Economic and Political Environment
Austria, with its well-developed market economy and high standard of living, is closely tied to other EU economies, especially Germany's. Its economy features a large service sector, a sound industrial sector, and a small, but highly developed agricultural sector.
Following several years of solid foreign demand for Austrian exports and record employment growth, the international financial crisis and global economic downturn in 2008 led to a sharp but brief recession. Austrian GDP contracted 3.9% in 2009 but saw positive growth of about 2% in 2010. Unemployment has not risen as steeply in Austria as elsewhere in Europe, partly because its government has subsidized reduced working hour schemes to allow companies to retain employees. Stabilization measures, stimulus spending, and an income tax reform pushed the budget deficit to 3.5% of GDP in 2009 and 4.7% in 2010, from only about 1.3% in 2008.
The international financial crisis caused difficulties for Austria's largest banks whose extensive operations in central, eastern, and southeastern Europe faced large losses. The government provided bank support - including in some instances, nationalization - to prevent insolvency and possible contagion. In the medium-term all large Austrian banks will need additional capital.
Even after the global economic outlook improves, Austria will need to continue restructuring, emphasize knowledge-based sectors of the economy, and encourage greater labor flexibility and labor participation to offset growing unemployment and Austria's aging population and low fertility rate.
Key economic indicators:
- Population: 8,217,280 (July 2011 est.)
- GDP (purchasing power parity): $332.6 billion (2010 est.)
- Per capita GDP: $40,300 (2010 est.)
- Real GDP growth: 2% (2010 est.)
- Unemployment: 4.5% (2010 est.)
- Public debt: 70.4% of GDP (2010 est.)
Currency:
Euro
The Banking Environment
Legislature
Austria is a federal parliamentary republic with a bicameral legislature; the Federal Assembly is composed of the
- Nationalrat (lower house), comprising 183 memeber which are elected for four-year terms via proportional representation, and the
- Bundesrat (upper house), comprising 64 members, indirectly elected by the provincial assemblies (Landtage) of Austria’s 9 federal states.
The president is elected every six years.
Central Bank
The Oesterreichische Nationalbank (OeNB) is responsible for the printing, issuance and holding of notes and coins, and has the right to act as a clearing house for payment, cheques and bill transactions. Its operational role is limited to interbank transfers, although it has a voice in all payment systems developments.
The OeNB is 50% owned by the Republic, but is legally independent. Neither the Republic nor provincial authorities can draw on its funds without providing counter-value and the Republic is not empowered to interfere with the proper performance of the OeNB's functions. The long-term goal of monetary policy is currency stability, responsibility for which is held by the OeNB as a national agency of the ECB.
As a member of the European System of Central Banks (ESCB) since January 1999, the OeNB's policy objectives are those of the ESCB (i.e. commitment to price stability). Additionally, the general lines of monetary and credit policy pursued by the OeNB must take into consideration the economic policy of the federal government.
As of April 1st, 2002, the Financial Market Authority (FMA) operates in accordance with the
Financial Market Supervision Act (FMABG) and supervises the banking sector within Austria, however, the ONB co-ordinates and analyses bank reporting on the FMA’s behalf. As laid down in the Banking Act, the OeNB has the right to be consulted e.g. prior to the granting of a license or issuance of an ordinance. The OeNB collects and processes money and banking statistics (e.g. monthly returns, quarterly reports, major loans register) on behalf of the FMA.
Banking System
Most Austrian banks provide universal banking services and do not strictly distinguish between retail and corporate banking. However, individual credit institutions may have a restricted banking licenceor specialize in particular lines of business (e.g. mortgage banks).
The major financial institutions on the Austrian market are.
UniCredit Bank Austria AG
is the clear number one in the Austrian banking sector and the country’s leading provider of services to corporate customers. Four out of five large companies use the bank’s services. Every fifth Austrian is a customer of UniCredit Bank Austria AG. By merging with the German HypoVereinsbank in 2001 and with UnicCredit Group in 2005, UniCredit Bank Austria AG has strenghtened its position as one of the leading banks in Central and Eastern Europe.
Erste Bank
is the country's largest savings bank and has established its role as the lead bank of the Savings Bank Group through steadily expanding cooperation within Austrian Savings Bank Group. Erste Bank is drawing on its traditional strength as a retail bank serving consumers and small to medium-sized companies.
Oesterreichische Postsparkasse (“PSK”, the postal bank)
is part of the BAWAG/PSK-Group and plays an important role in the payments system: cash handling, payments of state benefits and abt. 33% of non-cash payments are handled via PSK, even though there are no payment methods that are unique to the postal system. Apart from that, PSK offers a retail banking service and is the main relationship for many individuals, whereby the 2,300 post offices act as a branch network.
Raiffeisen Zentralbank Österreich AG (“RZB”)
is the central institution of the Austrian Raiffeisen Banking Group. As a universal banking group it offers a broad range of financial services to privates, corporates and financial institutions.
Internationally active corporate customers are chosing primarily the following institutions as their banking partners: UniCredit Bank Austria AG, RZB and Erste Bank, all of which are also holding a strong position across Central and Eastern Europe
Currency
The Euro.
Taxation
See “Tax and Legal Template”.
Corporation tax – 25%. Residents are subject to taxation on their world-wide income; non-residents are taxed on specified Austrian sourced income subject to any double tax treaty applicable., e.g. on income derived through the activities of any permanent establishment maintained in Austria.
Withholding taxes
• Dividends – 25%, imposed on dividends distributed by Austrian corporations and paid to either residents or non-residents. Resident corporations, owning 25% or more of the distributing Austrian corporation, and non-residents, where the EU Parent-Subsidiary Directive applies, may be exempted. A reduction is possible for non-residents under a double tax treaty if applicable. Dividends distributed by non Austrian corporations after March 31, 2004 and paid to resident individuals will be subject to 25 % withholding tax (final taxation).
• Royalties, trademark income – nil to residents; 20% to non-residents, if a double tax treaty or the EU Interest and Royalty Directive (for payments effected after December 31, 2003) does not apply.
• Interest – 25% to residentscertain exceptions may apply,e.g. for resident corporations) ); nil to non-residents under certain conditions. The tax is automatically deducted by the Austrian bank when interest is credited to the respective accounts. The holder of a non-resident account has to provide the Austrian bank sufficient documentation of his non-resident status to be exempted from the tax deduction. Alternatively the EU Interest and Royalty Directive might apply (for payments effected after December 31, 2003).
Stamp Duty – imposed at a rate of 0.8% or 1.5% of the principal amount on “loan contracts”, unless structuring techniques avoid it and unless it is an intercompany arrangement less than one month long – which is then not defined as a loan.
VAT – standard rate of 20% with a reduced rate of 10%
Transfer pricing guidelines – The principles enshrined by the OECD guidelines apply both to international transactions and to domestic transactions. The tax authorities may reclassify all or part of an excessive payment as a dividend, disallow the expense in the books of the payer and request a withholding tax payment as the deemed advance payment of corporation tax of the receiver.
Thin capitalisation rules – no specific laws but if a company’s equity is deemed too low ), interest payments on loans from shareholders can be reclassified as a dividend, the expense in the books of the payer disallowed and a withholding tax payment as the deemed advance payment of corporation tax of the receiver requested.
Exchange Control
None.
Austria is subject to the EU Regulation on cross-border payments whereby domestic pricing must be applied to such payments within the EU in EUR when the order party supplies the beneficiary’s IBAN and BIC – and the amount is below EUR12,500.
Central Bank Reporting
As stated above, OeNB is a legally independent institution which operates in accordance with the National Bank Act, whilst the Financial Market Authority (FMA) is an autonomous independent entity which operates in accordance with the Financial Supervision Act and has supervised the banking sector. OeNB coordinates and analyses bank reporting on the FMA´s behalf.
A company is deemed to be a resident company has its registered office or place of effective management located in Austria.
Holding of bank accounts:
• foreign currency accounts can be held by residents both domestically and abroad. Resident accounts in domestic currency (EUR) can be held abroad and are convertible into foreign currency
• non resident bank accounts are permitted in Austria, denominated in either domestic or foreign currency. Non resident accounts in domestic currency can be converted into foreign currency
• interest can be offered on both resident and non resident business current accounts.
Reporting:
• reporting regulations require all transactions between residents and non residents and residents´transactions on accounts held abroad to be reported to the OeNB if they exceed EUR 50.000
• resident accounts abroad must be reported on a monthly basis when their annual turnover of resident/non-resident transactions exceeds EUR 2.5 million.
• in addition, resident savingss accounts held abroad should be reported at the end of the reporting year if their value exceeds EUR 75.000
Reporting method:
• reporting may be carried out online, via XML or on paper basis
• residents must report to the OeNB by the 15th day of the following month
• since January 1st, 2006 all transaction have been reported directly by residents!!!