AUSTRIA Law and Practice Contributed by: Clemens Philipp Schindler and Mohamed Hemdan, Schindler Attorneys
1. Corporate Structures, Residence and Tax Treatment 1.1 Corporate Forms and Their Tax Treatment Businesses in Austria are typically operated via a lim - ited liability company ( Gesellschaft mit beschränkter Haftung , or GmbH) or – to a lesser extent, typically in the case of a listed company – via a joint stock com - pany ( Aktiengesellschaft , or AG). Under a GmbH, the shareholders are authorised to give instructions to a managing director. There is typi - cally a low degree of fungibility of shares and a wider range of possibilities for the design of the articles of association. Under an AG, a supervisory board and a management board are mandatory, with both operat - ing independently from the shareholders in terms of business decisions. There is typically a higher degree of fungibility of shares. GmbHs or AGs are separate taxpayers for Austrian corporate income tax ( Körper- schaftsteuer ) purposes. With the Corporate Amendment Act 2023, a new legal form ‒ the flexible company (“FlexCo”) ‒ was intro - duced in 2024. A simplified internal decision-making process for shareholders and the possible creation of so-called company value shares intend to facilitate the corporate participation of employees. The legislator describes the FlexCo as a hybrid of a GmbH and an AG, as it provides the option of holding its own shares as well as certain flexible capital measures. Generally, shareholders of corporations are not liable for the liabilities of the companies, apart from in very exceptional cases (eg, in the case of effective man - agement of the corporation by a shareholder). 1.2 Use and Taxation of Transparent Business Structures In Austria, the most commonly used tax-transparent entities are the general partnership ( Offene Gesells - chaft , or OG) and the limited partnership ( Komman- ditgesellschaft , or KG). An OG is a type of partnership entity consisting of at least two individuals or legal entities. Each of the partners in an OG bears personal, unlimited, direct and joint liability to the partnership’s creditors for its
obligations. In contrast to incorporated entities, OGs may be set up without any initial capital. An OG comes into legal existence as soon as it is entered into the Commercial Register. The OG possesses a legal iden - tity from a civil law perspective (whereas it is transpar - ent from a tax law perspective). and constitutes an independent entity with rights and obligations vis-à- vis external parties. In contrast to an OG, in a KG not all of the partners bear full and unlimited liability for the partnership’s obligations. Rather, it is only required that there be (at least) one general partner ( Komplementär ) who – just as in an OG – bears unlimited liability to the partner - ship’s creditors. The remaining partners can have lim - ited liability vis-à-vis the creditors; they are referred to as “limited partners” ( Kommanditisten ). The liability of each limited partner ends as soon as their limited partnership share (liability share) has been fully paid in. Only the liability share is registered and public. A special form of KG is the Gesellschaft mit beschränk- ter Haftung und Compagnie Kommanditgesellschaft (GmbH & Co KG), which is characterised by the fact that its sole personally liable general partner is a GmbH. In a typical set-up, the shareholders of the GmbH are ‒ at the same time ‒ also limited partners of the KG. In a typical GmbH & Co KG, sole management and representation authority over the KG is vested in the GmbH acting as the general partner. The GmbH, in turn, is represented by its managing director(s). This means that the duty of the GmbH’s managing director(s) is/are to manage the affairs of the GmbH & Co KG and fulfil all the related obligations. 1.3 Tests for Determining Tax Residence Under Austrian tax law, a corporation qualifies as tax-resident if either its registered seat or its place of management is located in Austria. The registered seat of a corporation is deemed to be located at the place stipulated in the articles of association and registered in the commercial register. The place of management is deemed to be where the corporation’s management makes its executive decisions. Earlier practice con - centrated primarily on where the relevant decisions are taken (for example, as evidenced by board min - utes), but the Austrian tax authorities now increasingly also consider where such decisions are communicat -
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