1. Openness To, and Restrictions Upon, Foreign Investment
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. However, in October 2019 a new digital services tax was signed into law, effective on January 1, 2020. This 5% tax on advertising revenues targets companies with global revenues exceeding €750 million ($848 million) provided at least €25 million ($28 million) of that sum comes from Austria, with a carve-out for Austria’s national broadcaster (ORF) which would otherwise be taxed. Government officials claim the tax is intended to level the playing field.
The corporate tax rate, a 25 percent flat tax, is above the EU average, and the government has indicated plans to reduce this rate to 21 percent within the current parliamentary term which runs through 2024. U.S. citizens and investors have occasionally reported that it is difficult to establish and maintain banking services since the U.S.-Austria Foreign Account Tax Compliance Act (FATCA) bilateral agreement went into force in 2014, as some Austrian banks have been reluctant to take on this reporting burden.
Potential investors should be aware of Austria’s lengthy environmental impact assessments in their investment decision-making. The mining and transportation sectors are also more heavily regulated than in other economies. The requirement that over 50 percent of energy providers must be publicly owned limits foreign investments in the energy sector. Strict liability and co-existence regulations regarding crop contamination in the agriculture sector virtually outlaw the cultivation, marketing, or distribution of genetically-modified crops.
Austria’s national investment promotion organization, the Austrian Business Agency (ABA), is a useful first point of contact for foreign companies interested in establishing operations 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 these services free of charge.
The Austrian Economic Chamber (WKO) and the American Chamber of Commerce in Austria (Amcham) are also good resources for foreign investors. Both conduct annual polls of their members to measure their satisfaction with the business climate, thus providing early warning to the government of problems identified by investors.
Limits on Foreign Control and Right to Private Ownership and Establishment
In principle there is generally no limitation on establishing and owning a business in Austria. However, a local managing director must be appointed to any newly established 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 regulated trade sectors is only granted when certain preconditions are met, such as certificates of competence, and recognition of foreign education.
The requirement that over 50 percent of energy providers must be publicly owned limits foreign investments in the energy sector. Strict liability and co-existence regulations regarding crop contamination in the agriculture sector virtually outlaw the cultivation, marketing, or distribution of genetically-modified crops.
Austria maintains a national security investment screening process to review potential foreign acquisitions of 25 percent or more of a company deemed essential to national security or which is involved in the provision of public services such as energy, water, telecommunications, and educational services. The government plans to reduce the threshold for review to ten percent and expand covered sectors through adoption of a new investment-screening law in 2020. The current screening process has seldom been used since its introduction in 2012. The EU Regulation establishing a framework for the coordination of members’ national security screening of foreign direct investments into the Union entered into force in April 2019. It creates a cooperation mechanism through which EU countries and the European Commission will exchange information and raise concerns related to specific investments which could potentially threaten the national security of EU countries.
Non-EU/EEA citizens need authorization from administrative authorities of the respective Austrian province to acquire land. Provincial regulations vary, but in general there must be a public (economic, social, cultural) interest for the acquisition to be authorized. Often, the applicant must guarantee that he does not want to build a vacation home on the land in order to receive the required authorization.
Other Investment Policy Reviews
While the World Bank Doing Business Index ranked Austria as the 27th in 2020 (www.doingbusiness.org), starting a business takes time and requires many procedural steps (Austria ranks 127 in this category ). The average time to set up a company in Austria is 21 days, compared to just 9.2 days in other high income countries. 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 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. Membership in the WKO is mandatory for all businesses in Austria.
For sole proprietorships, it is possible under certain conditions to use an online registration process via government websites (in German language only) 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.
Austria’s national investment promotion organization, the Austrian Business Agency (ABA), is a useful first point of contact for foreign companies interested in establishing operations 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 these services free of charge. 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/.
With more than 50 percent of its GDP derived from exports, the Austrian government encourages outward investment. 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 (Washington, DC, New York, Chicago, Atlanta, Los Angeles, and San Francisco.) It also has trade offices in 26 European, 19 Asian, 7 other North- and South American, 6 African countries, and Australia.
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 for market access costs and provides “soft subsidies,” such as counseling, legal advice, and marketing support.