Austria: Investment and hub/holding location Legal and tax environment

September 2020 – Marc Lager, Peter Grau

© 2020 Deloitte Tax Wirtschaftsprüfungs GmbH 2

General business environment in Austria 3

General legal environment in Austria for inbound investment and holding companies 4

General tax environment in Austria for inbound investment and holding companies 5

Table of Content

Austrian: Legal and Tax Environment

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Business and legal environment, quality of living

Austria – General Business Environment

EU Member State and member of the Schengen Area (travel without border controls)

Very stable economic and political environment.

− Member of the Euro zone.

− Home to around 300 regional headquarters of multinational companies, including 28 Fortune 500 companies.

− Austria hosts the seat of the OPEC headquarters, and a major United Nations office.

Highly developed infrastructure including Vienna International Airport, serving as hub for leading network airlines with unmatched service to Central and Eastern Europe and Russia/CIS and offering many non-stop intercontinental connections.

Outstanding quality of life and personal safety.

− Vienna ranked again as global #1 in Mercer’s 2019 Quality of Living Survey for the 10th consecutive year.

− According to an annual index compiled by the Economist Intelligence Unit (EIU) the Austrian capital is the most liveable city in the world in 2019 for the second year running (Globa Liveability Index).

− Comprehensive support for expatriates by federal and state investment promotion agencies.

− Significant number of international schools in Vienna.

Easy incorporation and administration of legal entities (typically AG or GmbH). Reliable and mature legal system.

− Moderate fee levels for compliance and maintenance.

− Moderate levels of office rent.

− Highly qualified workforce experienced in cross-border business, moderate pay level.

− Access to work permits for management and other qualified staff.

For further facts, go to www.aba.gv.at

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Types of corporations, basic building blocks and principles

Austria – General Legal Environment in Austria for Holding Companies

Two types of widely used corporations: AG and GmbH

Incorporation

− Incorporation typically fast, however KYC procedures for the required bank account may be time consuming

− Shelf companies are available at short notice

− Minimum registered capital typically EURk 35 or EURk 70 (exceptions may apply)

− Shares in subsidiaries can be contributed or sold to the holding company.

Selected principles of Austrian corporate law

− Capital maintenance rules

− Dividends (no interim dividends)

− Various reorganization types are available, e.g. mergers, de-mergers and spin-offs.

− liquidation

− Cross-border migration and cross-border mergers within the EU, including potential SE incorporation

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Overview of business taxation

Austria – General Tax Environment

Corporate income tax rate of 25%

− Clear and beneficial holding company taxation: 100% international participation exemption for qualifying dividends and capital gains (10% interest, one-year holding period, taxation/activities test).

− CFC taxation only for low-taxed passive income subsidiaries.

− Interest expenses for subsidiary shares acquired from third parties are deductible.

− Domestic and cross border tax consolidation.

− No withholding tax on interest payments in most cases.

Domestic dividend withholding tax rate is 25 or 27,5%, reduced to lower rates or 0% by treaties and EU-Directive

− EU Directives provide for relief from WHT on dividends, royalties, and interest and facilitate cross-border mergers.

− No withholding tax on capital repayments.

− In general no Austrian right to tax capital gains from disposal of Austrian shares under most tax treaties (exception: e.g., Brazil)

Extensive tax treaty network with over 90 jurisdictions

− Several treaties include a very beneficial framework for cross-border payments, e.g. with Turkey and Kazakhstan

OECD Transfer Pricing Guidelines with additional local guidance

− Advance Rulings are available on transfer pricing and other tax matters.

− Austria is neither blacklisted nor otherwise regarded as tax haven, unlike other frequently used holding company locations.

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Overview of selected tax considerationsAustria - Holding Company Tax Regime:

Foreign Parent

Company

Austrian Holdco

Opco OpcoOpcoDividends/

interest/royalties

(0% withholding tax within the EU and in many treaty source countries)

Dividends and capital gains 100% exempt in

Austria

Please note: the tax considerations above are a simplified summary of typical tax implications, subject to specific rules and requirements that apply.

Dividends/Interest/Royalties withholding taxes: relief/exemption for parents in treaty jurisdictions and the EU

© 2020 Deloitte Tax Wirtschaftsprüfungs GmbH 7

Peter GrauPartner, Deloitte TaxDeloitte Austria

Phone: +43 1 537 00 6744Email: pgrau@deloitte.at

Marc LagerPartner, Deloitte LegalJank Weiler Operenyi Rechtsanwaelte GmbH

Phone: +43 676 680 28 21Email: m.lager@jankweiler.at

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