A GmbH in Austria is defined by law as a commercial company. It does not matter whether a GmbH in Austria actually carries out a commercial activity as an operating company or whether it serves as a holding company only for asset management. In both cases, the GmbH is subject to corporate tax on a regular basis. But in another respect, it may well be important in which way a GmbH actually operates. Because if a GmbH in Austria pays dividends to its shareholder managing directors, then they are in principle subject to the social security obligation, at least for commercial companies. Only an asset management GmbH can transfer its profit distribution to its shareholder-managing directors without withholding the social security contributions. Dividends that flow to shareholders who have no further connection to the GmbH, on the other hand, are always exempt from the social security obligation in Austria.

In this interview with Roman Jagersberger, we explain what important taxes there are in Austria compared to Germany.

As shareholder-managing director of a GmbH in Germany, the activity for one’s own company is subject to social security obligations in certain cases. The only exception here is if the shareholder-managing director occupies a dominant position. For example, this exists if the shareholder-managing director holds the majority of the shares in the GmbH or he is entitled to a blocking minority. In this case, there is a right to vote for the social security obligation.

If you receive a profit distribution as a shareholder of a GmbH in Germany, this represents income from capital assets. It is irrelevant whether the GmbH carries out a commercial or other activity. With regard to the taxes incurred thereon, only income tax, usually in the form of capital gains tax, as well as solidarity surcharge and, if necessary, church tax are applicable. However, there is no social security obligation on this dividend.

So much for the situation in Germany. In our neighbouring country Austria, the GmbH is also known as a legal form for companies. It is also widespread there. In addition, there is also a general social security obligation, which affects employees in particular. However, under certain conditions, the managing directors of a GmbH may also be subject to this general social insurance obligation. However, if the criteria for this are missing, an alternative social security obligation may exist. In Austria, one also knows a commercial social insurance obligation. The type of social insurance obligation a GmbH shareholder-managing director in Austria is subject to depends in particular on whether there is an employment relationship.

But in addition to the social insurance obligation for GmbH shareholders who work for their GmbH, there is also one in Austria that exists in the distribution of dividends. Now let's take a closer look at that.

There is more than one social security law in Austria. In addition to the General Social Insurance Act (ASVG), one also knows the Commercial Social Insurance Act (GSVG). This means that in Austria as many social insurance providers as possible are included in the national social insurance network by means of special laws. Thus, it is by no means surprising that GmbH shareholder managing directors are also generally subject to social insurance obligations in Austria. However, there are also exceptions.

First of all, we consider the case in which there is a social insurance obligation when receiving a dividend from a GmbH in Austria. This depends on whether the GmbH carries out a commercial activity. In an operative GmbH, this is actually given because it is a member of a chamber of commerce. Thus, the managing director’s salary of the GmbH shareholder is also decisive in the calculation of his social security contributions. The question here is whether there is a social security obligation of the managing director’s salary according to the rules of the CSDP or other social security laws. If there is a commercial social insurance obligation on the managing director’s salary, then the dividend paid to this shareholder is also subject to the social insurance obligation.

Now we explain when there is no social insurance obligation when paying a dividend from a GmbH in Austria. There are several exceptions to this.

3.2.1. No social insurance obligation for dividends to shareholders in Austria

The first exceptional case is immediately the easiest to treat. In Austria, for example, there is no social security obligation if a shareholder has no other relationship with the GmbH that pays the dividends. Specifically, this means that such a shareholder does not work for the GmbH either as managing director or in any other form, for example as an employee, and is therefore subject to a related social security obligation in another way. This basically corresponds to the social security exemption for dividends, as we also know it from Germany.

3.2.2. No social security obligation if the social security ceiling is exceeded

However, if a shareholder works for the GmbH from which he or she receives a dividend, and the remuneration for this is the subject of the social insurance obligation, then a social insurance tax on the dividend is only considered if the salary is lower than the maximum allowable assessment basis. In 2020, this limit was EUR 75,180.

If the assessment basis for the salary of the GmbH shareholder should be lower than the maximum assessment basis, then you can optimize design. On the one hand, you can consider whether an increase in the salary is possible, so that the maximum allowable tax base is used in full. Because the dividends themselves then flow to the shareholder without deduction to social security. But then annually the maximum amount of social security benefits is incurred.

Therefore, one should perhaps consider a second alternative. For this, however, you first have to waive an annually recurring payment of dividends from the GmbH. But after a few years, if the profit carried forward has increased so much that a dividend in combination with the shareholder’s salary actually exceeds the upper limit of the tax base, you can take action. For then only the part of the dividend is a levy to the social security, which remains as the difference between the salary and the maximum assessment limit.

3.2.3. No social insurance obligation for dividends from a holding company in Austria

The third exception to the social security obligation, which is associated with the distribution of dividends in Austria, concerns dividends that a holding company transfers to its shareholder-managing director. Because the holding company usually only carries out an asset management activity instead of a commercial activity, it lacks the commercial element that requires the social security obligation.