems are transparent and consistent with international norms.

Federal ministries generally publish draft laws and regulations, including investment laws, for public comment prior to their adoption by Austria’s cabinet and/or Parliament.  Relevant stakeholders such as the “Social Partners” (Economic Chamber, Agricultural Chamber, Labor Chamber, and Trade Union Association), the Industrial Association, and research institutions are invited to provide comments and suggestions for improvement, which may be taken into account before adoption of laws.  However, over the past year, the government has increasingly moved towards excluding outside parties from its decision-making process by either ignoring suggestions provided, or by making the time period for commenting unreasonably short. Austria’s nine provinces can also adopt laws relevant to investments; their review processes are generally less extensive, but local laws are less important for investments than federal laws.  The judicial system is independent from the executive branch, thus helping ensure the government follows administrative processes.

Draft legislation by ministries (“Ministerialentwürfe”) and resulting government draft laws and parliamentary initiatives (“Regierungsvorlagen und Gesetzesinitiativen”) can be accessed through the website of the Austrian Parliament:  https://www.parlament.gv.at/PAKT/  (all in German).  The parliament also publishes a history of all law-making processes. All final Austrian laws can be accessed through a government data base, partly in English: https://www.ris.bka.gv.at/defaultEn.aspx 

The government has simplified the process for issuing business licenses and permits.  It can take up to three months to receive a business permit but the business may commence operations as soon as all the relevant documentation has been submitted and verified.

Austrian regulations governing accounting provide U.S. investors with internationally standardized financial information.  In line with EU regulations, listed companies must prepare their consolidated financial statements according to the International Financial Reporting Standards (IAS/IFRS) system.

International Regulatory Considerations

Austria is a member of the EU.  As such, its laws must comply with EU legislation and the country is therefore subject to European Court of Justice (ECJ) jurisdiction.  Austria is a member of the WTO and largely follows WTO requirements. Austria has ratified the Trade Facilitation Agreement (TFA), but has not taken specific actions to implement it.

Legal System and Judicial Independence

The Austrian legal system is based on Roman law.  The constitution establishes a hierarchy, according to which each legislative act (law, regulation, decision, and fines) must have its legal basis in a higher legislative instrument.  The full text of each legislative act is available online for reference. All final Austrian laws can be accessed through a government data base, partly in English: https://www.ris.bka.gv.at/defaultEn.aspx .

Commercial matters fall within the competence of ordinary regional courts except in Vienna, which has a specialized Commercial Court.  The Commercial Court also has nationwide competence for trademark, design, model, and patent matters. There is no special treatment of foreign investors and the executive does not interfere in judicial matters.

The system provides an effective means for protecting property and contractual rights of nationals and foreigners.  Sensitive cases must be reported to the Minister of Justice, which can issue instructions for addressing them. Austria’s civil courts enforce property and contractual rights and do not discriminate against foreign investors. Austria allows for court decisions to be appealed, first to a Regional Court and in the last instance, to the Supreme Court.

Laws and Regulations on Foreign Direct Investment

There is no discrimination against foreign investors, but businesses are required to follow numerous local regulations.  Although there is no requirement for participation by Austrian citizens in ownership or management of a foreign firm, at least one manager must meet Austrian residency and other legal requirements.  Expatriates are allowed to deduct certain expenses (costs associated with moving, maintaining a double residence, education of children) from Austrian-earned income.

The “Law to Support Investments in Municipalities” (published in the Federal Law Gazette, 74/2017, available online in German only on the federal legal information system www.ris.bka.gv.at ), allows federal funding of up to 25 percent of the total investment amount of a project to “modernize” a municipality.

Austria has restrictions on investments into industries that could affect national security, critical infrastructure or public services.  The government has to approve any foreign acquisition of a 25 percent or higher stake in any of these industries.

Competition and Anti-Trust Laws

Austria’s Anti-Trust Act (ATA) is in line with European Union anti-trust regulations, which take precedence over national regulations in cases concerning Austria and other EU member states.  The Austrian Anti-Trust Act prohibits cartels, anticompetitive practices, and the abuse of a dominant market position. The independent Federal Competition Authority (FCA) and the Federal Antitrust Prosecutor (FAP) are responsible for administering anti-trust laws.  The FCA can conduct investigations and request information from firms. The FAP is subject to instructions issued by the Justice Ministry and can bring actions before Austria’s Cartel Court. Additionally, the Commission on Competition may issue expert opinions on competition policy and give recommendations on notified mergers.  The most recent amendment to the ATA was in May, 2017. This amendment facilitated enforcing private damage claims, strengthened merger control, and enabled appeals against verdicts from the Cartel Court.

Companies must inform the FCA of mergers and acquisitions (M&A).  Special M&A regulations apply to media enterprises, such as a lower threshold above which the ATA applies, and the requirement that media diversity must be maintained.  A cartel court is competent to rule on referrals from the FCA or the FCP. For violations of anti-trust regulations, the cartel court can impose fines of up to the equivalent of 10 percent of a company’s annual worldwide sales.  The independent energy regulator E-Control separately examines antitrust concerns in the energy sector, but must also submit cases to the cartel court.

Austria’s Takeover Law applies to friendly and hostile takeovers of corporations headquartered in Austria and listed on the Vienna Stock Exchange.  The law protects investors against unfair practices, since any shareholder obtaining a controlling stake in a corporation (30 percent or more in direct or indirect control of a company’s voting shares) must offer to buy out smaller shareholders at a defined fair market price.  The law also includes provisions for shareholders who passively obtain a controlling stake in a company. The law prohibits defensive action to frustrate bids. The Shareholder Exclusion Act allows a primary shareholder with at least 90 percent of capital stock to force out minority shareholders.  An independent takeover commission at the Vienna Stock Exchange oversees compliance with these laws.

Expropriation and Compensation

According to the European Convention of Human Rights (applicable in Austria) and the Austrian Civil Code, property ownership is guaranteed in Austria.  Expropriation of private property in Austria is rare and may be undertaken by federal or provincial government authorities only on the basis of special legal authorization “in the public interest” in such instances as land use planning, and infrastructure project preparations.  The government can initiate such a procedure only in the absence of any other alternatives for satisfying the public interest; when the action is exclusively in the public interest; and when the owner receives just compensation. In 2017-18, the government expropriated Hitler’s birth house in order to prevent it from becoming a place of pilgrimage for neo-Nazis, paying the former owner €1.5 million (USD 1.8 million) in compensation. The expropriation process is non-discriminatory toward foreigners, including U.S. firms.  There is no indication that further expropriations will take place in the foreseeable future.

Dispute Settlement

ICSID Convention and New York Convention

Austria is a member of both the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID) and the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, meaning local courts must enforce foreign arbitration awards in Austria. There is no specific domestic legislation in this regard, but local courts must enforce arbitration decisions where the affected companies have their business locations.

Investor-State Dispute Settlement

Austria is a member of the UN Commission on International Trade Law (UNCITRAL). Its arbitration law largely conforms to the UNCITRAL model law. The main divergence is that an award may only be set aside if the arbitral procedure is not in accordance with Austrian public policy.

Austria does not have a BIT or FTA with the United States. There is no special domestic arbitration body.

In 2015, the Austrian government was sued, for the first time ever, by the offshore parent company of the Austrian Meinl Bank, Far East.  The case was brought before the ICSID in New York because of alleged damages arising from domestic prosecution in Austria; the ICSID dismissed the case in November 2017.

International Commercial Arbitration and Foreign Courts

The Vienna International Arbitral Center of the Austrian Federal Economic Chamber acts as Austria’s main arbitration institution.  Legislation is modeled after the UNCITRAL model law (see above). The New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (NYC) overrides most of Austria’s domestic provisions, where applicable, and Austrian courts are consistent in applying it.

Bankruptcy Regulations

The Austrian Insolvency Act contains provisions for business reorganization and bankruptcy proceedings.  Reorganization requires a restructuring plan and the debtor to be able to cover costs or advance some of the costs up to a maximum of €4,000 (USD 4,520).  The plan must offer creditors at least 20 percent of what is owed, payable within two years of the date the debtor’s obligation is determined. The plan must be approved by a majority of all creditors and a majority of creditors holding at least 50 percent of all claims.  Bankruptcy proceedings take place in court and are opened upon application of the debtor or a creditor; the court appoints a receiver for winding down the business and distributes proceeds to the creditors. Bankruptcy is not criminalized, provided the affected person performed all his documentation and reporting obligations in accordance with the law.

Austria’s major commercial association for the protection of creditors in cases of bankruptcy is the “KSV 1870 Group”,www.ksv.at , which also carries out credit assessments of all companies located in Austria. Other European-wide credit bureaus, particularly “CRIF” and “Bisnode”, also monitor the Austrian market.

Austria is a member of the Council of Europe’s Group of States against Corruption (GRECO) and also ratified the UN Convention against Corruption (UNCAC) and the OECD Anti-Bribery Convention.  As part of the UNCAC ratification process, Austria has implemented a national anti-corruption strategy. Central elements of the strategy are promoting transparency in public sector decisions and raising awareness of corruption.  Corruption generally is not a major issue in Austria, which ranked 14th (out of 180 countries) in Transparency International’s latest Corruption Perceptions Index.

Bribery of public officials is covered by the Austrian Criminal Code and corruption does not significantly affect business in Austria.  However, there is a small risk of corruption in public procurement, most commonly in the form of criteria that are tailor-made for certain participants.

Anti-corruption cases are often characterized by slow-moving trials that drag on for years.  Bribing members of Parliament is considered a criminal offense, and accepting a bribe is a punishable offence with the sentence varying depending on the amount of the bribe. There are no rules on managing conflicts of interest for parliamentarians and no framework for dealing with gifts and other benefits.

Austria is in the midst of a prominent corruption case involving former Finance Minister Karl-Heinz Grasser and the privatization of BUWOG, an Austrian real-estate company, in 2003.  The case, which began in 2010 and went to trial in 2017, features 16 defendants. Grasser is accused of having demanded a bribe of EUR 9.6 million (USD 11 million) in exchange for privatization advantages, and judicial proceedings are ongoing.  There were no major new corruption cases uncovered in 2018.

Corruption provisions in Austria’s Criminal Code cover managers of Austrian public enterprises, civil servants, and other officials (with functions in legislation, administration, or justice on behalf of Austria, in a foreign country, or an international organization), representatives of public companies, members of parliament, government members, and mayors.  The term “corruption” includes the following in the Austrian interpretation: active and passive bribery; illicit intervention; and abuse of office. Corruption can sometimes include a private manager’s fraud, embezzlement, or breach of trust.

Criminal penalties for corruption include imprisonment of up to ten years for all parties involved.  Jurisdiction for corruption investigations rests with the Austrian Federal Bureau of Anti-Corruption and covers corruption taking place both within and outside the country.  The Lobbying Act of 2013 introduced binding rules of conduct for lobbying. It requires domestic and foreign organizations to register with the Austrian Ministry of Justice. Financing of political parties requires disclosure of donations exceeding EUR 3,500 (USD 3,960).  Private companies are subject to the Austrian Act on Corporate Criminal Liability, which makes companies liable for active and passive criminal offences. Penalties include fines up to EUR 1.8 million (USD 2.0 million).

Resources to Report Corruption

Contacts at government agencies responsible for combating corruption:

Wirtschafts- und Korruptionsstaatsanwaltschaft
(Central Public Prosecution for Business Offenses and Corruption)
Dampfschiffstraße 4
1030 Vienna, Austria
Phone:  +43-(0)1-52 1 52 0
E-Mail: wksta.leitung@justiz.gv.at

BAK – Bundesamt zur Korruptionsprävention und Korruptionsbekämpfung
(Federal Agency for Preventing and Fighting Corruption)
Ministry of the Interior
Herrengasse 7
1010 Vienna, Austria
Phone:   +43-(0)1-531 26 – 6800
E-Mail: BMI-III-BAK-SPOC@bak.gv.at

Contact at “watchdog” organization:

Transparency International – Austrian Chapter
Berggasse 7
1090 Vienna, Austria
Phone:  +43-(0)1-960 760
E-Mail: office@ti-austria.at