Quizgecko3.docx

Starting a new business in Austria requires choosing between the different types of companies provided by the Austrian legal system. 2.2.1. Sole proprietorship (Einzelunternehmen) A sole proprietor (also: sole trader) is a single natural person who operates the business alone in their own name and f...

Starting a new business in Austria requires choosing between the different types of companies provided by the Austrian legal system. 2.2.1. Sole proprietorship (Einzelunternehmen) A sole proprietor (also: sole trader) is a single natural person who operates the business alone in their own name and for their own account. Of course, the sole proprietor can engage employees, subcontractors, or other third parties on a contractual basis, but these persons would not join the trader in leading the business. No further formalities are required in order to establish sole proprietorship. Support for taking all necessary steps electronically are provided by the USP portal. The sole proprietor is liable for debts with business assets as well as private assets, without limitation. This means that, where the sole proprietor has incurred a debt in the course of their business activities, the creditor can sue the sole proprietor and, at the end of the day, have even the sole proprietor’s private assets seized by the court in enforcement proceedings if the debt cannot be paid otherwise. Sole proprietors do not have to register in the company register until their annual turnover exceeds a particular threshold (EUR 1,000,000 in one or EUR 700,000 in each of two consecutive business years, which is the threshold that triggers formal accounting duties). Even if these thresholds are not reached, voluntary registration is possible. Sole proprietors who are registered may choose a trade name (see below p. 19) and must use the designation ‘eingetragener Unternehmer’ or an abbreviation such as ‘e.U.’. 2.2.2. Business partnerships (Personengesellschaften) Selma and Sebastian are determined to run the trade jointly, i.e. not separately, nor with one of them being the other’s employee. Therefore, they are wondering whether there are other options, such as business partnerships … Partnerships are companies formed by two or more natural or legal persons (partners), which may have legal personality, but are not clearly detached from the partners in legal and financial terms (e.g. in terms of liability). Civil law partnership (Gesellschaft bürgerlichen Rechts, GesbR) The GesbR is a company in which two or more persons participate by contributing labour or assets for a common undertaking, e.g. in a consortium or joint venture. There are no particular formalities, but usually a written agreement is drawn up. The company itself has no legal personality and You will study company law in BA CM 11 (Business Law). Starting a business – registration and permission requirements 17 cannot be entered in the company register, but the partners may operate under a common name, which must indicate the nature as a GesbR. If the turnover exceeds the threshold for formal accounting requirements, the company must be transformed into a general partnership or limited partnership. The partners are fully liable with their business as well as their private assets and without limitation. Each individual partner must obtain all the necessary trade licences. General partnership (Offene Gesellschaft OG) The OG is established by the conclusion of a partnership agreement between two or more natural or legal persons. It must be entered in the company register and only comes into existence upon entry in the company register. No minimum share capital is required and, therefore, no cash has to be raised on the occasion of the formation. The OG can acquire rights and incur liabilities in its name and can sue and be sued (rechtsfähige Personengesellschaft). The partners are personally and jointly liable for the company's debts, including with their private assets, without any limitation. Unless agreed otherwise and noted in the company register, each partner is authorized to manage the company and can also represent the OG alone. The trade licence must be in the name of the company, which requires the appointment of a manager under the Trade Act. Limited partnership (Kommanditgesellschaft KG) A limited partnership is similar to the OG, but the liability vis-à-vis the company's creditors of at least one partner is limited. This limitation is entered into the company register. Such a partner is called a ‘limited partner’ (Kommanditist). There must also be at least one partner who has unlimited liability, and this partner is called a ‘general partner’ (Komplementär). The legal situation is similar to that of an OG, but most rules applicable in an OG only apply to the general partners. For instance, only the general partners are authorized to represent the company (a limited partner can theoretically be appointed an authorized signatory under the law of agency, though). 2.2.3. Corporations (Kapitalgesellschaften) Selma and Sebastian want to have a ‘real’ company that is registered in the company register, and they want to run the company on equal terms and with equal liability, so an OG would be an option. But they know that there are also company types with just limited liability, which sounds attractive … As contrasted with business partnerships, corporations are legal persons of their own that are – legally and financially – fully detached from the shareholders. The most important forms of corporations are the private limited company and the public limited company. There are also other forms, such as cooperatives, which are less frequently used. Private Limited Company (Gesellschaft mit beschränkter Haftung, GmbH) A private limited company (also: limited liability company) is a corporation whose share capital is divided into shares in accordance with initial capital contributions of the shareholders. The company is a legal entity of its own. In principle, only the company is liable with its entire corporate assets, i.e. there is no direct or personal liability of the shareholders. The GmbH is subject to the accounting regulations under company law and must therefore prepare annual financial statements, which must also be submitted to the competent authorities. Unlike partnerships, a limited liability company can be established by only one person. You will study accounting law in MA CM 6 (Economic Competence in Law) 18 Starting an E-Commerce Business in Austria The company needs written articles of association, and the founding agreement of the company must be in the form of a notarial deed (but one-person companies can also be established electronically via the USP portal). The company is represented by one or several managing directors (who may or may not be identical to the manager under the Trade Act). The GmbH comes into existence only upon entry in the company register. The trade license must be in the name of the company. The absence of personal liability creates a risk for creditors. The law provides for minimum amounts of share capital to protect future creditors and reduce incentives to create ‘fake’ companies. The share capital, which must be raised by the shareholders, must be at least EUR 35,000. Half of this amount must normally be paid up in cash at the time of formation. Newly established limited liability companies can take advantage of the so-called foundation privilege: The articles of association may provide that capital contributions are initially (and for a period of up to 10 years) limited to EUR 10,000, and that only at least EUR 5,000 must be paid up immediately in cash. Public Limited Company (Aktiengesellschaft, AG) Another company form is the public limited company. The AG is also a separate legal entity. The share capital of the AG is at least EUR 70,000 and is to be raised by subscription of the shares by the shareholders. For many AGs, shares are traded on the stock market. Shareholders are not personally liable for debts of the AG, and all they can lose is the value of shares subscribed for. Like the GmbH, the AG comes into existence upon registration in the company register. The mandatory bodies of an AG are the Management Board (Vorstand), Supervisory Board (Aufsichtsrat) and General Meeting (Hauptversammlung). The management and representation of the AG is carried out by the Management Board, whose members are appointed by the Supervisory Board, which is in turn elected by the General Meeting. While Selma and Sebastian are convinced their company will be really big one day, they realise that an AG is beyond reach. A GmbH would be an option, but they are not sure they want to face the formal accounting requirements (and associated costs) that come with establishing a GmbH immediately. So after considering all the pros and cons of the various company forms they tend towards an OG … but they want to check first whether they also have the option of a European or foreign company form. 2.2.4. Cross-border situations While most companies operate cross-border, there are only few truly European company forms, such as the Societas Europaea (SE), a kind of public limited company, and the Societas Cooperativa Europaea (SCE). This is why the vast majority of companies are established under domestic law. Foreign companies can in any case open a branch office (Zweigniederlassung) in Austria, which has to be registered in the company register. A branch office of a foreign company does not have its own legal personality and is normally not established under Austrian law. A branch office is not to be confused with a subsidiary (Tochtergesellschaft) in Austria, which is a separate company with its own legal personality, but dominated by a foreign parent company (Muttergesellschaft) within a group of companies (Konzern). Freedom of establishment is one of the fundamental principles of Union law (Articles 49 and 54 TFEU). In a long line of judgments, the CJEU has stressed the right of a company duly established under the law of one Member State to continue operating under this law, and maintain its foreign legal form, while moving its registered office, central administration or principal place of business to another Member State. This is why also foreign company forms from EU/EEA countries may also Starting a business – registration and permission requirements 19 be entered into the Austrian company register. From 2023, new legal provisions implementing the Mobility Directive will apply for particular types of cross-border mobility of corporations. Subject to international agreements, companies established under the law of third countries do not benefit from freedom of establishment and must, if they wish to move their seat to Austria, normally be dissolved and re-established under Austrian law. Selma and Sebastian realise they have to go for an Austrian company form. So their final choice remains an OG. So they first need to establish the company and register it in the company register before they can apply for a trade licence. However, when filling in the forms required for this step, they realise they also have to decide on a name for their company …. 2.3. Trade name law and trademark law 2.3.1. Trade name law (Firmenrecht) The trade name (Firma) of a sole proprietor or company is the name under which that trader pursues their economic activities. It is not to be confused with a trademark (on which see below p. 20). A trade name must be a legible and pronounceable designation that may serve as a name (as contrasted with, e.g., purely figurative characters). There are different types of trade names, which must, in each case, be followed by a suffix indicating the company type: • Trade name based on the name of an individual subject to unlimited liability (Namensfirma) • Trade name based on the business purpose (Sachfirma) • Trade name based on a fancy designation (Phantasiefirma) The above-mentioned forms can also be mixed or combined, e.g. the name of an individual can be combined with the business purpose. The trade name must fulfil a number of requirements and serve a number of purposes. In particular, it must allow the company name to be distinguishable from other company names in the relevant geographical area (which means that, if everyday words are used, it is advisable to add another component) and must not be misleading, i.e. the trade name must not create an incorrect impression about the company (e.g. its purpose, size or economic significance). If a trader wishes to include a geographical term (e.g. ‘Creative Stuff Vienna’) there must already be a certain economic significance in the geographical area, to be verified and confirmed by the Chamber of Commerce. Selma and Sebastian decide to create their trade name out of their marketing slogan ‘Make a Statement with your Stuff’ and call their company ‘MaSwyS’ OG – looks a bit weird at first sight, but people may start wondering what it means and become interested. They are just wondering whether someone else, be it in Austria or abroad, might simply open a shop with the same or a similar name. Maybe they should go for a better form of protection? You will study trade name law as well as trademark law in BA CM 11 (Business Law). MaSwyS 20 Starting an E-Commerce Business in Austria 2.3.2. Trademark law (Markenrecht) Entering a trade name in the company register only affords the trader limited protection against other traders who wish to use the same or a similar name. This is why it is possible to register a trademark, which is a special type of intellectual property right. Conversely, before choosing a trade name or a distinctive design for one’s website or one’s products and services it is highly advisable to check whether this infringes someone else’s registered trademark. National trademark Trademarks are recognisable signs or designs which serve to identify products or services as coming from a particular company and to distinguish the products or services of a company from similar products and services of other companies (identifying and distinguishing function). The sign must be must be capable of being presented in such a way that the competent authorities and the public can clearly and unambiguously determine the subject of the protection granted to them and can consist of numbers, letters or words (word mark), in a graphic design (figurative marks) including a particular colour or combination of colours (colour mark) or a special written form (word-image mark). The mark can also be a physical (three-dimensional) mark or a sound mark. A national trademark within the meaning of the Trademark Protection Act (Markenschutzgesetz, MSchG) is registered with the national Patent Office. It is valid for a period of 10 years and may be renewed an indefinite number of times. A trademark confers on the registered owner a bundle of exclusive rights. Most importantly, it gives the trademark holder the right to exclusive use of the mark for the types of products or services for which it is registered. Thus, competitors are not allowed to use identical or very similar signs for similar types of products or services. A sign is considered to infringe a trademark if a consumer or the public could be confused as to the identity of the source or origin of products or services. It is sufficient for confusion if there is a certain likelihood a consumer will associate the products or services with the registered owner. However, the use of a sign similar to a well-known trademark (e.g. ‘Coca-Cola’) may be an infringement of trademark law, even though there is no risk that the public would confuse the products or services with those of the registered owner of the well-known trademark. The higher level of protection is based on the rationale that no one should in an unjustified manner exploit or impair the reputation associated with a well-known trademark. EU and international trademarks A national trademark offers protection only for the national territory of the Republic of Austria (including protection against goods produced elsewhere to be imported into the national territory). Where a trader wishes to be protected also on other markets that trader must register the trademark also in the relevant countries. The so-called Madrid System of the WIPO is a convenient and cost-effective solution for registering and managing trademarks worldwide as it allows to file one single application and pay one set of fees to apply for protection in up to 123 participating states. Alternatively, the EU trade mark is obtained by registration in the Register kept by EU Intellectual Property Office (EUIPO) and has EU-wide effect. Filing an application to register an EU trade mark is much cheaper than filing separate national applications in all EU Member States. However, if an application is rejected on grounds which apply in only one or several Member States, such as following opposition by the holder of a national trademark, things may become more expensive. . Types of taxes and taxable entities Whoever wants to start a business must think about taxes and about registering with the tax authorities. There are different types of taxes. Direct taxes are taxes levied directly from the person that will ultimately bear the economic burden resulting from the tax and include, e.g., taxes on income and property. Indirect taxes are taxes levied from a person or company that will openly pass the economic burden on to other parties. This includes, e.g., value added tax or VAT (Mehrwertsteuer), also referred to as sales tax or turnover tax (Umsatzsteuer), excise duties (Verbrauchssteuern) on certain goods and services (such as alcoholic beverages or tobacco products), and payroll tax (Lohnsteuer) for employees. The question who is the taxable subject depends on the type of company: • Sole proprietors are liable for both direct and indirect taxes. • Partnerships are considered an independent tax subject only with regard to VAT and other indirect taxes, but not with regard to income tax. The company and the individual partners need their own tax numbers. • Corporations (such as GmbHs) are taxable entities in their own right and liable for both direct and indirect taxes Selma and Sebastian realise that they each need their own tax number (luckily, at least Sebastian already has one), plus a tax number and UID for the MaSwyS OG. They are a bit worried, though, about taxation as they do not have much of a clue what kind of taxes they will have to pay … 2.4.2. Income tax Personal and corporate income tax All natural persons who have a domicile or habitual residence in Austria, including sole proprietors and partners in a business partnership, are subject to unlimited liability for personal income tax (Einkommensteuer, Est). ‘Unlimited’ means that, in principle, all domestic and foreign income is subject to income tax in Austria. Personal income tax is calculated on the basis of the sum of all taxable income, whatever its source. In Austria, there is a progressive income tax scheme, i.e. the first EUR 11,000 are not taxed at all, and beyond this threshold tax rates range from 25 percent to 55 percent, depending on the amount of annual income. Corporations (such as GmbHs) are taxable entities in their own right. Profits are taxed at 25% corporate income tax (Körperschaftsteuer, KÖSt). For GmbHs, there is a minimum corporate income tax that must be paid in any case, even if the company makes no or only small profits. A You will study tax law in MA CM 5 (Tax Law) 22 Starting an E-Commerce Business in Austria 27.5% capital gains tax (Kapitalertragsteuer, KESt) must be withheld from the profit distributions to the shareholders and paid directly to the tax office. International tax law Selma and Sebastian have read in the media that digital businesses, in particular of the GAFAM type, often get away with paying close to zero taxes. Is that an option for them? After all, they want to engage in a digital business. … In the context of cross-border economic activities, double taxation agreements (‘DTA’) are in place between most states to avoid that the same income is taxed twice. In these agreements, contracting states formulate rules as to which state’s rights of taxation prevail under which circumstances. In respect of business income derived from countries other than the place of residence taxing rights under DTA usually require a permanent establishment (Betriebsstätte). A main argument in favour of taxation in the state of establishment is that companies benefit from public institutions, services and infrastructures provided by that state and should therefore participate in its financing. The debate about ‘digital tax’ Digitalisation has changed the situation because it is no longer necessary to have a relevant (physical) establishment in a country in order to profit from its institutions and infrastructures. So typical online companies have a motivation to have their establishment in a place where taxes and wages are low, do business and make profits elsewhere, and not contribute in any way to the financing of the systems they benefit from (free riding). Experience shows that big cross-border digital companies can reduce effective taxation to almost zero through aggressive tax planning. Since January 2020, Austria has levied a digital tax on online advertising services, the details of which are laid down in the Digital Tax Act 2020 (Digitalsteuergesetz 2020). Online advertising services are subject to digital tax if and to the extent that they are provided by online advertisers in Austria against payment. An online advertising service is deemed to be provided in Austria if it is received on a device of a user with an Austrian IP address and is (also) targeted at Austrian users in terms of content and design. The person liable for the tax is the company entitled to remuneration for the provision of the online advertising service. The Austrian digital tax only applies to online advertising operators with a worldwide annual turnover of at least EUR 750 million and that generate sales of at least EUR 25 million in Austria from the provision of online advertising services. The tax rate is 5 percent of the tax base. Of course, online advertising companies (e.g. Facebook) will normally pass the additional costs on to the companies on whose behalf the advertising is made. In late 2021, leaders of 136 countries worldwide signed an agreement to introduce a global minimum corporate tax rate (GMCTR) of 15% in order to reduce tax competition between countries and the avoidance of corporate taxes. The global minimum tax rate would apply to overseas profits of multinational firms with EUR 750 million euros in sales globally. National governments would still be allowed to set a lower corporate tax rate for their countries, but if a multinational company pays lower rates in a particular country, its home government may ‘top up’ that company’s taxes to the 15% minimum, thus eliminating incentives to shift profits. In addition, countries where revenues are earned would be allowed to tax 25% of the largest multinational companies' profit that is in excess of 10% of revenue. Starting a business – registration and permission requirements