Both in Germany and in Austria, a GmbH pays taxes. Although in both cases this concerns corporate tax, there are certain differences. For example, a GmbH in Austria pays 25% corporation tax, but no business tax. In addition, profits that a GmbH receives from a subsidiary are completely tax-free in Austria. However, the sale of a subsidiary in such a holding company for a GmbH in Austria is fully taxable. Thus, double taxation takes place at the level of the GmbH and the shareholders in Austria. Therefore, in Austria a conversion is used to tax the sale of a company only on a private level.

Taxation of a GmbH in Austria and Germany

We clarify what similarities & differences there are in the taxation of a GmbH in Austria & Germany.

1st Tax at a GmbH in Austria – Introduction

Tax law in Austria has many things in common with German tax law. This is particularly evident in the case of a corporation. This is what the tax they have to pay is called corporation tax in both countries. The law that codifies this income tax is also called the Corporate Tax Act in Austria. However, there are also numerous regulations that differ from those in Germany. Apart from other differences that also exist between a GmbH in Germany and Austria, we only want to compare taxes in this article.

2. GmbH in Austria pays taxes on world income

Since the world income principle applies in Austria, as in Germany and many other countries, a GmbH also pays taxes on all domestic and foreign income there.

The type of income also has no influence on tax liability. In Austria, for example, the same types of income exist that German tax law also knows. Thus, a GmbH in Austria must also pay taxes on the same income that a GmbH in Germany must also take into account.

In this context, one should therefore consider whether a GmbH is subject to limited or unlimited taxation in Austria. The criteria for an unlimited tax liability in Austria correspond to those in Germany. If a GmbH in Austria has its registered office determined by the statutes or the place of management, then it is taxable there without restriction. However, if, for example, the place of management is outside Austria, the GmbH is only subject to limited taxation in Austria. In this case, a GmbH in Austria pays taxes only on the income generated there. However, a double taxation agreement with another state may affect Austria’s right to tax a limited liability company. If this is true, this can de facto lead to a avoidance of taxes in Austria for such a GmbH.

The first point in our explanations about the taxes paid by a GmbH in Austria is already illuminating. Because it pays, unlike a German GmbH, no trade tax. Although there was a trade tax until 1993, but since then no GmbH and no other company pays such a tax.

On the other hand, in Germany, although it has been under criticism for a long time, we still have a trade tax. Many entrepreneurs in this country would welcome a reform of the trade tax. And abolishing this tax, which is unknown in many parts of the world, would even make them happy. However, the legislature would then have to find another way to involve the cities and municipalities in the tax revenue. Finally, they too must perform their duties in the service of the public. But without adequate financial resources, this is impossible for them.

Taxes of a GmbH in Austria – Corporate Tax

Now that we have been able to exclude trade tax due to lack of relevance as a tax of a GmbH in Austria, we are now devoting ourselves to income tax. At the beginning, we point out a different difference from corporate tax in Germany. While in Germany the abbreviation KSt is common for this type of tax, in Austria the abbreviation KöSt is used.

4.1. GmbH in Austria pays 25% tax

Corporate income tax is subject to a flat-rate fixed tax rate in Austria, as well as in Germany. However, it amounts to 25% in Austria instead of the 15% that a GmbH pays in Germany. But it should be remembered that the GmbH in Austria does not pay any trade tax. Taking this fact into account, the GmbH in Austria pays a total of 5% less tax than its counterpart in Germany.

4.2. GmbH in Austria pays fixed taxes (minimum tax)

However, there are also some other aspects to consider when it comes to corporate tax in Austria. Thus, a GmbH in Austria always pays a certain amount of taxes. The amount of the tax in Austria depends on the time the GmbH was founded. For the first five years, a GmbH in Austria pays EUR 125 per quarter or EUR 500 per year in fixed taxes. This is followed by a period of another five years in which the tax is EUR 250 per quarter and thus EUR 1,000 per year. And from the eleventh year comes the full amount of the minimum corporate tax of EUR 437.50 per quarter, which increases in the calendar year to a total of EUR 1,750. This would like to avoid in Austria that still young companies are subject to the same amount of taxation as a GmbH that has been established for years.

On the other hand, this minimum corporate tax has a different effect in Austria. Even if the GmbH writes a loss instead of a profit, which occurs in particular in newly founded companies, the GmbH must pay a tax to the Treasury in Austria. However, it can in future count the tax paid on the tax burden it has to bear on future profits. So there is a different form of crediting of losses in Austria than in Germany.

If a GmbH in Germany receives a dividend from a subsidiary as a holding company, then this income is in principle tax-free. After all, the subsidiary has already taxed this profit itself. However, it is a condition that the participation in the subsidiary is at least 10% at the beginning of the calendar year. In addition, there is a further restriction, which leads to indirect double taxation of the tax-free dividend, albeit only to a small extent. Thus, 5 % of the dividend is considered a flat-rate operating expense, which is excluded from the tax exemption. Thus, the German Holding GmbH pays 15 % corporation tax on 5 % of the dividend received. More specifically, this is therefore 1.5% of the profit distribution.

Even if this is only a small amount, this still represents a certain double taxation in Germany. It is different in Austria. Because a GmbH in Austria, which receives a profit distribution of its subsidiary as a holding company, does not have to pay taxes on this. Although there is no tax on this, a GmbH in Austria is obliged to declare this income in its tax return.

6. GmbH in Austria pays taxes on company sales

If a German GmbH sells shares in a subsidiary, the profits realised are tax-free. In Austria, however, a GmbH also pays taxes on the profit of the sale of a subsidiary. Therefore, the difference between a GmbH in Germany and in Austria in this respect only exists in the taxation of holding companies.

However, it must be taken into account that in addition to the taxation of the profit from the sale of the subsidiary of a Holding GmbH in Austria, a further tax on the distribution of profits to the shareholder of the Holding GmbH may also arise in the context of corporate tax. Thus, the sale of a subsidiary by a GmbH in Austria effectively leads to a double tax. In order to sell an operating subsidiary of a holding GmbH in Austria without double taxation, a restructuring should be carried out at an early stage.