Austria has a well-developed market economy that welcomes foreign direct investment, particularly in technology and R&D. The country benefits from a skilled labor force, and a high standard of living, with its capital Vienna consistently placing at the top of global quality-of-life rankings.
With more than 50 percent of its GDP attributed to exports, Austria’s economy is closely tied to other EU economies, especially Germany’s, its largest trading partner, followed by the U.S. The economy features a large service sector and an advanced industrial sector specialized in high-quality component parts, especially for vehicles. The agricultural sector is small but highly developed.
Austria’s economy grew from 2017-18. GDP increased by 2.7 percent in 2018, leading to a decrease in the unemployment rate to 4.8 percent. However, positive momentum has slowed since then, with GDP growth forecast to reach only 1.7 percent in 2019 and 1.6 percent in 2020.
The country’s location between Western European industrialized nations and growth markets in Central, Eastern, and Southeastern Europe (CESEE) has led to a high degree of economic, social, and political integration with fellow European Union (EU) member states and the CESEE.
Some 300 U.S. companies have investments in Austria, and many have expanded their original investment over time. U.S. Foreign Direct Investment into Austria totaled approximately EUR 14.5 billion (USD 16.5 billion) in 2018, according to the Austrian National Bank, and U.S. companies support over 20,000 jobs in Austria. Altogether, Austria offers a stable and attractive climate for foreign investors.
The most positive aspects of Austria’s investment climate include:
- Relatively high political stability;
- Harmonious labor-management relations and low incidence of labor unrest;
- Highly skilled labor across sectors;
- High levels of productivity and international competitiveness;
- Excellent quality of life through high levels of personal security and high-quality health, telecommunications, and energy infrastructure.
Negative aspects of Austria’s investment climate include:
- A high overall tax burden;
- A large public sector and a complex regulatory system with extensive bureaucracy;
- Low-to-moderate innovation dynamics.
Key sectors that have historically attracted significant investment in Austria:
Key issue to watch:
- Austria’s government has announced a comprehensive tax-reform plan for the coming years. This plan includes lowering the corporate tax rate from 25 percent to around 20 percent in 2022, reducing personal income tax in 2021, and increasing the permissible amount of hours worked per week from 50 to 60. The government is hoping to increase Austria’s attractiveness as a business location by reducing bureaucracy, reducing labor market protections and lowering non-wage labor costs.
Table 1: Key Metrics and Rankings
|TI Corruption Perceptions Index||2018||14 of 175||http://www.transparency.org/research/cpi/overview|
|World Bank’s Doing Business Report||2019||26 of 190||http://www.doingbusiness.org/en/rankings|
|Global Innovation Index||2018||21 of 126||https://www.globalinnovationindex.org/analysis-indicator|
|U.S. FDI in partner country ($M USD, stock positions)||2017||$7,800||http://www.bea.gov/international/factsheet/|
|World Bank GNI per capita||2018||$45,440||http://data.worldbank.org/indicator/NY.GNP.PCAP.CD|
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. 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
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: or . It is advisable to seek information from ABA or the WKO before applying to register a firm.
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.
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.