Successfully investing in Austria

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last updated on 2 August 2022 | reading time approx. 4 minutes

 

 

 

How do you assess the current economic situation in Austria?

The Austrian economy grew more solidly than the average of the EU member states in the first quarter of 2022 and the labour market has recovered from the effects of the pandemic much better than expected. Many com­panies are currently having great problems finding qualified staff. The other framework conditions for Austrian companies are also extremely challenging at present. The Austrian economy is burdened by unusually high inflation, disrupted supply chains, the COVID 19 pandemic, which has not yet been fully overcome, and the effects of the war in Ukraine. In this context, it is not surprising that economic expectations have dimmed a little and the mood of Austrian companies has darkened. Among other things, this is also due to falling export demand as a result of the slowdown in global economic growth. Inflation is driven in particular by energy prices and has now also spread to food and industrial goods. On average, inflation is expected to reach 7.5 percent in 2022. The greatest risk for the Austrian economy, however, is a Russian gas supply freeze. Since only about 10 percent of annual gas consumption comes from domestic production and Austria obtains roughly 80 percent of its gas imports from Russia, such a supply freeze would hit industrial companies in particular and thus, sub­se­quently, the entire economy hard. The resulting uncertainties are currently the dominant topic in politics and business. At the moment, however, we at Rödl & Partner do not assume that Russia will completely stop its deliveries to Austria. 

  

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

Despite all adversities, the investment climate can still be described as robust. In any case, the federal govern­ment is trying to do its part. In particular, tax regulations introduced in recent years, such as accelerated depre­ciation of buildings, declining balance depreciation and the investment-related tax allowance for natural per­sons, which has been in place for some time, should be mentioned here. In addition, corporate income tax will be gradually reduced from the current 25 percent to 23 percent in 2024.   
 
There is great potential in those sectors that benefit from the investments that will be necessary to achieve the climate targets, such as the construction industry, energy sector and mechanical engineering.
 

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

German entrepreneurs are generally not confronted with any extraordinary challenges when engaging in Austria. Of course there are differences, but they are of secondary importance and usually have only a minor role to play. Due to the common language and the geographical proximity, many procedures are similar – also in tax law. Tax, company and commercial law are systematically the same as in Germany, so no big surprises are to be expected.
 
Secure and stable economic conditions in Austria make a commitment for German companies manageable and plannable. Negative surprises, however, are always to be found in the area of trade law and the licensing of business facilities. The often propagated one-stop-shop principle for founding and opening a business cannot always be implemented in practice. On the whole, however, German entrepreneurs should be able to find their way around in Austria relatively quickly and not encounter any significant problems. However, it is advisable to seek tax and legal advice when entering the market in order to avoid small but all the more annoying hurdles.  

  

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

Austria offers attractive framework 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 liveable cities in the world in various rankings. The high level of personal safety certainly contributes to this. Austria is also relatively safe with regard to 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 holds 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 skilled labour force, which is reflected in high labour productivity. One of the reasons for this is the dual education system practised 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. 
 
Last but not least, 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?

The war in Ukraine and the COVID 19 pandemic are and have been the dominant topics in recent years. In all likelihood, however, this will not have a lasting impact on the growth of the Austrian economy. The average economic growth of the next 5 years of 1.8 percent is about the average of the countries in the euro area. In the coming year, inflation is expected to be lower than this year, but still high at over 4 percent due to the second-round effects of increased wage costs. Against the background of a moderate economic development and assuming stable energy prices, however, the upward pressure on prices will ease and inflation will continue to fall in the coming years. Recently, economic policy has been focused on immediate crisis management. It is expected that in the coming years greater emphasis will be placed on productivity-enhancing issues such as education, digitalisation and research. In addition, enabling the energy transition will present Austria with major challenges but also opportunities. 

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Prof. Dr. Peter Bömelburg

Certified Public Auditor (Germany), Certified Tax Consultant (Germany)

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