Sole Proprietorship In Austria

Austria has a robust economy supporting different industries. In particular, small and medium enterprises form the backbone of the Austrian economy, comprising about 99.6% of all companies. The self-employment rate in the country was reported at 11.85% as of 2020. Despite the disparity, Austria has a booming business environment – it ranks 27 among 190 nations in the World Bank Ease of Doing Business Index. 

The prospect of establishing a sole proprietorship in Austria appeals to individuals looking to establish a business presence in the country. Moreover, Austria is an attractive business destination because of the robust infrastructure, reliable legal system, stable political structure, tax advantages, talent pool, and high quality of life. However, you must first know how to register a sole proprietorship in Austria. 

Setting up a sole proprietorship in Austria is one of the easiest ways to do business in the country and a minimum requirement for self-employment. The sole proprietorship, or the Einzelunternehmen, is a legal entity in Austria, with one person operating the business as the sole owner and assuming total personal liability. Unlike other business models such as a limited partnership, a joint-stock company, or a general partnership, sole proprietorship owners have complete freedom to determine the capital they can afford to invest. Moreover, sole proprietorship taxes in Austria are moderate, and accounting is relatively hassle-free.

Anyone can establish a sole proprietorship in Austria, provided they hold an Austrian residence permit or citizenship of the EU, an EEA country, or Switzerland. Additionally, the sole proprietor must be above 18 years of age and free from any possible grounds for trading disqualifying, such as a criminal record or financial offense. A person looking to establish a sole proprietorship in Austria must apply for a trade license at the local municipal or district authority. 

The trade license is mandatory for sole proprietors in the commercial sector, sales, etc., who wish to operate a business within the ambit of the Austrian Trade and Industry Regulation Act. However, the laws around establishing a sole proprietorship in Austria are comparatively more stringent for persons seeking to carry out any professional practice, such as tax advisors, attorneys, etc. Persons of other nationalities can also register a sole proprietorship in Austria if their home country and Austria agree to grant trade permits. 

If need be, a sole proprietorship in Austria may also have to register with the Austrian Commercial Register or Firmenbuch. Legal registration is mandatory if your sole proprietorship generates more than € 700,000 (792,897.00 USD) per fiscal year during two successive fiscal years. Sole proprietorships not fulfilling the turnover criteria can also register with the Austrian Commercial Register, especially if they have a statutory obligation to register the business. Sole proprietorships that do not register with the Commercial register voluntarily must record their payments and receipts to determine their income. 

In Austria, a sole proprietorship is one of the simplest business structures run solely by an individual. Therefore, the owner bears total liability for the business affairs with no distinction between the identities of the sole proprietor and the business entities’ identities.

The pointers below list some of the significant benefits of setting up a sole proprietorship in Austria:

• Setting up a sole proprietorship in Austria is inexpensive, with no significant administrative fees or stamp duties.

• Since a single person is at the helm of affairs of the sole proprietorship company, it is easier to operate the business and make decisions with no conflict of opinion.

• Unlike partnerships or LLP companies, the owner of a sole proprietorship company is the only beneficiary of the profits.

• Most importantly, sole proprietors in Austria are exempt from paying value-added tax (VAT) if they earn less than €30,000 (34048.35 USD) a year. However, owners of sole proprietorships in Austria must pay income tax.

You need to keep relevant documents ready when setting up a sole proprietorship in Austria. Below is a list of requirements:

Documents required for the sole proprietor‍

• Certificate of citizenship or passport and birth certificate of the registrant.
• Residence permit for citizens of states outside the EEA and EU (except Switzerland).
• Confirmation of the registration.
• Statements that there are no grounds for disqualification (under Section 13 of the Austrian Trade and Industry Regulation Act 1994).
• Any academic degree certificates.
• Criminal record certificate (no more than three months old) of the country of origin for individuals living abroad or those who have lived in Austria for less than five years.
• Notice of change of name or marriage certificate if the individual has had a change of name.

Documents required if the sole proprietor appoints a professional representative:‍

• Certificate of citizenship or passport and birth certificate of the registrant.
• Residence permits for citizens of states outside the EEA and EU (except Switzerland).
• Confirmation of the registration.
• Any academic degree certificates.
• Criminal record certificate (no more than three months old) of the country of origin for individuals living abroad or those who have lived in Austria for less than five years.
• Notice of change of name or marriage certificate if the individual has had a change of name.
• Statements that there are no reasons for disqualification (under Section 13 of the Austrian Trade and Industry Regulation Act 1994) if the sole proprietor appoints a professional representative to represent the business externally.
• If the appointment of the professional representative is not for representing the business externally, the documents required include:
• Statement for the registrant for a license (under Section 39 of the Austrian Trade and Industry Regulation Act 1994)
• Statement for professional representatives (under Section 39 of the Austrian Trade and Industry Regulation Act 1994)
• Employer account number and social insurance provider’s confirmation if the professional representative is an employee

Individuals already registered in the Austrian Business License Information System (GISA) need not submit their nationality, passport, birth certificate, and registration confirmation while registering a sole proprietorship in Austria.

Persons applying to set up a sole proprietorship or register as self-employed in Austria must adhere to specific requirements. Below is an overview of the general prerequisites for setting up a sole proprietorship in Austria:

• The applicants must be 18 years or above, and the same must be proven by submitting a copy of a personal ID.
• The applicant must hold Austrian citizenship or citizenship of a member state of the EU. Non-EU citizens require an unlimited residence permit, whereas third-country nationals must have a residence permit allowing them self-employment or access to the labor market. 
• Foreign applicants must have a criminal record certificate of their origin (translated by a court-approved translator) showing a clean record of financial crimes such as embezzlement, tax evasion, etc.
• The applicant looking to establish a sole proprietorship in Austria must have no grounds for exclusion or disqualification from trading.

A sole proprietorship in Austria governed by the Austrian Trade and Industry Regulation Act, 1994, must be registered with the competent business authority of its location. Such a competent authority can be the district authority or a municipal executive. In addition, sole proprietors who are not Austrian citizens must appoint a professional representative.

The steps below outline the procedure for how to set up a sole proprietorship in Austria:

Step 1

Register with the competent business authority. It can be done in person, in writing in a printed form, or electronically through the Austrian Federal Economic Chamber (WKO). In addition to the relevant supporting documents discussed previously, you need to provide the following details at the time of registration:

• Name of the business
• The location where the business will be carried out
• Details of the registrant, including name, address, date of birth, date and place, nationality, and social insurance number. 

If you are appointing a professional representative, you must provide the following information:

• The name, address, date of birth, date & place, and nationality of the professional representative.
• Social insurance and employer account numbers if the professional representative is an employee.

If all the prerequisites and conditions have been met, the authority will send you a copy of your entry into the Austrian Business License Information System (GISA). Your entry in GISA will take place within about three months after the registration comes into effect or the authority receives all your documents. However, the authority may refuse your registration request if you do not meet all the conditions of establishing a sole proprietorship in Austria.

Step 2

If you hire employees for your sole proprietorship in Austria, you must register them with the Austrian Health Insurance Fund. 

Step 3

Next, you must register for the self-employed social security (within the first month). You can register for the same at the district administrative office that further forwards it to the social insurance services.

Step 4

To deal with the sole proprietorship taxes in Austria, you must register with the fiscal authorities and apply for a taxpayer identification number. You can do it electronically at the district administrative authority that will forward it to the fiscal authorities.

‍Step 5

If your sole proprietorship company is not located in an apartment or residential building, you must acquire the desired site’s allocation and usage permission. Moreover, you have to notify the municipality if you plan on hiring employees. In addition, registration with the Austrian Company Register is essential if your sole proprietorship in Austria has an annual net turnover of €700,000 (792,897.00 USD) or more.

Austria offers a favorable business environment for setting up sole proprietorships. A sole proprietorship in Austria is a legal entity with one person managing all the business affairs. While sole proprietors enjoy several benefits, including tax exemptions and exclusive entitlement to profits, they are also responsible for the business’s liabilities. Setting up a sole proprietorship in Austria is relatively hassle-free, provided you know the procedure and requirements. In any case, registration is the first and most important step to incorporating a sole proprietorship in Austria.

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