Country report Austria 2021

Economic overview

In Austria, the composition of GDP, based on 2019 data, is as follows: 1.3% comes from the primary sector, 28.5% from the secondary sector and over two thirds (70.2%) from the sector tertiary.

In 2019, the Austrian GDP increased by only 1.4%. The COVID-19 pandemic has had a strong impact on the Austrian economy, in terms that are not yet fully assessable. Much will depend on the development of the epidemiological framework and, in particular, on the outcomes of the vaccination plan in progress.

According to the latest estimates of the Austrian National Bank OeNB, published in December 2020, the decrease in Austrian GDP stood at 7.1% in 2020 due to the generalized decline in all economic sectors (production, exports, investments, private consumption, tourism, etc.) and rising unemployment. State measures to support the Austrian economy for COVID-19 have also caused an increase in the Austrian budget deficit. After a positive balance of 0.7% of GDP in 2019, a deficit of 9.2% is estimated for 2020, with an increase in public debt from 70% to 86.4% of GDP.

For 2021, the OeNB foresees a GDP growth of 3.6%, therefore not such as to allow reaching pre-crisis levels. All the other main economic indicators are also expected to improve.

However, the forecasts are extremely uncertain due to the closure of most of the commercial activities that took place between the end of December 2020 and the beginning of February 2021 and the uncertainties about the actual date of reopening of activities.

Main sectors of industry

The main economic sectors of Austria are represented by the industrial, tourism and agricultural sectors. The main segments of the Austrian industry are made up of food and consumer discretionary, chemical, mechanical and steel construction. The vehicle sector in Austria is very important, where the production of engines and gears represents more than 90% of exports. In fact, as many as 800,000 engines come out of the Austrian industry every year and are used on the cars of the most prestigious car manufacturers.

All sectors of the Austrian industry are predominantly characterized by medium-sized structures that include all stages of production, from processing of raw materials to final processing. Industrial activity is mainly concentrated in the Upper Austria region, a center of excellence for the national economy, in particular in the Linz-Steyr-Wels triangle.

Taxation for businesses in Austria

The profits of companies are taxed at the uniform tax rate of 25% – in this way Austria holds a record of excellence over the new EU member states.

Resident companies, which have their registered or administrative office in Austria, are subject to a tax of 25% on their income wherever they arise. In this case, the tax base is determined according to the comparative net asset value method. The amount of the taxable profit or loss is obtained, in fact, by calculating the difference between the net assets resulting at the beginning of the year and that resulting at the end of the year, adjusted on the basis of tax legislation. Foreign companies, on the other hand, are taxed only in relation to business income attributable to a permanent establishment located on Austrian territory; in the absence of a permanent establishment, the taxable income is determined on the basis of the same income categories envisaged for individuals. Expenses are generally considered deductible if directly related to the production of income. The legal system then provides for the payment of an alternative minimum tax of € 1,750 for limited liability companies and € 3,500 for joint-stock companies each year.

Persons fiscally resident in Austria are subject to tax on all income generated on a worldwide basis; non-resident subjects are instead required to pay the tax only for income earned in Austria. For the purposes of applying income tax (Einkommensteuer), a natural person is considered to be fiscally resident in Austria when he has his domicile or habitually resides within the territory of the State.

Investing in Austria

Austria is one of the most popular destinations for entrepreneurs for its thriving market but also for the bureaucracy and public structures that work perfectly, smoothly.

In Austria it is possible to set up companies, take over companies even for foreign citizens. The tax system is very orderly and provides for a series of facilitations or exemptions for a certain type of business.

Entrepreneurs wishing to set up a limited liability company in Austria must provide a minimum capital of 35,000 euros. However, in order to start the registration procedure, only half of the minimum capital, equal to 17,500 euros, must be paid.

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