2018 Investment Climate Statements: Austria

Policies Towards Foreign Direct Investment

The Austrian government welcomes foreign direct investment, particularly when such investments have the potential to create new jobs, support advanced technology fields, promote capital-intensive industries, and enhance links to research and development.

There are no sectoral or geographic restrictions on foreign investment. American investors have not complained of discriminatory laws against foreign investors. Corporate taxes are relatively low (25 percent flat tax) and a tax reform implemented in 2016 aimed to further stimulate the economy. Citizens and investors have reported that it is difficult to establish and maintain banking services since the Foreign Account Tax Compliance Act (FATCA) Agreement went into force in 2014, as some Austrian banks have been reluctant to take on this reporting burden.

Potential investors should also factor in Austria’s strict environmental regulations and environmental impact assessments into their investment decision-making. The requirement that over 50 percent of energy providers must be in public hands creates a potential additional burden for investments in the energy sector. Strict liability and co-existence regulations in the agriculture sector restrict research and virtually outlaw the cultivation, marketing, or distribution of biotechnology crops. That situation is unlikely to improve for biotech producers under the new coalition government.

Austria’s national investment promotion company, the Austrian Business Agency (ABA), is the first point of contact for foreign companies aiming to establish their own business in Austria. It provides comprehensive information about Austria as a business location, identifies suitable sites for greenfield investments, and consults in setting up a company. ABA provides its services free of charge.

Austrian agencies do not press investors to keep investments in the country, but the Federal Economic Chamber (WKO), and the American Chamber of Commerce in Austria (Amcham) carry out annual polls among their members to measure their satisfaction with the business climate, thus providing early warning to the government of problems investors have identified.

Limits on Foreign Control and Right to Private Ownership and Establishment

There is no principal limitation on establishing and owning a business in Austria. A local managing director must be appointed to any newly-started enterprise. For non-EU citizens to establish and own a business, the Austrian Foreigner’s Law mandates a residence permit that includes the right to run a business. Many Austrian trades are regulated, and the right to run a business in many trades sectors is only granted when certain preconditions are met, such as certificates of competence, and recognition of foreign education. There are no limitations on ownership of private businesses. Austria maintains an investment screening process for takeovers of 25 percent or more in the sectors of national security and public services such as energy and water supply, telecommunication, and education services, where the Austrian government retains the right of approval. The screening process has been rarely used since its introduction in 2012, but could pose a de facto barrier, particularly in the energy sector.

Other Investment Policy Reviews

Not applicable.

Business Facilitation

Although the World Bank ranks Austria among the top 25 countries in 2018 with regard to “ease of doing business” (www.doingbusiness.org ), starting a business takes time and requires many procedural steps (rank 118 in 2018).

There is no business registration website or online process for starting a business in Austria.

In order to register a new company, or open a subsidiary in Austria, a company must first be listed on the Austrian Companies’ Register at a local court. The next step is to seek confirmation of registration from the Austrian Federal Economic Chamber (WKO) establishing that the company is really a new business. The investor must then notarize the “declaration of establishment,” deposit a minimum capital requirement with an Austrian bank, register with the tax office, register with the district trade authority, register employees for social security, and register with the municipality where the business will be located. Finally, membership in the WKO is mandatory for all businesses in Austria.

According to Deloitte Austria, the average time to set up a company in Austria is 25 days, far more than the EU average of 7 days. A one-stop shop procedure for completing all necessary steps would improve the situation for U.S. investors significantly.

Austrian law prohibits gender-based discrimination. Job advertisements have to be gender-neutral. While government entities advertise a preference for women for top positions if they possess the same qualifications as males, private companies have no formal quotas and only encourage applications from qualified female candidates.

The government-run Austrian Business Agency (ABA) provides consulting services to firms interested in setting up business operations in Austria. There are several legal structures for companies to use in establishing a presence in Austria. The ABA website contains further details and contact information, and is intended to serve as a first point of contact for investors: https://investinaustria.at/en/starting-business/ .

Outward Investment

The Austrian government encourages outward investment. There is no special focus on specific countries, but the United States is seen as an attractive target country. The “Austrian Foreign Trade Service” (“Aussenwirtschaft Austria”) is a special section of the WKO promoting outward foreign investment and exports alike. The ATS runs six offices in the United States in Washington, DC, New York, Chicago, Atlanta, Los Angeles, and San Francisco. The Ministry for Digital and Economic Affairs and the WKO run a joint program called: “go international,” providing services to companies that are considering investing for the first time in foreign countries. The program provides grants in form of contributions to “market access costs” and “soft subsidies,” such as counselling, legal advice, and marketing support.

There is no current investment agreement between the United States and Austria. Austria has Bilateral Investment Treaties (BITs) in force with: Albania, Algeria, Argentina, Armenia, Azerbaijan, Bangladesh, Belarus, Belize, Bosnia and Herzegovina, Bulgaria, Chile, China, Croatia, Cuba, Czech Republic, Egypt, Estonia, Ethiopia, Georgia, Guatemala, Hong Kong, Hungary, India, Iran, Jordan, Kazakhstan, Republic of Korea, Kuwait, Latvia, Lebanon, Libya, Lithuania, Macedonia, Malaysia, Malta, Mexico, Moldova, Mongolia, Montenegro, Morocco, Namibia, Oman, Paraguay, Philippines, Poland, Romania, Russia, Saudi Arabia, Serbia, Slovakia, Slovenia, Tajikistan, Tunisia, Turkey, Ukraine, United Arab Emirates, Uzbekistan, Vietnam, and Yemen. BITs with Cambodia, Kyrgyzstan, Nigeria, and Zimbabwe have been signed, but have not yet entered into force.

The EU Commission questions the legality of Austria’s 12 intra-EU BITs. Austria insists the BITs will remain in force until another EU-wide investment protection mechanism has been negotiated. In 2016, Austria and other EU Member States outlined such a mechanism in a “non-paper.” On March 16, 2018, the European Court of Justice called arbitration clauses in Member State BITs incompatible with EU law; the verdict might speed up the abolition of bilateral BITs between EU states.

Austria and the United States are parties to a bilateral double taxation convention covering income and corporate taxes, which went into effect on January 1, 1999. Another bilateral double taxation convention (covering estates, inheritances, gifts and generation-skipping transfers) has been in effect since 1982 (amended in 1999). Austria and the United States signed the Foreign Account Tax Compliance Act (FATCA) Agreement on April 29, 2014, covering U.S. citizen account holders in Austria. The FATCA Agreement went into force December 9, 2014.

Austria has 90 additional taxation treaties in force with other countries.

Two other Austrian agreements, with Switzerland and Liechtenstein, on cooperation in the areas of taxation and financial markets (which entered into force in January and April 2013 respectively) cover the treatment of anonymous accounts from Austrian citizens in those countries.

Transparency of the Regulatory System

Austria’s legal, regulatory, and accounting systems are transparent and consistent with international norms.

Federal ministries generally publish draft laws and regulations for public comment prior to their adoption by Austria’s cabinet and/or Parliament. In addition, relevant stakeholders such as the “Social Partners” (Economic Chamber, Agricultural Chamber, Labor Chamber, and Trade Union Association), the Industrial Association, and research institutions are invited to provide comments and suggestions for improvement, which may be taken into account before adoption of laws. This mechanism encompasses investment laws, as well. Austria’s nine provinces can also adopt laws relevant to investments; their review processes are generally less extensive, but local laws are less important than federal laws for investments. The judicial system is independent from the executive branch, thus helping to ensure the government follows administrative processes.

Draft legislation by ministries (“Ministerialentwurfe”) and resulting government draft laws and parliamentary initiatives (“Regierungsvorlagen und Gesetzesinitiativen”) can be accessed through the website of the Austrian Parliament: https://www.parlament.gv.at/PAKT/  (all in German). The parliament also publishes a history of all law-making processes. All final Austrian laws can be accessed through a government data base, partly in English: https://www.ris.bka.gv.at/defaultEn.aspx .

The government has made progress in streamlining its complex and cumbersome requirements for issuing business licenses and permits. It claims to have reduced the processing time for business permits to less than three months, except in the case of projects requiring an environmental impact assessment.

Austrian regulations governing accounting provide U.S. investors with internationally standardized financial information. In line with EU regulations, listed companies must prepare their consolidated financial statements according to the International Financial Reporting Standards (IAS/IFRS) system.

International Regulatory Considerations

Austria is a member of the EU. As such, its laws must comply with EU legislation and the country is therefore subject to European Court of Justice (ECJ) jurisdiction. Austria is a member of the WTO and largely follows WTO requirements. Austria has ratified the Trade Facilitation Agreement (TFA), but has not taken specific actions to implement it.

Legal System and Judicial Independence

The Austrian legal system is based on Roman law. The constitution establishes a hierarchy, according to which each legislative act (law, regulation, decision, and fines) must have its legal basis in a higher instrument. The full text of each legislative act is available online for reference. All final Austrian laws can be accessed through a government data base, partly in English: https://www.ris.bka.gv.at/defaultEn.aspx .

Commercial matters fall within the competence of ordinary regional courts except in Vienna, which has a specialized Commercial Court. The Commercial Court also has nationwide competence for trademark, design, model, and patent matters. There is no special treatment of foreign investors and the executive does not interfere in judicial matters.

The system provides an effective means for protecting property and contractual rights of nationals and foreigners. Sensitive cases must be reported to the Minister of Justice who can issue instructions for addressing them. Austria’s civil courts enforce property and contractual rights and do not discriminate against foreign investors. Austria allows for court decisions to be appealed, first to a Regional Court and finally, in the Supreme Court.

Laws and Regulations on Foreign Direct Investment

There is no discrimination against foreign investors, but businesses are required to follow numerous local regulations. Although there is no requirement for participation by Austrian citizens in ownership or management of a foreign firm, at least one manager must meet Austrian residency and other legal requirements. Expatriates are allowed to deduct certain expenses (costs associated with moving, maintaining a double residence, education of children) from Austrian-earned income.

In April 2017, a new “Law to Support Investments in Municipalities” (published in the Federal Law Gazette, 74/2017, available online in German only on the federal legal information system www.ris.bka.gv.at ) was adopted that allows federal funding of up to 25 percent of the total investment amount of a project to “modernize” a municipality.

Competition and Anti-Trust Laws

Austria’s Anti-Trust Act (ATA) is in line with European Union anti-trust regulations, which take precedence over national regulations in cases concerning Austria and other EU member states. The Austrian Anti-Trust Act prohibits cartels, anticompetitive practices, and the abuse of a dominant market position. The independent Federal Competition Authority (FCA) and the Federal Cartel Prosecutor (FCP) are responsible for administering anti-trust laws. The FCA can conduct investigations and request information from firms. Private parties are enabled to file damage claims based on an infringement of Austrian and European anti-trust rules under an April 2017 ATA amendment. The ATA amendment also includes strengthened merger control, and more room for appeals against verdicts based on the ATA.

Companies must inform the FCA of mergers and acquisitions (M&A). Special M&A regulations apply to media enterprises, such as a lower threshold above which the ATA applies, and the requirement that media diversity must be maintained. A cartel court is competent to rule on referrals from the FCA or the FCP. For violations of anti-trust regulations, the cartel court can impose fines of up to the equivalent of 10 percent of a company’s annual worldwide sales. The independent energy regulator E-Control separately examines antitrust concerns in the energy sector, but must also submit cases to the cartel court.

Austria’s Takeover Law applies to friendly and hostile takeovers of corporations headquartered in Austria and listed on the Vienna Stock Exchange. The law protects investors against unfair practices, since any shareholder obtaining a controlling stake in a corporation (30 percent or more in direct or indirect control of a company’s voting shares) must offer to buy out smaller shareholders at a defined fair market price. The law also includes provisions for shareholders who passively obtain a controlling stake in a company. The law prohibits defensive action to frustrate bids. The Shareholder Exclusion Act allows a primary shareholder with at least 90 percent of capital stock to force out minority shareholders. An independent takeover commission at the Vienna Stock Exchange oversees compliance with these laws.

Expropriation and Compensation

According to the European Convention of Human Rights (applicable in Austria) and the Austrian Civil Code, property ownership is guaranteed in Austria. Expropriation of private property in Austria is rare and may be undertaken by federal or provincial government authorities only on the basis of special legal authorization “in the public interest” in such instances as land use planning, and infrastructure project preparations. The government can initiate such a procedure only in the absence of any other alternatives for satisfying the public interest; when the action is exclusively in the public interest; and when the owner receives just compensation. The expropriation process is non-discriminatory toward foreigners, including U.S. firms. There is no indication that significant expropriations will take place in the foreseeable future.

Dispute Settlement

ICSID Convention and New York Convention

Austria is a member of both the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID) and the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, meaning local courts must enforce foreign arbitration awards in Austria. There is no specific domestic legislation in this regard, but local courts must enforce arbitration decisions where the affected companies have their business locations.

Investor-State Dispute Settlement

Austria is a member of the UN Commission on International Trade Law (UNCITRAL). Its arbitration law largely conforms to the UNCITRAL model law. The main divergence is that an award may only be set aside if the arbitral procedure is not in accordance with Austrian public policy.

Austria does not have a BIT or FTA with the United States. There is no special domestic arbitration body.

In 2015, the Austrian government was sued, for the first time ever, by the offshore parent company of the Austrian Meinl Bank, Far East. The case was brought before the ICSID in New York because of alleged damages arising from domestic prosecution in Austria; the ICSID dismissed the case in November 2017.

International Commercial Arbitration and Foreign Courts

The Vienna International Arbitral Center of the Austrian Federal Economic Chamber acts as Austria’s main arbitration institution. Legislation is modeled after the UNCITRAL model law (see above). The New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (NYC) overrides most of Austria’s domestic provisions, where applicable, and Austrian courts are consistent in applying it.

Bankruptcy Regulations

The Austrian Insolvency Act contains provisions for business reorganization and bankruptcy proceedings. Reorganization requires a restructuring plan from the still solvent debtor. The plan must offer a quota of at least 20 percent of the debtor’s obligation and be adopted by a majority of all creditors and a majority of creditors holding at least 50 percent of all claims. Bankruptcy proceedings take place in court and are opened upon application of the debtor or a creditor; the court appoints a receiver for winding down the business and distributes proceeds to the creditors. Bankruptcy is not criminalized, provided the affected person performed all his documentation and reporting in accordance with the law.

Austria’s major commercial association for the protection of creditors in cases of bankruptcy is the “KSV 1870 Group”, www.ksv.at , which also carries out credit assessments of all companies located in Austria. Other European-wide credit bureaus, particularly “CRIF” and “Bisnode”, also monitor the Austrian market.

Investment Incentives

Austria offers financial and tax incentives (within EU competition policy limits) to firms undertaking projects in economically underdeveloped areas. In most of these areas, eligibility for co-financing subsidies under EU regional and cross-border programs has gradually declined under the EU’s financial frameworks, but subsidies could account for up to EUR 200 million (approx. USD 228 million) per year (mainly for rural areas) within the EU “Common Strategic Framework” for the period 2014 to 2020.

Financial incentives provided by Austrian federal, state, and local governments to promote investments are equally available to domestic and foreign investors and include tax incentives, preferential loans, loan guarantees, and grants. Most incentives are targeted to investments that meet specified criteria, including job-creation and use of cutting-edge technology. Tax allowances for advanced employee training and R&D expenditures are also available, as are financing options for start-ups and cash grants. The Austrian Labor Market Service (AMS) offers grants for job creation and personnel development training.

Austria’s Wirtschaftsservice (AWS) is the government’s institution that provides financial incentives for businesses. Additional information on targeted investment incentives) is available at www.aws.at ,with limited English text. More detailed information on investment incentives in English language is available on the ABA website (see chapter 2) at http://investinaustria.at/en/ .

Various government agencies in Austria offer attractive incentives for research and development (R&D) activities (up to 50 percent of the investment amount). The incentives are also available for foreign-owned enterprises. The agencies providing incentives include: The Austrian Research Promotion Agency (FFG) (https://www.ffg.at/en ); the Austrian Science Fund (FWF), which is the country’s central body for the promotion of basic research (https://www.fwf.ac.at/en/  ); and AWS (above).

Foreign Trade Zones/Free Ports/Trade Facilitation

Not applicable.

Performance and Data Localization Requirements

If investors want to employ foreign workers in Austria, they will need to apply for a work permit with the Austrian Labor Service (AMS). The AMS only grants that permission if there is no comparable person in the pool of registered unemployed persons. This does not apply to senior management positions.

Austria offers several non-immigrant business visa classifications, including intra-company transfers/rotational workers, and employees on temporary duty. Recruitment of long-term, overseas specialists or those with managerial duties is governed by a points-based immigration scheme to attract skilled workers and specialists in individual sectors (points are available for qualification, education, age, and language skills). This Red-White-Red card (RWR) model has been designed to allow firms to react flexibly to rising demand for talent in different occupations. It is available to highly qualified individuals, qualified specialists/craftsmen in certain understaffed professions (qualified labor and registered nurse jobs), and key personnel/professionals. Applicants must have an offer of employment to apply for the RWR. Highly qualified individuals may apply locally in Austria, or opt to find a potential employer from abroad and have the company apply in Austria on their behalf. Austrian immigration law requires those applying for residency permits to take German language courses and exams. The Austrian government in 2017 introduced a law that introduces a specific visa category under the RWR model for founders of start-up enterprises to support Austria’s push to expand its innovation economy.

While there is no requirement for foreign IT providers to turn over source code and/or provide access to encryption, EU and Austrian data protection stipulations apply. Transmission of customer or business related data are subject to authorization of Austria’s Data Protection Authority, unless the data are permissibly published in Austria, are transmitted with the permission of the data holder, or are necessary to fulfill contract regulations. The transfer of data is also permitted if it is in line with the U.S.-EU Privacy Shield, which provides a waiver for certified U.S. companies.

The Austrian government may impose performance requirements when foreign investors seek financial or other assistance from the government, although there are no performance requirements to apply for tax incentives. There is no requirement that Austrian nationals hold shares in foreign investments or for technology transfer, and no requirement for foreign investors to use domestic content in the production of goods or technology.

Real Property

The Austrian legal system protects secured-interests in property. For any real estate agreement to be effective, owners must register with the land registry. In case of rededication of land, approval of the land transfer commission or the office of the state governor is required. The land registry is a reliable system for recording interests in property, and access to the registry is public.

Non-EU/EEA citizens need authorization from administrative authorities of the respective Austrian province to acquire land. Provincial regulations vary, but in general there must be a public (economic, social, cultural) interest for the acquisition to be authorized. Often, the applicant must guarantee that he does not want to build a vacation home on the land in order to receive the required authorization.

Intellectual Property Rights

Austria has a strong legal structure to protect intellectual property rights, including patent and trademark laws, a law protecting industrial designs and models, and a copyright law. Austria is a party to the World Intellectual Property Organization (WIPO) and several international property conventions, including the European Patent Convention, the Universal Copyright Convention and the “Paris Union” International Convention for the Protection of Industrial Property. American investors are entitled to the same protection under Austrian patent legislation as Austrian nationals. Austria also participates in the Patent Prosecution Highway (PPH) program with the USPTO (started in 2014), which allows filing of streamlined applications for inventions determined to be patentable in other participating countries. The program is expected to reduce average processing time for patents.

Austria’s Copyright Act conforms to EU directives on intellectual property rights. It grants authors exclusive rights to publish, distribute, copy, adapt, translate, and broadcast their work. The law also regulates copyrights of digital media (restrictions on private copies), works on the Internet, protection of computer programs, and related damage compensation. Infringement proceedings, however, can be time-consuming and costly. In 2015 and 2016, the Austrian High Court confirmed that Austrian Internet providers must prevent access to illegal music and streaming platforms once made aware of a copyright violation and must also block workaround websites from these platforms.

Austria also has a law against trade in counterfeit articles. In 2017, Austrian customs authorities confiscated pirated goods worth EUR 13.7 million (USD 15.6 million).

Austria is not listed in USTR’s Special 301 report, but its trade secrets regime is a concern for some U.S. businesses. While Austria offers basic protection for trade secrets, both Austrian and U.S. companies have voiced specific concerns about both the scope of protection and the difficulty of adjudicating breaches. For example, gaps in the system make it unlikely that confidential information will be safe from malign actors. If a party entrusted with a “non-technical” secret, such as a go-to-market strategy or a list of customers, discloses it, there is no criminal liability. Similarly, a competitor can make use of confidential information he receives, as long as the party providing it originally received it legitimately. Another concern relates to the burden of gathering evidence, which lies with the injured party. Because it is required to implement the 2016 EU Directive on Trade Secrets, the Austrian government, along with industry representatives, is currently reevaluating its trade secrets regime to address these and other concerns; a new trade secrets law should enter into force in 2018, as the EU directive must be implemented in this year.

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .

Capital Markets and Portfolio Investment

Austria has sophisticated financial markets that allow foreign investors access without restrictions. The government welcomes foreign portfolio investment. The Austrian National Bank (OeNB) regulates portfolio investments effectively.

Austria has a national stock exchange which currently includes 66 companies. The Austrian Traded Index (ATX) is a price index consisting of the 20 largest stocks on the market and forms the most important index of Austria’s stock market. The size of the companies listed on the ATX is roughly equivalent with the MDAX in Germany. However, the stock exchange has been suffering from a declining number of listed companies in recent years and declining interest from investment bankers and brokers. This can be attributed to more companies pursuing a private ownership structure, as well as listed companies shifting to foreign stock exchanges. This trend is likely to continue in the future, as the Austrian stock exchange consists of largely small- to medium-sized companies which do not stand to benefit from the latest EU regulations. The new government intends to facilitate SME access to the Austrian stock exchange, but has not yet set incentives to increase the free flow of financial resources into product and factor markets.

Austria has robust financing for product markets, but the free flow of resources into factor markets (capital, raw materials) could be improved. To that end, the Austrian government has appointed a special envoy for capital markets, and announced it plans to open the stock exchange to small, innovative companies.

Austria is fully compliant with IMF Article VIII, all financial instruments are available, and there are no restrictions on payments. Credit is available to foreign investors at market-determined rates. Credit standards for loans have been tightened as banks work to improve the quality of their loan portfolios and align with European Central Bank regulations. Nevertheless, the strong growth in Austria’s economy resulted in a 4.8 percent increase in loans to Austrian companies in 2017, with loans reaching their highest value since 2009. Austria’s financial market development showed significant improvement, ranking 30^th in the most recent World Economic Forum’s Global Competitiveness Report out of 137 countries examined, compared to 47^th in the previous year.

Money and Banking System

Austria has one of the densest banking networks in Europe with over 535 Head Offices and close to 3,800 branch offices registered in the first quarter of 2018. The banking system is highly developed with worldwide correspondent banks, and representative offices and branches in the United States and other major financial centers. Large Austrian banks also have extensive networks in Central and Southeast European (CESEE) countries and the countries of the former Soviet Union. Total assets of the banking sector amounted to EUR 950 billion (USD 1.1 billion) in 2017, approximately three times the country’s GDP.

Austria’s banking sector is primarily managed and overseen by the Austrian National Bank (OeNB) and, to a lesser extent, the Financial Market Authority (FMA). Six Austrian banks with assets in excess of EUR 30 billion (USD 34 billion) are subject to the Eurozone’s Single Supervisory Mechanism (SSM), as is Sberbank Europe AG, a Russian bank subsidiary headquartered in Austria. All other Austrian banks continue to be subject to the country’s dual-oversight bank supervision system with roles for the OeNB and the FMA, both of which are also responsible for policing irregularities on the stock exchange and for supervising insurance companies, securities markets, and pension funds.

Due to U.S. government financial reporting requirements, Austrian banks are very cautious in accepting U.S. clients, whose access to banking services here is consequently restricted. Locally incorporated businesses belonging to U.S. investors have also reported problems in finding banking services.

There is considerable interest among Austria’s banking sector in cryptocurrencies and blockchain technology. Austria’s banks generally struggle to keep up with modern IT requirements, partially due to a lack of IT specialists available for hire. This opens up possibilities for mobile banking providers and Financial Technology Companies (Fintechs) to provide online banking services. These are still nascent, as a comparatively large share of the population continues to prefer traditional banking services and cash transactions.

Foreign Exchange and Remittances

Foreign Exchange Policies

Austria has no restrictions on cross-border capital transactions, including the repatriation of profits and proceeds from the sale of an investment, for non-residents and residents. The Euro, a freely convertible currency and the only legal tender in Austria and 18 other Euro-zone member states, shields investors from exchange rate risks within the Euro-zone.

Remittance Policies

Not applicable.

Sovereign Wealth Funds

Austria has no sovereign wealth funds.

Austria has two major wholly state-owned enterprises (SOEs): The OBB (Austrian Federal Railways) and Asfinag (highway financing, building, maintenance and administration). Other government industry holding companies are bundled in the government holding company OBIB: http://www.oebib.gv.at/en/ .

OBIB holds a 53 percent stake in the Post Office, 33 percent in the gambling group Casinos Austria, 31.5 percent in the energy company OMV, 28 percent in the Telekom Austria Group, and a few other minor ventures. The federal government also owns 51 percent of the energy company Verbund AG. Local governments own the majority of utilities, Vienna International Airport, and more than half of Austria’s 275 hospitals and clinics.

Private enterprises in Austria can generally compete with public enterprises under the same terms and conditions with respect to market access, credit, and other such business operations as licenses and supplies. However, SOEs in the past have used political ties to prolong dispute resolution and appeal procedures, and/or delay implementation of remedies. For example, a few years ago, a new private railway provider had to fight discriminatory track charges and elimination from public timetables against the incumbent state-owned OBB. While most SOEs must finance themselves under terms similar to private enterprises, some large SOEs (such as OBB) benefit from state-subsidized pension systems. As a member of the EU, Austria is also a party to the Government Procurement Agreement (GPA) of the WTO, which indirectly also covers the SOEs (since they are entities monitored by the Austrian Court of Auditors).

The four major OBIB companies (Postal Service, Casinos Austria, OMV, Telekom Austria) as well as Verbund AG, are listed on the Vienna stock exchange. In these cases, senior management does not directly report to a minister, but to an oversight board. However, the government often appoints management and board members, who usually have strong political affiliations.

The Austrian Foreign Trade Act (FTA) requires advance approval by the Austrian Ministry for Digital and Economic Affairs for foreign acquisitions of a relevant stake (25 percent) in enterprises in certain strategic industries (with sales over EUR 700,000 per year), comprising a wide range of sectors. Strategic sectors include not only internal and external security services, but also public order and safety, procurement, and crisis services. The latter include hospitals, ambulance and emergency medical services; fire fighters and civil protection services; energy and gas supply; water supply; telecoms; railways; road traffic; universities; schools of various types and pre-schooling institutions.

Privatization Program

The government has not privatized any public enterprises since 2007. Austrian public opinion is skeptical regarding further privatization. The current government consisting of the center-right People’s Party (OVP) and right-populist Freedom Party (FPO) is decidedly more pro-market than the previous government but there is no plan for further privatization.

In prior privatizations, foreign and domestic investors received equal treatment. Despite a historical government preference for maintaining blocking minority rights for domestic shareholders, foreign investors have successfully gained full control of enterprises in several strategic sectors of the Austrian economy, including telecommunications, banking, steel, and infrastructure.

Austrian Responsible Business Conduct (RBC)/Corporate Social Responsibility (CSR) standards are laid out in the Austrian Corporate Governance Codex, which is based on the EU Commission’s 2011 “Strategy for Corporate Social Responsibility.” The Austrian Standards Institute’s ONR 192500 acts as the main guidance for CSR and is based on the EU Commission’s published Strategy, which is also compliant with UN guidelines. Major Austrian companies follow generally accepted CSR principles and publish a CSR chapter in their annual reports; many also provide information on their health, safety, security, and environmental activities.

Austria adheres to the OECD’s Guidelines for Multinational Enterprises. The Ministry for Labor, Social Affairs, Health, and Consumer Protection is represented in national and international CSR-relevant associations and supports CSR initiatives while working closely together with the Austrian Standards Institute.

The Austrian export credit agency promotes information on CSR issues, principles and standards, including the OECD Guidelines, on its website.

https://www.oekb.at/en/oekb-group/our-claim/corporate-governance.html 

Austria is a member of the Council of Europe’s Group of States against Corruption (GRECO) and also ratified the UN Convention against Corruption (UNCAC) and the OECD Anti-Bribery Convention. As part of the UNCAC ratification process, Austria’s government in January 2018 has committed to implementing a national anti-corruption strategy, which was a previously unfulfilled obligation. Details on the strategy remain vague. Transparency International’s main recommendations include improving on the current Freedom of Information law, revising existing lobbying laws to improve transparency of political party funding, and introducing a national register of company ownership.

Bribery of public officials is covered by the Austrian Criminal Code and corruption does not significantly affect business in Austria. However, there is a small risk of corruption in public procurement, most commonly in the form of criteria that are tailor-made for certain participants.

Anti-corruption cases are often characterized by slow-moving trials that drag on for years. Bribery of Members of Parliament was criminalized broadly in 2013; accepting a bribe is a punishable offence with the sentence varying depending on the amount of the bribe.

There are no rules on managing conflicts of interest for parliamentarians and no framework for dealing with gifts and other benefits. This was highlighted as a key area for improvement in the latest GRECO report in 2017. GRECO also found that 30 percent of Austrian survey respondents consider it acceptable to offer a gift or favor in order to obtain something from a public service official, which is significantly above the EU average.

In 2017, several prominent corruption cases went on trial. The most noteworthy was the case involving former Finance Minister Karl-Heinz Grasser and the privatization of the BUWOG, an Austrian real-estate company, in 2003. The case, which was begun in 2010, features 16 defendants. Grasser is accused of having demanded a bribe of EUR 9.6 million (USD 11 million), and judicial proceedings are ongoing. Additionally, the mayor of the city of Salzburg, Heinz Schaden, was forced to resign when he was found guilty of involvement in a 2012 scandal in which around EUR 350 million (USD 400 million) of public funds were lost due to risky interest rate swaps conducted by several of his administration’s officials. He was sentenced to three years in prison, with a minimum of one year to be served. There were no major new corruption cases uncovered in 2017.

Corruption provisions in Austria’s Criminal Code cover managers of Austrian public enterprises, civil servants, and other officials (with functions in legislation, administration, or justice on behalf of Austria, in a foreign country, or an international organization), representatives of public companies, and domestic members of parliament, government members, and mayors. The term corruption includes the following: active and passive bribery; illicit intervention; and abuse of office. Corruption can sometimes include a private manager’s fraud, embezzlement, or breach of trust.

Criminal penalties for corruption include imprisonment of up to ten years for all parties involved. The jurisdiction of corruption investigations rests with the Austrian Federal Bureau of Anti-Corruption and covers corruption taking place both within and outside the country. The Lobbying Act of 2013 introduced binding rules of conduct for lobbying and requires domestic and foreign organizations to register with the Austrian Ministry of Justice. Financing of political parties requires disclosure of donations exceeding EUR 3,500 (USD 4,000). Private companies are subject to the Austrian Act on Corporate Criminal Liability, which makes companies liable for active and passive criminal offences. Penalties include fines up to EUR 1.8 million (USD 2.1 million).

Resources to Report Corruption

Contacts at government agencies responsible for combating corruption:

Wirtschafts- und Korruptionsstaatsanwaltschaft
(Central Public Prosecution for Business Offenses and Corruption)
Dampfschiffstrasse 4
1030 Vienna, Austria
Phone: +43-(0)1-52 1 52 0
E-Mail: wksta.leitung@justiz.gv.at

BAK – Bundesamt zur Korruptionspravention und Korruptionsbekampfung
(Federal Agency for Preventing and Fighting Corruption)
Ministry of the Interior
Herrengasse 7
1010 Vienna, Austria
Phone: +43-(0)1-531 26 – 6800
E-Mail: BMI-IV-BAK-SPOC@bak.gv.at

Contact at “watchdog” organization:

Transparency International – Austrian Chapter
Berggasse 7
1090 Vienna, Austria
Phone: +43-(0)1-960 760
E-Mail: office@ti-austria.at

There have been no incidents of politically motivated damage to foreign businesses. Civil disturbances are very rare and the overall security environment in the country is considered to be safe.

Austria has a well-educated and productive labor force of about 4 million, of whom 3.5 million are employees and 500,000 are self-employed or farmers. In line with EU regulations, the free movement of labor from all member states is allowed, except for Croatia, which joined the EU in July 2013 and is subject to a transition period until 2020.

Austria’s booming economy has led to a drop in the unemployment rate, from 6.0 percent in 2016 to 5.5 percent in 2017. The rate is forecast to decrease further in the following years, due to strong job creation which outpaces the labor force’s rate of growth. Currently, around 500,000 foreign workers are employed in Austria, with this number forecast to increase. Migrant workers are largely from the CEE region but the 2015 Syria refugee crisis led to a stream of asylum seekers from the Middle East entering the country and gradually becoming active on the labor market. Migrants from Eastern Europe frequently accept low-paid jobs and fill crucial vacancies in the tourism and healthcare sectors, which otherwise would likely experience shortages.

Youth unemployment is much less of a problem in Austria than in other EU member states, due in large measure to Austria’s successful dual-education apprenticeship system. That system combines on-the-job training with classroom instruction in vocational schools and includes guaranteed placement by the Public Employment Service for those 15-24 year olds who cannot find an apprenticeship.

The new Austrian government elected in October 2017 has made several changes to existing labor market policies. It has scrapped a trial program initiated in 2016 that provides a job guarantee in public services for 20,000 unemployed workers age 50+, while also eliminating non-wage labor cost subsidies for the hiring of new workers. The government is also planning to shorten the maximum duration of unemployment benefits payments in order to encourage the long-term unemployed to pursue jobs outside their area of expertise, rather than continue to receive payments from Austria’s social welfare system.

Social insurance is compulsory in Austria and is comprised of health insurance, old-age pension insurance, unemployment insurance, and accident insurance. Employers and employees contribute a percentage of total monthly earnings to a compulsory social insurance fund. Austrian laws closely regulate terms of employment including working hours, minimum vacation time, holidays, maternity leave, statutory separation notice, severance pay, dismissal, and an option for part-time work for those parents with children under the age of seven. Problematic areas include increased deficits in the pension and health insurance systems, the shortage of personnel to care for the increasing number of elderly, and escalating costs for retirement and long-term care. Due to employer contributions to social insurance for employees, paid leave, paid sick leave, fringe benefits, etc., additional wage costs in Austria add up to about 70 percent of gross pay.

Labor-management relations are relatively harmonious in Austria, which has enjoyed a low incidence of industrial unrest. No major work stoppages have occurred since 2005. Approximately 35 percent of the work force belongs to a union.

Collective bargaining revolves mainly around wages and fringe benefits. Approximately 90 percent of the labor force works under a collective bargaining agreement. In June 2017, Austria decided to implement a national minimum wage of EUR 1,500 (approx. USD 1,710) per month. This equates to an hourly wage of EUR 10.09 (approx. USD 11.50), placing Austria in the upper tier among European countries with a minimum wage, ahead of France, Germany and the UK. Sectors where wages are currently below this threshold have until 2020 to amend their collective bargaining agreements accordingly.

Austrian law stipulates a maximum workweek of 40 hours, but collective bargaining agreements also allow for a workweek of 38 or 38.5 hours per week. This applies to roughly half of all employees in Austria. Flexible work hour regulations allow firms to increase the maximum regular hours from 40 to 50 per week in special cases (and for a limited period up to 60 hours) with no more than 10 hours in a single day. This is one of the lowest caps in Europe. Responsibility for agreements on flextime or reduced workweeks resides at the company level. Overtime is paid at an additional 50 percent and, in some cases, such as work on public holidays, even 100 percent. Austrian employees are generally entitled to five weeks of paid vacation (and an additional week after 25 years in the workforce); the rate of absence due to illness/injury averages 12 workdays annually.

OPIC programs are not available for Austria. Austria is a member of the World Bank Group’s Multilateral Investment Guarantee Agency (MIGA).

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy

*Statistics Austria (GDP)
http://www.statistik.at/web_de/statistiken/wirtschaft/volkswirtschaftliche_gesamtrechnungen/
index.html 
Austrian National Bank (Foreign Direct Investments)
https://www.oenb.at/isaweb/report.do?lang=EN&report=9.3.31 
https://www.oenb.at/isaweb/report.do?lang=EN&report=9.3.01 
Table 3: Sources and Destination of FDI

Table 4: Sources of Portfolio Investment

Alexander Schratt
Economic Specialist
U.S. Embassy Vienna
1090 Vienna
+43 1 31339-2206
schrattax@state.gov