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Successfully investing in Austria

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last updated on 16 June 2023 | reading time approx. 3 minutes

 

 

 

How do you assess the current economic situation in Austria?

The business environment for Austrian companies remains very challenging. After GDP still grew strongly in 2022, the downturn in the global economy made itself felt toward the end of the year due to the relatively high inflation and the war in Ukraine. Towards the end of 2022, the Austrian economy therefore stagnated and is not expected to pick up again until mid-2023 when the international economy picks up as well. GDP will therefore grow only slightly this year. Construction activity is likely to remain weak due to the dampening of demand by higher construction prices and the deterioration in financing conditions. Austria is currently struggling with per­sistent inflation which is above the average in the euro area. The reason for this are high wage dynamics, fiscal measures and the still strong demand. Despite the easing on the energy markets, these factors will continue to hold back the decline in inflation in the near future. Above-average inflation will therefore remain in place until 2024. The unemployment rate remains low and is likely to stay that way. 

How would you describe the investment climate in Austria? Which sectors offer the largest potential?

Despite all the adversities, the general investment climate can still be described as robust. In any case, the fe­der­al government is trying to do its part. Starting in 2023, an investment allowance has been introduced and cor­porate income tax has been reduced to 24 percent. In addition to these measures, the accelerated de­pre­ci­ation of buildings introduced in recent years, declining balance depreciation and the investment-related tax allowance for natural persons, which has been in place for some time, should also be mentioned. In addition, the corporate income tax will be lowered to 23 percent in 2024. There is great potential in those sectors that will benefit from investments that will be necessary to achieve the climate targets.
 

What challenges do German companies face during their business ventures into Austria?

German entrepreneurs are generally not confronted with any extraordinary challenges when they become in­volved in Austria. Of course, there are differences, but these are of secondary importance and usually play only a minor role. Due to the common language as well as the geographical proximity, many procedures are similar – also in tax law. Tax, company and commercial law are largely the same as in Germany, so that no major sur­pri­ses are to be expected. 

Secure and stable economic conditions in Austria makes the market entry for German companies manageable and plannable. Negative surprises, however, are always to be found in trade law and plant licensing. The often propagated one-stop-shop principle for founding and opening a business cannot always be implemented in prac­tice. Overall, however, German entrepreneurs should be able to find their way around in Austria relatively quickly and should not encounter any significant problems. However, it is advisable to seek tax and legal advice when entering the market to avoid unnecessary stumbling blocks.

Why should companies choose to enter/remain in the Austrian market?

Austria offers attractive conditions for foreign companies. As one of the richest countries in the EU, Austrian con­sumers have above-average purchasing power. 

The infrastructure is highly developed and the administration is modern and efficient. In addition, the quality of life in Austria is very high. Vienna is regularly ranked among the most livable cities in the world. The high level of personal safety certainly contributes to this. Austria is also relatively safe regarding climate change and na­tu­ral disasters triggered by it. The security of supply with electrical energy has the highest priority in Austria, which is why Austria has a top position in this respect in comparison with other European countries. 

Furthermore, Austria is politically very stable and has a reliable legal system. Relations between employers and employees are traditionally very good, which results in a very low number of strike days. Austria has a large highly qualified workforce, which is reflected in high labor productivity. This is partly due to the dual education system practiced in Austria, which combines theory and practice and leads to an optimal link between business and education. 

Another advantage of Austria is its central location in Europe. Vienna is the leading hub for air traffic and lo­gis­tics to Central and Eastern Europe. Therefore, Austria offers excellent access to the Central and Eastern Euro­pean markets. 

Finally, Austria is also fiscally competitive due to attractive group taxation and a dense network of double tax­ation agreements. 

 

In your opinion, how will Austria develop?

Economic growth in 2024 will be around the average of the Euro member states. As a small, open economy, the economic development of Austria depends on the international economic development. Austria's continued com­petitiveness will also depend on whether the high inflation can be brought under control as quickly as pos­sible. The demographically driven shortage of labor also poses a challenge. In the long term, it will therefore be crucial to train enough skilled workers to meet the demand or to attract them to the country. Austria must de­ve­lop a strategy to become even more attractive for qualified immigrants. It is expected that productivity-en­han­cing topics such as education, digitization and research will be given greater priority in the coming years. In addition, the realization of the energy transition will present Austria with major challenges but will also create opportunities. 

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