GmbH in Austria: pros and cons.
Doing business in Austria is usually connected with the registration of a company in the form of GmbH. This is the most common “type of enterprise” with both certain advantages and disadvantages. Let us dwell on them in more detail, but without going beyond the discussion at the thesis level.
The law defines the minimum authorized capital of GmbH in the amount of 35 thousand euros. This can be a very significant amount for a small business. On the other hand, the owner has no risk of losses and liability for debts exceeding it.
The annual accounts of the GmbH consist of a balance sheet and a profit and loss statement, as well as notes and appendices thereto. The cost of reporting is very significant and depends on the volume of operations performed by the company for the reporting period.
In addition, it should be borne in mind that Austrian banks very often require the provision of additional information about corporate clients, especially about the state of their debts to suppliers and other lenders. This translates into an additional burden on accounting.
On the other hand, as a result of qualified accounting, it is possible to predict tax & insurance payments, which is very useful for enterprises not only small businesses.
The myth is widespread that Austrian tax authorities are not indifferent to GmbH, which is reflected in their frequent inspections. In practice, the main reasons for unscheduled inspections are “doubtful indicators” in the reports revealed by the tax authorities, and, as it may seem strange, statements by former employees of the companies to the tax authorities.
As a rule, a director registered in the register of legal entities is responsible for the correct and timely payment of taxes. But in essence, responsibility arises only when directors can be reproached for dishonesty in the performance of their duties.
From January 1, 2013, the actual managers & owners of companies, which are often not directors, but determine the tax policy of GmbH, are also responsible for paying taxes.
The income of the owner, who is also the director of the company, is classified as income from non-entrepreneurial activities if the share of this owner in the authorized capital does not exceed 25%. This qualifies him as an employee who receives a salary and salary already defines taxes.
If the director’s share is more than 25%, then all income received from the company is considered as entrepreneurial with tax consequences arising from this.
Among the issues most recently discussed by the newly made owners of the GmbH, a special place is played by the methods of investing & financing the company.
Contributions that owners make to the charter capital of a firm are not taken into account when calculating the taxable income of the firm. However, such deposits are taxed on changes in the authorized capital in the amount of 1% of the amount deposited.
As for loans provided by the owners of their company, it's reasonable treat them “more carefully” in terms of taxation.
For example, if we are talking about a repayable loan with interest, then interest is an expense for the company and at the same time income for the owner. Otherwise, the loan can be considered as a contribution of the owner, subject to taxation as with an increase in the authorized capital.
Subsequent publications will attempt to examine the various aspects of using GmbH from a business perspective in Austria.
If you have questions related to the registration & use of enterprises of various forms of ownership in Austria, our company specialists are ready to answer them.
