Changes to Limited Liability Companies in Austria

Changes to Limited Liability Companies in Austriabigstock-Latest-News-4129140resized

The Austrian Parliament has made changes to legislation concerning Limited Liability Companies in the country to make Austria a more attractive business location. Under the Austrian Limited Liability Corporation Act, the requirement for minimum share capital has been significantly reduced.

Currently the minimum share capital for a limited liability corporation in Austria (locally known as a Gesellschaft mit beschränkter Haftung or GmbH) is €35,000. Half of this – €17,500 – must be fully paid up. During a review of Austrian business practices and costs, the national government acknowledged that this was a relatively high fee when compared to the rest of Europe. They therefore made the decision to

reduce the minimum share capital to just €10,000, of which half – €5,000 – must be paid up.

This change hopes to further encourage investment in Austria by making limited liability corporations a more accessible company form. It also puts the country’s business laws more in line with international standards.

By association, additional costs relating to the formation of limited liability corporations in Austria are also being lowered. These include reduced costs for the notary public. The requirement for an official announcement in the federal gazette (Wiener Zeitung) is also being phased out so there will be no costs for this in the future as there will just be an electronic publication in the official register of the administration of the judiciary (Ediktsdatei).

Investors can take advantage of this change not only in the initial amount of share capital required, but in the effect it has on taxation. Specifically this applies to corporate income tax. Liability is significantly reduced in proportion to the share capital amounts. Businesses must pay a minimum corporate income tax rate of 5% which is calculated from the minimum share capital, and so liability has decreased from €1,750 to just €500 per year.

There has been some objection to the implementation of these reductions with regard to creditor protection. In order to cover these issues, the new law requires a shareholder meeting to be held if, under the Corporate Restructuring Act (Unternehmensreorganisationsgesetz), the equity ratio is below 8%, the fictitious debt repayment period is projected to be longer than 15 years, or if half the minimum share capital has been lost.

The Act was passed on June 12, 2013 and the new law will be effective from July 1, 2013.