Starting an E-Commerce Business in Austria PDF 2024

Starting an E-Commerce Business in Austria Christiane C. Wendehorst Professor of Law Bachelor‘s Programme in International Legal Studies Preparatory Materials for Admissions Procedure 2024 Published under the responsibility of: Directorate of Studies Faculty of Law University of Vienna Author: Univ.-Prof. Dr. Christiane Wendehorst, LL.M. Linguistic advice: Mag. Susan Ambler Smith, Legal Translations The author wishes to thank Univ.-Prof. Dr. Elisabeth Brameshuber, Univ.-Prof. Dr. Sabine Kirchmayr-Schliesselberger, Univ.-Prof. Dr. Dr. h.c. Paul Oberhammer, Univ.-Prof. Dr. Magdalena Pöschl, Univ.-Prof. Dr. Susanne Reindl-Krauskopf, Hon.-Prof. (The University of Queensland), Univ.-Prof. MMag. Dr. August Reinisch, LL.M., Univ.-Prof. Dr. Friedrich Rüffler, LL.M. and Univ.-Prof. Dr. Brigitta Zöchling-Jud for helpful comments and advice on a draft version of these materials. 2nd edition, February 2022 Disclaimer: These materials are intended for admission candidates who have applied to the BA International Legal Studies programme. The information provided in these materials has been simplified for didactic purposes and is not sufficiently detailed or complete to be used as the basis of any kind of business or legal decision. Neither the University of Vienna nor the author can accept any liability whatsoever for any damage that may be caused to any party relying on the information. A party wishing to start an e-commerce business is strongly advised to seek professional legal advice and to consult official sources, such as the USP portal set up by the Austrian government with the support of the European Commission, or the online information provided by the Austrian Chamber of Commerce (in German). © 2021, 2022, all rights reserved. Photo front cover: © University of Vienna / Peter Wienerroither I Contents The Case........................................................................................................................ 1 1. Where could legal requirements originate from?......................................................... 2 1.1. Sources of the law in Austria.................................................................................................. 3 1.1.1. Austrian domestic law.................................................................................................... 3 1.1.2. European Union law....................................................................................................... 4 1.1.3. International law............................................................................................................ 5 1.2. How national is ‘national law’?.............................................................................................. 6 1.3. Cross-border situations.......................................................................................................... 7 2. Starting a business – registration and permission requirements................................... 8 2.1. Trade regulation law (Gewerberecht).................................................................................... 9 2.1.1. Who needs a trade licence?............................................................................................ 9 2.1.2. How to obtain a trade licence in Austria?.................................................................... 11 2.1.3. Who is excluded from obtaining a trade licence?........................................................ 13 2.1.4. When is the appointment of a manager under the Trade Act required?.................... 15 2.2. Company law (Gesellschaftsrecht)....................................................................................... 16 2.2.1. Sole proprietorship (Einzelunternehmen).................................................................... 16 2.2.2. Business partnerships (Personengesellschaften)........................................................ 16 2.2.3. Corporations (Kapitalgesellschaften).......................................................................... 17 2.2.4. Cross-border situations................................................................................................ 18 2.3. Trade name law and trademark law.................................................................................... 19 2.3.1. Trade name law (Firmenrecht)..................................................................................... 19 2.3.2. Trademark law (Markenrecht)...................................................................................... 20 2.4. Tax law (Steuerrecht)............................................................................................................ 21 2.4.1. Types of taxes and taxable entities.............................................................................. 21 2.4.2. Income tax.................................................................................................................... 21 2.4.3. VAT................................................................................................................................. 23 2.5. Social security law (Sozialversicherungsrecht).................................................................... 24 3. Starting a website and commercial communications................................................. 26 3.1. Choosing a domain name..................................................................................................... 27 3.2. Dealing with content generated by others.......................................................................... 27 3.2.1. Content protected under copyright law (Urheberrecht)............................................. 28 3.2.2. Activities requiring the rightholder’s consent............................................................. 29 3.2.3. Consent of the rightholder........................................................................................... 31 3.2.4. Similar restrictions....................................................................................................... 31 II 3.3. Imprint and disclosure requirements.................................................................................. 32 3.3.1. General provisions for traders...................................................................................... 32 3.3.2. Special provisions for websites.................................................................................... 32 3.3.3. Special provisions for electronic advertising and marketing..................................... 33 3.4. Non-Discrimination Law....................................................................................................... 33 3.4.1. General non-discrimination law.................................................................................. 33 3.4.2. Prohibition of geo-blocking......................................................................................... 34 3.5. Alternative Dispute Resolution............................................................................................ 35 3.5.1. Dispute resolution in general...................................................................................... 35 3.5.2. Consumer ADR and ODR............................................................................................... 36 4. Dealing with personal data..................................................................................... 37 4.1. Which activities are affected by data protection law?........................................................ 38 4.1.1. General data protection law........................................................................................ 38 4.1.2. E-privacy law................................................................................................................. 39 4.2. What can you do with data?................................................................................................. 40 4.2.1. Requirement of a legal ground.................................................................................... 40 4.2.2. Purpose limitation........................................................................................................ 41 4.2.3. Data subjects’ rights..................................................................................................... 42 4.3. What to bear in mind when setting up a trading website................................................... 43 4.3.1. Information duties (data protection notice)............................................................... 43 4.3.2. Cookies.......................................................................................................................... 43 4.3.3. Privacy by design and by default................................................................................. 44 4.4. Contracting with other businesses...................................................................................... 44 4.4.1. Contracts with other controllers and processors........................................................ 45 4.4.2. Data transfers to third countries.................................................................................. 45 4.5. Requirements for bigger players.......................................................................................... 46 5. Concluding contracts online................................................................................... 47 5.1. Contract law.......................................................................................................................... 48 5.1.1. Formation of contracts................................................................................................. 48 5.1.2. Consumer, general, and commercial contracts.......................................................... 48 5.1.3. Cross-border trading.................................................................................................... 49 5.2. Duties under e-commerce law............................................................................................. 51 5.3. Duties under distance sales law (Fernabsatzrecht)............................................................. 52 5.3.1. Steps towards online contract conclusion.................................................................. 52 5.3.2. Consumer’s right of withdrawal................................................................................... 54 5.4. Warranty law (Gewährleistungsrecht).................................................................................. 55 5.4.1. Consumer Warranty Act................................................................................................ 55 5.4.2. General warranty regime.............................................................................................. 57 III 5.5. Trading via a platform.......................................................................................................... 57 5.5.1. General duties of platform operators.......................................................................... 58 5.5.2. P2B Regulation............................................................................................................. 59 5.5.3. Competition law (Wettbewerbsrecht).......................................................................... 60 6. Enforcement of the law.......................................................................................... 61 6.1. Public enforcement.............................................................................................................. 62 6.2. Representative and competitor enforcement..................................................................... 62 6.1. Private enforcement............................................................................................................. 64 Appendix: Curricula BA and MA International Legal Studies.............................................. 67 Note that these boxes indicate where in the curriculum a particular subject matter will be addressed. ‘CM’ stands for ‘Compulsory Module’, and the numbers refer to the numbers of the relevant modules in either the BA curriculum or the MA curriculum. You find an overview of both curricula on the inner side of the back cover. These materials are intended for admission candidates who have applied to the BA International Legal Studies programme and are required to answer knowledge questions based on these materials in the 2023 entrance examination. Their aim is to give candidates an idea of the typical legal issues that may arise in an everyday situation, such as the starting of a new e-commerce business by two individuals. Candidates are expected to study and understand the content in order to be able to answer multiple-choice questions, but not to learn details (such as the §§ numbers in a legal instrument or a list of requirements) by heart. Hyperlinked documents (such as the full text of legal instruments provided by RIS or eurlex) are not an integral part of these materials and candidates are not expected to study the hyperlinked documents and know their content. IV List of Abbreviations ABGB Allgemeines bürgerliches Gesetzbuch (Austrian General Civil Code) ADR Alternative Dispute Resolution AG Aktiengesellschaft (Public Limited Company) AI Artificial Intelligence AMD-G Audiovisuelle-Mediendienste-Gesetz (Audiovisual Media Services Act) AMS Arbeitsmarktservice (Public Employment Service Austria) ArbVG Arbeitsverfassungsgesetz (Labour Constitution Act) AStG Alternative-Streitbeilegung-Gesetz (Alternative Dispute Resolution Act) ASVG Allgmeines Sozialversicherungsgesetz (General Social Insurance Act ) AsylG Asylgesetz (Asylum Act) AuslBG Ausländerbeschäftigungsgesetz (Employment of Foreign Nationals Act) B2B business to business B2C business to consumer BG Bezirksgericht (district court) B-VG Bundes-Verfassungsgesetz (Federal Constitutional Law) BGStG Bundes-Behindertengleichstellungsgesetz (Disability Equality Act) C2C consumer to consumer c.f. confer/conferatur (compare) CFREU Charter of Fundamental Rights of the European Union CJEU Court of Justice of the European Union COE Council of Europe DE German DSM digital single market DLG Dienstleistungsgesetz (Services Act) DTA double taxation agreements DSG Datenschutzgesetz (Data Protection Act) ECG E-Commerce-Gesetz (E-Commerce Act) E-Commerce electronic commerce ECHR European Convention on Human Rights ECtHR European Court of Human Rights EDPB European Data Protection Board EEA European Economic Area EFTA European Free Trade Agreement e.g. exempli gratia (for example) EN English ESt Einkommensteuer (personal income tax) e.U. eingetragener Unternehmer (registered sole proprietor) EU European Union EUIPO EU Intellectual Property Office FAGG Fern- und Auswärtsgeschäftegesetz (Distance and Off-Premises Contracts Act) FPG Fremdenpolizeigesetz (Aliens Police Act) GAFAM Acronym for the big five tech companies (Google, Apple, Facebook, Amazon, and Microsoft) GATS General Agreement on Trade in Services GATT General Agreement on Tariffs and Trade GDPR General Data Protection Regulation GesbR Gesellschaft bürgerlichen Rechts (Civil law partnership) GewO Gewerbeordnung (Austrian Trade Act) GISA Gewerbeinformationssystem Austria (Austrian Business Licence Information System) GlBG Gleichbehandlungsgesetz (Equal Treatment Act) GmbH Gesellschaft mit beschränkter Haftung (private limited company) GSVG Gewerbliches Sozialversicherungsgesetz (Social Insurance Act for Trade and Industry) ICJ International Court of Justice i.e. id est (that is) IOSS Import One-Stop Shop V IP intellectual property LG Landesgericht (regional court) KartG Kartellgesetz 2005 (Cartel Act) KESt Kapitalertragsteuer (capital gains tax) KG Kommanditgesellschaft (Limited Partnership) KÖSt Körperschaftsteuer (corporate income tax) KSchG Konsumentenschutzgesetz (Consumer Protection Act) MedienG Medien-Gesetz (Media Act) MSchG Markenschutzgesetz (Trademark Protection Act) MSR Market Surveillance Regulation MFN Most Favoured Nation Principle NAG Niederlassungs- und Aufenthaltsgesetz (Settlement and Residence Act) NATO North Atlantic Treaty Organization ODR Online Dispute Resolution OECD Organisation for Economic Co-operation and Development OG Offene Gesellschaft (General Partnership) OGH Oberster Gerichtshof (Supreme Court) OLG Oberlandesgericht (Higher Regional Court) OSS One-Stop Shop P2B platform to business PHG Produkthaftungsgesetz (Product Liability Act) PrAG Preisauszeichnungsgesetz (Price Indication Act) RCS reverse charge system RIS Rechtsinformationssystem (Legal Information System of the Republic of Austria) RTR Rundfunk und Telekom Regulierungs-GmbH (Regulatory Authority for Telecommunications and Broadcasting) SCC Standard Contractual Clauses SCE Societas Cooperativa Europaea SE Societas Europaea StGB Strafgesetzbuch (Criminal Code) TCA Trade and Cooperation Agreement between the EU and the UK TEU Treaty on European Union TFEU Treaty on the Functioning of the European Union TKG Telekommunikationsgesetz (Telecommunications Act) TRIPS Agreement on Trade-Related Aspects of Intellectual Property Rights UCC Universal Copyright Convention UGB Unternehmensgesetzbuch (Commercial Code) UID Umsatzsetuer-Identifikationsnummer (VAT registration number) UK United Kingdom UN United Nations UNCITRAL United Nations Commission on International Trade Law UrhG Urheberrechtsgesetz (Copyright Act) U.S. United States of America USP Unternehmensserviceportal (Business Service Platform) UWG Gesetz gegen unlauteren Wettbewerb (Act Against Unfair Competition) VAT value added tax VbVG Verbandsverantwortlichkeitsgesetz (Corporate Criminal Liability Act) VCLT Vienna Convention on the Law of Treaties VGG Verbrauchergewährleistungsgesetz (Consumer Warranty Act) VKI Verein für Konsumenten Information (Consumer Information Association) VStG Verwaltungsstrafgesetz (Administrative Offence Act) WettbG Wettbewerbsgesetz (Competition Act) WHO World Health Organization WIPO World Intellectual Property Organization WKÖ Wirtschaftskammer Österreich (Austrian Chamber of Commerce) WTO World Trade Organization 1 The Case Selma and Sebastian made it – both successfully passed admissions and are now enrolled in the new BA programme ‘International Legal Studies’ at the University of Vienna. They are very excited about what they are going to learn over the coming years, and also about the vibrant international student community they are going to be part of and the wealth of opportunities that is lying ahead of them. There is just one little problem: They will have to move to Vienna, and Vienna is an expensive place. So what they need is a business idea, ideally something digital as they are both IT-savvy. Other students purportedly started digital businesses in their student dorms and are now billionaires in Silicon Valley. Why not try the same? They are also inspired by their fellow student Zhang Xu from China, whose parents make their living by selling products to Europe via platforms such as Amazon or Alibaba, and by Matteo from Italy and John from the UK, who are making good money with similar businesses. Selma and Sebastian are determined to give it a try. They want to start by selling some really ‘cool’ clothing and accessories to young people, such as T-shirts with quotes and pictures referring to current trends or political developments, focussing on local communities. ‘Make a Statement with your Stuff’ is to be their core marketing slogan, and they hope that, if pictures with some of their products go viral on social media, they will be able to reach really large communities. They are wondering, however, whether there are any legal requirements or restrictions to consider in setting up their business … 2 1. Where could legal requirements originate from? Where could legal requirements originate from? 3 Such requirements or restrictions might arise from a variety of sources, including domestic law, EU law, and international law. 1.1. Sources of the law in Austria 1.1.1. Austrian domestic law Domestic law is law enacted by the Austrian national legislator. Austria being a federal legal system, there is law both at federal and at state level, but the law relevant for doing business in Austria and cross-border is almost exclusively federal law. The important policy decisions are taken by democratically elected legislative bodies. For federal law, this is the National Council (Nationalrat), in cooperation with the Federal Council (Bundesrat), a second Chamber consisting of state parliament representatives. Given that the Federal Government can usually count on a majority in the National Council and that the preparation of draft bills is often in the hands of Federal Ministries, it has considerable influence on law-making. Constitutional law is law of a very special nature, as it is higher in rank than all other law and lays down the very foundations on which the whole State and its legal system are built. Federal constitutional law (Bundesverfassungsrecht), also referred to as ‘the Constitution’, is not one comprehensive document like in many other countries, but rather contained in a broad range of different legal instruments. These include, above all, the 1920 Federal Constitutional Law as revised in 1929 (Bundes- Verfassungsgesetz, B-VG), and inter alia the 1867 Basic You will study constitutional law Law on the General Rights of Nationals and the role of state institutions (Staatsgrundgesetz), the 1947 National Socialism in BA CM 12 (Constitutional Law). Prohibition Act (Verbotsgesetz 1947), the 1955 State Treaty for the Re-establishment of an Independent The history of constitutions and and Democratic Austria (Staatsvertrag von Wien) and legal systems in general will be the European Convention on Human Rights. For law discussed in BA CM 3 (European to be enacted as constitutional law, special and Global Legal History). procedures and majorities are required. The whole legal order must comply with the Constitution. The Constitutional Court (Verfassungsgerichtshof) is in charge of deciding whether or not a law is in conformity with the Constitution. While only law enacted by the legislative bodies counts as law in a formal sense (Gesetz im formellen Sinn) it would be much too cumbersome if all law had to go through parliamentary procedures. This is why law passed by parliament often authorises the administration (at federal, state or lower levels) to determine the details by way of administrative regulations (Verordnungen). Such regulations also count as law in a broader sense. The legislator may also declare that instruments issued by other bodies have legislative effect, such as collective bargaining agreements. In addition to law in the sense of general standards of conduct directed at any person fulfilling the requirements there are also legal sources that apply exclusively to the parties in an individual case, such as court judgments (Gerichtsurteile), administrative decisions (Verwaltungsbescheide), and contracts (Verträge). It is to be noted that ‘case law’ generated by Austrian courts is not a recognised source of the law with effect beyond the individual case, e.g. a lower court is not strictly under an obligation to follow the rulings even by the Supreme Court if the lower court is convinced these rulings are incorrect (but in practice the lower court will normally follow the higher courts). 4 Starting an E-Commerce Business in Austria Austrian legal sources, including preparatory materials, can best be searched in the Legal Information System of the Republic of Austria (Rechtsinformationssystem, RIS). For some sources there is an English translation, but this is normally not kept up to date and therefore not reliable. 1.1.2. European Union law Sources and scope of EU law The European Union (EU) is a political and economic union of currently 27 Member States. Since the 2009 Lisbon Treaty, the most important sources of primary EU law (also referred to as ‘the Treaties’), i.e. the instruments setting out the distribution of powers and responsibilities between the EU and its Member States and between the EU institutions, are the Treaty on European Union (TEU) and the Treaty on the Functioning of the European Union (TFEU), accompanied by the Charter of Fundamental Rights of the European Union (CFREU). You will study EU law in BA CM 2 The Charter applies to activities by the European (Introduction to International institutions and by national institutions when they Law) and CM 5 (European Law). implement EU law. Law enacted by the competent EU institutions is referred to as secondary EU law. The most important types of such secondary law are EU Regulations, which take direct effect in the Member States, i.e. are directly binding on natural and legal persons and are directly applied by courts and authorities; and EU Directives, which are only addressed to the Member States and do not normally take direct effect, i.e. need to be implemented by national legislators, and courts and authorities will only apply the national implementing law. Secondary law is made jointly by the three most central EU institutions, the European Commission, the European Parliament and the Council of the EU (not to be confused with either the European Council, which is the assembly of heads of government, or with the Council of Europe, which is a separate international organisation). All three institutions together are often simply referred to as ‘the European legislator’. Their exact roles are complex and not identical with the roles of institutions at national level. Very roughly speaking, the Commission is the executive power and ‘guardian of the treaties’. It takes the initiative by proposing draft new legislation (note that since recently also the Parliament has the right of initiative), but the legislative process itself is predominantly in the hands of the Parliament and of the Council. EU legal sources (including preparatory materials) can easily be searched via the Eurlex portal, which is available in all official languages of the EU. A large part of EU secondary law applies also in the non-EU Member States of the European Economic Area (EEA), which includes the EU Member States as well as Iceland, Liechtenstein and Norway. Whether or not an EU legal instrument is relevant also for the EEA (and thus references to ‘Member State’ or ‘Union’ must be read as including EEA countries) is indicated in the heading. Switzerland is not part of the EEA, but only of the European Free Trade Agreement (EFTA). However, there is a series of bilateral treaties through which Switzerland is associated with the EU and on the basis of which Switzerland has adopted various provisions of EU law in order to participate in the Single Market without joining either the EU or the EEA. Since the United Kingdom left the EU it has a special relationship with the EU, in particular as laid down in the Trade and Cooperation Agreement (TCA). This relationship is much looser than that with Switzerland, and it is not based on EU law, but on international treaties. Where could legal requirements originate from? 5 The primacy of EU law Although an EU Directive is not directly applicable and national institutions will only apply the national implementing law, the fact that national law is based on a Directive has a huge impact on the way this national law is interpreted and applied. In particular, national law must always be applied in a manner that is in conformity with EU law. Where the Court of Justice of the European Union (CJEU) has issued an authoritative interpretation of EU law (Regulation, Directive, or other) this interpretation is binding also on Member States’ institutions. Where a national court of last instance is confronted with a case whose decision depends on the correct interpretation of EU law, and where that correct interpretation is not clear (i.e. is not a so-called acte claire), that court must (and lower courts may) submit the issue for a preliminary ruling, i.e. refer the matter to the CJEU to give binding guidance on the correct interpretation. Also, under certain circumstances, failure by a Member State to implement a Directive may lead to that Directive taking (limited) direct effect. The case law of the CJEU can best be searched on the Curia portal, which is available in all official languages of the EU. Where there is a conflict between a national legal provision and EU law, it is EU law that prevails according to the principle of primacy or supremacy of EU law. The national provision is not annulled, but set aside and must be disapplied by Member State institutions (Anwendungsvorrang). According to the CJEU, European law even takes precedence over national constitutional law, which is, however, a view not generally shared by the constitutional courts in the Member States. So far, open clashes between national constitutional courts and the CJEU have largely been avoided. 1.1.3. International law The term ‘(public) international law’ is usually reserved to legal relations with, in particular, other states and entities that have historically acquired a similar status (such as the Holy See, the International Committee of the Red Cross, or the Sovereign Military Order of Malta). Apart from sources such as customary international law and universally recognised general principles of law, the main sources of international law are treaties (international agreements, conventions). Treaties can be bilateral or multilateral, depending on the number of parties to a treaty. After the text of a treaty has You will study international law been finalised by the states participating in negotiations, in BA CM 2 (Introduction to it is usually signed by these states. However, a state is International Law) and CM 6 usually not bound before ratification, i.e. the formal act (International Law). in which a state indicates its consent to be bound by a treaty and its entry-into-force. In the case of multilateral treaties, the usual procedure is for a designated depositary (e.g. an international organisation) to collect ratification documents, and there is often an agreement that the treaty will enter into force only after a specified minimum number of ratification documents have been received. For states that are not among the initial signatory states, the formal act indicating that a state will be bound by a treaty is called ‘accession’. The Vienna Convention on the Law of Treaties (VCLT) comprises comprehensive provisions on the procedure for the conclusion of treaties, their entry into force and how treaties are defined, amended and interpreted. Some treaties contain provisions that are self-executing, i.e. that become directly applicable and judicially enforceable in the national legal system. Often treaties are non-self-executing, and they can be relied upon (by e.g. private parties) only after the relevant contracting state has implemented them in its national law. This is similar to the difference between Regulations and Directives in EU law (see p. 4). 6 Starting an E-Commerce Business in Austria By way of treaties between states and similar entities, international organisations and other ‘derivative’ new legal entities have been created, many of which have been granted the power to enact and/or enforce further international law. The European Union is, strictly speaking, such a derivative legal entity, and EU law is strictly speaking just a subset of international law, but it has developed into a body of law very much of its own and is better characterised as ‘supranational law’. The Council of Europe (CoE) is an international organisation founded in 1949 with the aim to uphold human rights, democracy and the rule of law in Europe. It has currently 47 member states. Its headquarters are in Strasbourg (France). The CoE cannot make binding laws, but has been afforded the power to enforce select international agreements made by its member states. Most notably, the European Convention on Human Rights (ECHR), which enjoys the status of constitutional law in Austria (see p. 3), is interpreted and enforced by the European Court of Human Rights (ECtHR). The World Trade Organization (WTO) is an international organisation focussed on the regulation of cross-border trade by way of international trade agreements and has currently 164 member states worldwide. The WTO's dispute-settlement system involves case-specific panels, whose priority it is to settle disputes, preferably through a mutually agreed solution. WTO member nations have accepted the WTO dispute settlement procedure as exclusive and compulsory, but it cannot be used to resolve trade disputes that arise from political disagreements. The United Nations (UN) is an international organisation that aims to maintain international peace and security, develop friendly relations among nations and achieve international cooperation. Founded in 1945, it currently boasts 193 member states. Its headquarters are in New York and it has offices in other cities, notably in Vienna. Its organs include the International Court of Justice (ICJ) located in The Hague (Netherlands). The UN has established a number of specialised agencies, such as the World Health Organization (WHO) or the World Intellectual Property Organization (WIPO). Other sub-units include the United Nations Commission on International Trade Law (UNCITRAL) whose Secretariat is located in Vienna. In the State Treaty, Austria declared that it will maintain full neutrality, i.e. will not join any military alliances and not permit the establishment of any foreign military bases on its territory. This is why Austria has not joined NATO, but it is part of, e.g., UN-led peacekeeping and humanitarian missions. 1.2. How national is ‘national law’? You will study these interrelationships in BA CM 1 (Introduction to Law and its International Aspects). Meanwhile, a large part of Austrian national law has either been derogated by EU Regulations, or relies on EU Directives, or is indirectly affected by EU or international law. This means that even in purely domestic cases (e.g. where all elements of the case are located in Austria) other than domestic legal sources must be taken into account. Where could legal requirements originate from? 7 More or less all issues addressed by these preparatory materials are either fully harmonised or at least heavily influenced by EU law and/or international law, even where this has not been specifically mentioned. 1.3. Cross-border situations The international dimension of law in Austria is even more apparent in cases with an international element, e.g. where a party to a legal relationship has a foreign nationality or is located in a foreign state. Generally speaking, laws (in the sense of specific sets of legislation, or whole areas of the law) deal with such cross-border situations in one or more of the following four ways: 1. A law may directly and specifically regulate cross-border situations (e.g. free trade agreements p. 10, asylum law p. 12, UN Cross-border aspects will normally Convention on the International Sale of Goods p. be taught as part of the course 51); dealing with the relevant subject matter itself. In private law, where 2. Elements of a law may address the international foreign domestic law may become dimension indirectly, such as by requiring a applicable, there is a separate particular nationality, law of incorporation etc. course which is an integral part of or, conversely, by recognising as equivalent BA CM 10 (Civil Law and Private foreign nationalities, laws of incorporation etc. International Law). (e.g. trade regulation law p. 9, social security law p. 25); Differences and similarities between legal systems worldwide 3. A law may set out rules for dealing with particular will be discussed in MA CM1 situations in a general manner and clarify in (Comparative Law). separate sections the territorial reach of these rules and under which conditions they apply to cross- border situations (e.g. Austrian Criminal Code p. 14, General Data Protection Regulation p. 38); 4. A law may stay silent on cross-border situations in the first place, but have to be read together with a separate body of law called ‘conflict-of-laws’ that tells a court or authority which out of several different national laws governs the issue at hand (e.g. the law of contractual and extra- contractual obligations, property law, family law, and the law of succession, see e.g. p. 50). So while Austrian courts and other authorities generally only apply Austrian law (which includes Austrian domestic law, directly applicable EU law, and self-executing international law applicable in Austria) when they have international jurisdiction, the fourth of the four scenarios means that an Austrian court or other authority may also have to apply foreign domestic law. 8 2. Starting a business – registration and permission requirements Starting a business – registration and permission requirements 9 As a first step, Selma and Sebastian have to become traders. They do not really know whether they can just give themselves a trade name and start doing business or whether they need a permission or need to meet any other formal requirements. It cannot be that difficult to start an online shop, can it? Well … there are some legal steps that need to be taken... 2.1. Trade regulation law (Gewerberecht) 2.1.1. Who needs a trade licence? Opening a business in Austria Starting a business in Austria requires that all necessary permits are granted. For starting a trade (Gewerbe), including a craft, the most relevant legal instrument is the Trade Act 1994 (Gewerbeordnung 1994, GewO). This instrument applies to any economic activity that is self-employed; at least potentially conducted on a regular or continuous basis or at a larger scale; and for profit. A range of economic activities that would, as such, satisfy the above criteria are nevertheless excluded from all or most of the requirements of the Trade Act 1994. Some of these economic activities are wholly or largely exempt because the legislator felt there was no need for regulation, e.g. agriculture and forestry, the arts, and household activities (such as self-employed cleaning or babysitting) or other very simple activities. Other economic activities are not governed by the Trade Act 1994 because they are subject to more specific (and usually stricter) requirements under other laws. This applies, e.g., for the regulated liberal professions (such as doctors, attorneys-at-law, notaries or tax advisors). Trade regulation law is part of special administrative law (Besonderes Verwaltungsrecht), together with a You will study administrative wide range of other areas, such as asylum law, planning law in BA CM 13 (Public Law). and building law, energy law, waste management law and genetic engineering law, to name but a few. Since Some aspects of economic trade regulation law deals with economic activities it is administrative law will be dealt specifically considered to be part of ‘economic with in BA CM 11 (Business Law). administrative law’ (Wirtschaftsverwaltungsrecht). In contrast, general administrative law (Allgemeines Verwaltungsrecht) deals with cross-cutting issues, such as the structure and competence of administrative authorities, administrative procedure, or remedies against administrative decisions. Together, they form the body of administrative law, which is part of the wider area of public law (Öffentliches Recht). E-commerce businesses targeting Austria from EU and EEA countries Selma is wondering why she needs a trade licence in Austria while Matteo, who has been operating his online shop from Rome for some time and makes good money with Austrian professional customers, is only registered in Italy. Traders established in other EU Member States may, without any restrictions, sell goods or provide services into Austria from abroad. This is based on the very cornerstones of the European Single Market, the ‘Four Freedoms’, as laid down in the Treaties. The same rules apply for the Member States of the EEA and, due to bilateral agreements, for Switzerland (see p. 4). 10 Starting an E-Commerce Business in Austria These Freedoms are Free movement of goods You will study EU law in BA CM 2 Free movement of capital (Introduction to International Law) Freedom to establish and provide services and CM 5 (European Law). Free movement of persons The free movement of goods implies, inter alia, a prohibition between Member States of customs duties on imports and exports with regard to products originating in Member States and to products coming from third countries which are in free circulation in Member States, as well as of all charges and other measures having equivalent effect (Article 28 TFEU). The freedom of establishment includes the right to take up and pursue activities on a permanent basis as self-employed persons and to set up and manage undertakings in another Member State (Article 49 TFEU), whereas the freedom to provide services means the right to offer and provide services in other Member States on a temporary basis while remaining in one’s country of origin (Article 56 TFEU). With the emergence of e-commerce, the delineations between these freedoms have become somewhat blurred because, for being an online retailer ‘in Austria’ on a permanent basis (i.e. targeting Austrian customers in a similar way as a shop established in Austria) one does not have to be physically present in Austria any more. A number of EU legal instruments address in a cross-cutting manner the phenomenon of the ‘Digital Single Market’. E-commerce businesses targeting Austria from third countries Selma understands that Matteo from Italy may be a somewhat special case, but how can the parents of her friend Xu from China sell goods to Austria on a regular basis, through big online platforms, without having an Austrian trade licence? And what about John from the UK? Other third countries, such as China, may be associated with the EU and Austria through free trade agreements, notably the rules of the World Trade Organization (WTO), of which both You will study international Austria and China are member states. The three most trade law in important ‘pillars’ of WTO law are the General Agreement on BA CM 2 (Introduction to Tariffs and Trade (GATT), the General Agreement on Trade in International Law) and Services (GATS) and the Agreement on Trade-Related Aspects CM 6 (International Law). of Intellectual Property Rights (TRIPS). The fundamental principles of the trading system include: The Most Favoured Nation (MFN) rule, which requires a WTO member to grant the most favourable conditions under which it allows trade in a certain product type with one other WTO member to all other WTO members (in practice, this most importantly implies that customs duties must be levied on a non-discriminatory basis, but the establishment of specific free trade zones between particular WTO members, such as the EU, is still permissible). The National Treatment rule, which means that foreign goods, once they have entered the WTO member’s market, should be treated no less favourably than domestically produced goods. A trader established in China is free to sell and deliver goods into Austria, but has to declare goods at customs and possibly pay customs duties (tariffs) and taxes (on which see p. 24) when the goods enter the EEA. Charging customs duties on import is considered to be compatible with the National Treatment rule. Starting a business – registration and permission requirements 11 The amount of customs duties due depend on the product type and can easily be identified with the help of the Access2Markets tool. Import of goods shipped in consignments with a value not exceeding EUR 150 (low value goods) is exempt from customs duties, but not from VAT (see p. 24). It is important to note that all goods imported from outside the EU/EEA must nevertheless comply with EU/EEA product safety standards. Strictly speaking, acting as a retailer is also a service, and the provision of services by traders established in other WTO members into Austria is governed by GATS and is much less liberal than the delivery of goods (e.g. a Chinese trader could not simply fly in from Beijing once a week, on the basis of their Chinese trade licence, and provide services in Austria). However, although e-commerce is not exactly a new phenomenon, the WTO is still struggling with how to deal with e-commerce. Already in 1998, there was a ‘Work programme on electronic commerce’, which included a moratorium in which WTO members agreed to continue the current practice of not imposing customs duties or other restrictions on electronic transmissions. This moratorium has been renewed several times so far. Since 2019, a ‘Joint Statement Initiative on E-Commerce’ is underway within the WTO, which a fair number of States have joined, but potential results are still not clear. When Selma asks her about this, Xu confirms that dealing with customs requirements has always been a major obstacle for her parents. Since recently, they have outsourced this to a provider of global parcel delivery services, which is working reasonably well. John, who has overheard the conversation, complains that Brexit has made things really complicated for him. Since the United Kingdom left the EU, relationships between the EU and UK are governed by WTO law and special international agreements, notably the Trade and Cooperation Agreement (TCA). As far as goods are concerned, the Title on trade in goods provides, inter alia, freedom of transit (i.e. traffic in transit to or from the territory of either EU or UK and any other third country) and prohibition of customs duties on all goods ‘originating in the other Party’, and in some other cases. It is, in particular, the requirement of ‘originating in’ that makes customs procedures necessary, and the rules on ‘origin’ are complicated. The Title on trade in services facilitates the cross-border provision of services, but provides for less liberal rules than the Title for goods. Other than current WTO law, the TCA provides for a separate Title on ‘Digital Trade’, which includes both trade in digital content or services (i.e. where the traded commodity is digital) and trade in traditional goods or services by digital means (i.e. e-commerce in the proper sense). However, the TCA has to use the WTO regime as a backbone, and this Title, while featuring a number of special provisions, largely qualifies digital trade as the supply of services. The relevant Title on services does not contain provisions that address e-commerce more specifically. 2.1.2. How to obtain a trade licence in Austria? Selma and Sebastian accept that they cannot just start selling stuff but have to get a trade licence first. They will have to file an application, accompanied by a range of documents, with the competent trade authority (Gewerbebehörde). Normally, this can also be done electronically using the Austrian Business Licence Information System (GISA). They just hope that this is not going to be too difficult. They are both of age, but Selma is from Bosnia and resident in Austria on the basis of her student visa, so she is worried whether there are any restrictions. 12 Starting an E-Commerce Business in Austria General requirements If an economic activity falls under the GewO, this may still mean very different things. The majority of trades is ‘free’ in the sense that no special certificate of qualification is required. The only requirement is the registration with the competent trade authority (Anmeldungsgewerbe). In order to register, a natural person has to fulfil the following requirements (cf. §§ 8 to 15 GewO): Full legal age and capacity; Citizenship of an EU Member State, or another Member State of the European Economic Area (EEA), or equivalent status under international law, or residence permit that includes self- employed economic activities; and No grounds for exclusion (on which see p. 13 further below). Full legal age and capacity is very rarely a problem. What is usually more problematic is whether the residence permit (Aufenthaltstitel) of a third-country national (i.e. a person who is not a citizen of an EU/EEA Member State) allows self-employed commercial activities. The most important provisions can be found in the Settlement and Residence Act (Niederlassungs- und Aufenthaltsgesetz, NAG) and the Asylum Act 2005 (Asylgesetz 2005, AsylG), but there are also specific provisions for diplomats, employees of international organisations etc., and special visa for temporary activities under the Aliens Police Act (Fremdenpolizeigesetz, FPG). § 8 NAG lists 13 different types of residence permits, each of which has its own rules as to the permissibility of employment or self-employed activities. For employment, many types of residence permits require an additional employment permit (Beschäftigungsbewilligung) issued by the Public Employment Service Austria (Arbeitsmarktservice, AMS) under the Employment of Foreign Nationals Act (Ausländerbeschäftigungsgesetz, AuslBG). The most important categories of individuals addressed by the AsylG are: Asylum and migration law will Recognised refugees (Asylberechtigte, § 3 AsylG); be addressed in individuals with subsidiary protection status BA CM 6 (International Law) (subsidiär Schutzberechtigte, § 8 AsylG); and CM 13 (Public Law) Asylum seekers (Asylwerber) enjoying de facto protection (§ 12 AsylG) and a temporary residence permit after the asylum procedure has been admitted (§ 13 AsylG); and Individuals with a residence permit for exceptional circumstances (§§ 54 to 57 AsylG). Recognised refugees and individuals with subsidiary protection status may engage in the same economic activities as Austrian nationals. Asylum seekers whose asylum procedure is admitted and individuals with a residence permit for exceptional circumstances require an additional employment permit under the AuslBG for employed activities, but may pursue a self-employed economic activity. Selma holds a visa for third-country students (§ 64 NAG). If she were seeking employment, she would need a separate employment permit, which would normally be issued for employment not exceeding 20 hours/week because her work may not seriously impair her studies (no such permit would, by the way, be required if Selma sought employment in academic research and teaching, e.g. as a student assistant at Vienna University). There is no explicit restriction for self-employed traders but, of course, Selma must prove that she is actually and successfully pursuing her studies if she seeks an extension for her student visa. Specific requirements for regulated trades An enumerative list of trades (§ 94 GewO) are regulated trades (reglementierte Gewerbe), which require a specific qualification (§§ 16 et seq. GewO). Those among the regulated trades for which Starting a business – registration and permission requirements 13 the law requires particular ‘reliability’ are sometimes referred to as ‘reliability trades’ (Zuverlässig- keitsgewerbe, § 95 GewO). Regulated trades are a subset of the wider notion of ‘regulated professions’, which can, for EU/EEA Member States, be identified by way of a search in the EU Regulated Professions Database. Where a professional qualification has been obtained in another EU/EEA country (or Switzerland), there are, in general, three different types of recognition, depending on the type of profession concerned: Recognition on the basis of coordination of minimum training conditions (e.g. for doctors) Recognition of professional experience (e.g. for many crafts) Recognition of an attestation of competence issued by the competent authorities of a Member State (for all other regulated professions) An attestation of competence does not preclude the host Member State from requiring the applicant to complete an adaptation period of up to three years or to take an aptitude test (Eignungsprüfung), e.g. if the training the applicant has received covers substantially different matters than those required in the host Member State. This applies, inter alia, for lawyers who have obtained their law degree in another Member State and wish to practice as attorneys in Austria. For professional qualifications obtained in third states there exist a wide range of bilateral and multilateral agreements on recognition. Practical guidance is provided by the Recognition Guide of the Austrian Integration Fund. Selma and Sebastian browse the list of regulated trades and note with a degree of relief that running an online shop and platform is not among them, but is a ‘free’ trade. They later learn that it is in fact an explicit requirement set out in the E-Commerce Act (E-Commerce-Gesetz, ECG) that no specific procedures are imposed. Nevertheless, they have to specify the type of trade in their application. They will primarily choose ‘Handelsgewerbe’. Depending on whether or not they plan to engage in further activities, such as working more extensively with customer data and providing digital services, including marketing services for third parties, they may also wish to add ‘Dienstleistungen in der automatischen Datenverarbeitung und Informationstechnik’ and/or ‘Ankündigungsunternehmen’. 2.1.3. Who is excluded from obtaining a trade licence? When filling in the relevant forms Selma and Sebastian have to tick a range of boxes concerning possible exclusion criteria, mentioning criminal convictions and something about insolvency. Suddenly, new worries emerge because of a criminal conviction for forgery of documents, which Sebastian committed as a 19-year-old high school student. Moreover, he became a partner in his father’s company when he was 18, and the company went insolvent during the Covid-19 crisis. There are exclusion criteria both for natural persons and for companies (§ 13 GewO). It is immaterial whether the facts giving rise to exclusion occurred in Austria or abroad. Where a natural person would be excluded, a company on whose operations that natural person has a significant influence is likewise excluded. In a similar vein, a natural person that had significant influence on the operations of a company that would be excluded is also excluded. Criminal convictions For natural persons, exclusion criteria are the final conviction by a court of an enumerative list of criminal offences (such as fraudulent withholding of employees’ social security contributions or organised undeclared work, for persons seeking a licence for the catering trade also drug crimes); or a final sentence for other criminal offences to more than three months imprisonment or to a fine of more than 180 daily rates, unless the crime has already been expunged. There is also a list of financial 14 Starting an E-Commerce Business in Austria offences that serve as exclusion criteria where the financial authority has imposed a fine of more than 726 EUR or imprisonment. Criminal law (Strafrecht) is an independent part of public law dealing with sanctions and other measures You will study criminal law in imposed by the State for qualified unlawful and BA CM 8 (Criminal Law and culpable behaviour (including for cases where the Procedure). offender is not criminally responsible due to insanity). Behaviour that is qualified as a crime must be clearly defined as such in the law. In Austria, criminal law can be divided into two main areas: judicial criminal law (Kriminalstrafrecht), and administrative criminal law (Verwaltungsstrafrecht). Criminal law normally addresses only natural persons, but companies can be prosecuted if a decision-maker or employee has committed a judicial crime that can be attributed to the company under the Corporate Criminal Liability Act (Verbandsverantwortlichkeitsgesetz, VbVG). Judicial criminal law is adjudicated exclusively by fully independent judges in the general (judicial) courts (ordentliche Gerichte), including by lay judges where so provided (e.g. murder, political offences). Jurisdiction in the first instance is either with the district courts (Bezirksgerichte, BG) or the regional courts (Landesgerichte, LG), depending on the severity of the offence. Regional courts also deal with appeals against decisions of district courts. Appeals against decisions of regional courts are dealt with partly by one of the four higher regional courts (Oberlandesgerichte, OLG) and partly by the Supreme Court (Oberster Gerichtshof, OGH), which is the highest instance of judicial courts in Austria. Crimes are mostly defined in the Criminal Code (Strafgesetzbuch, StGB), but may also be defined in other statutes. The main forms of punishment are fines (Geldstrafe) and imprisonment (Freiheitsstrafe), but there is also a range of further measures (e.g. confiscation, forfeiture) that can be imposed. Crimes are divided into felonies (Verbrechen) and misdemeanours (Vergehen), with felonies being defined as serious intentional crimes punishable by a maximum term of imprisonment of more than three years. Criminal convictions by courts, once they are final and can no longer be challenged by way of appeal, are entered into the criminal records (Strafregister). This concerns all convictions by Austrian courts and convictions by foreign courts where the convict is an Austrian citizen or has their domicile or habitual residence in Austria. After the lapse of a certain period of time, which is normally counted from the time when the sentence has been fully served or remitted, an entry in the criminal records is expunged. The length of that period (Tilgungsfrist) depends on the nature of the crime and the severity of the sentence imposed. Life-sentences and (at least in principle) sentences of over five years imposed for sexual crimes cannot be expunged from the criminal records. Administrative criminal law is applied by administrative authorities. Since 2014, appeals are, however, dealt with by administrative courts (Verwaltungsgerichte) and not by the administration itself. Administrative authorities in charge of the prosecution of administrative offences may also impose both fines and imprisonment (generally limited to a maximum period of six weeks), but the sentences are not entered into the criminal records. While administrative offences are listed in a broad range of different statutes, cross-cutting issues are addressed in the Administrative Offence Act (Verwaltungsstrafgesetz 1991, VStG). To a large extent, it is within the discretion of the Austrian legislator whether a particular offence is qualified as a crime under judicial criminal law or under administrative criminal law. Normally, the more serious offences with rather high maximum punishment will be classified as crimes under judicial criminal law. However, administrative offences, such as under cartel law or data protection law, can also trigger fines of several million Euros. Sebastian is relieved - forgery of documents is not among the crimes that would disqualify him from starting a business in Austria, and he was only sentenced to a fine of 15 daily rates. But what about that insolvency? Starting a business – registration and permission requirements 15 Insolvency law For companies, there is also the exclusion criterion of a denial of the opening of insolvency proceedings for want of sufficient assets, unless the period during which insolvencies are listed in the insolvency registry has lapsed. In Austria, there are several different types of insolvency proceedings, in particular different types You will study insolvency law in of restructuring proceedings (Sanierungsverfahren, MA CM 4 (Law of Civil Procedure). Restrukturierungsverfahren), which aim at the rescue of a company, as well as bankruptcy proceedings (Konkursverfahren), which head directly towards the winding up of the company and the sale of remaining assets or, in many cases, the sale of the business as a whole. There are also special proceedings for natural persons, so-called ‘private insolvency’ proceedings (Privatinsolvenz), which are available to both traders and consumers. Insolvency proceedings are opened where the debtor is in a state of being unable to pay the debts (Zahlungsunfähigkeit) or, in the case of certain companies, of over-indebtedness (Überschuldung). Since July 2021, also preventive restructuring proceedings in a situation where insolvency is likely are possible. A petition for insolvency proceedings can be filed by the debtor or any creditor, but the debtor is obliged to initiate proceedings within 60 days at the latest (failure to do so may amount to a crime or result in personal liability). The petition is entered into the insolvency register (Insolvenzdatei). When bankruptcy proceedings are opened, an insolvency practitioner (receiver) is appointed to take over the administration of the estate. In restructuring proceedings and ‘private insolvency’ proceedings, the debtor may perform the administration of the estate themselves under the supervision of the court and a special administrator. Creditors must file their claims, which are normally converted into monetary claims irrespective of their nature. Unsecured creditors, i.e. creditors that cannot rely on security interests such as a pledge or a mortgage, must be treated equally (with very few exceptions) and will receive an equal quota of their claims, whether after restructuring and partial discharge of residual debt or after sale of the debtor’s assets. However, proceedings are opened only where there are sufficient assets to cover the likely costs of the proceedings or where the applicant or the officers or shareholders of an insolvent company make an advance payment to cover these costs. If there are no sufficient assets left and the officers or shareholders are not able to pay the amount of up to EUR 4,000 required for opening proceedings, the court will refuse to open proceedings, which means that the debtor will lose their trade license and will not be granted a new license before the entry in the register has been expunged. The latter is normally the case after three years. While this applies to companies, there are some significant differences that apply to natural persons and private insolvency proceedings. Inter alia, proceedings are cheaper, and it is possible to obtain debt discharge after a certain period even against the will of the creditors. The opening of insolvency proceedings does not affect a trade licence, and it would even be possible to register a new trade during proceedings. After having studied insolvency law, Sebastian is once again relieved, because in the case of their family company insolvency proceedings were opened and properly conducted. So are they all set? Well, Selma and Sebastian come across some other boxes they have to tick… 2.1.4. When is the appointment of a manager under the Trade Act required? Companies, natural persons without full legal capacity, and persons that are not resident in Austria and where proper service of documents concerning administrative sanctions, and the enforcement of such sanctions, is not otherwise guaranteed, may start a trade in Austria, but have to appoint a manager under the Trade Act (gewerberechtlicher Geschäftsführer, § 39 GewO) who must fulfil the requirements and make sure that all obligations under trade regulation law are met. The same applies if a person wants to start a regulated trade, but does not hold the relevant qualification 16 Starting an E-Commerce Business in Austria themselves. In the case of a company, the manager must fulfil a number of minimum requirements concerning their actual role in the company and their actual influence on the company’s operations. So, when filling in the form, Selma and Sebastian suddenly realise that some important decisions still need to be taken … 2.2. Company law (Gesellschaftsrecht) Before Selma and Sebastian file an application, they have to decide precisely in whose name that application will be made, and whether they need one or two applications. In other words, they have to make up their mind whether they will act as sole proprietors or whether they will establish a company, and if the latter, what type of company. Starting a new business in Austria requires choosing between the different types of companies provided by the Austrian legal system. You will study company law in 2.2.1. Sole proprietorship (Einzelunternehmen) BA CM 11 (Business Law). 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 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 You will study accounting no direct or personal liability of the shareholders. The GmbH law in MA CM 6 (Economic is subject to the accounting regulations under company law Competence in 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. 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 You will study trade name law as activities. It is not to be confused with a trademark (on well as trademark law in which see below p. 20). A trade name must be a legible and BA CM 11 (Business Law). 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 MaSwyS 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? 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. Selma and Sebastian would hate to incur further costs and have absolutely zero appetite for still more bureaucracy. Something to be dealt with later … Starting a business – registration and permission requirements 21 2.4. Tax law (Steuerrecht) So Selma and Sebastian make a simple written contract to establish an OG, then fill in the form for registering the company in the company register. Their signatures on the form require authentication (Beglaubigung) by a notary or by the court. It is only after having taken all these steps that they can apply for a trade licence. They appoint Sebastian as manager under the Trade Act. They hope that these were the last formalities they have to deal with, but there is still something missing…. 2.4.1. 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 You will study tax law in include, e.g., taxes on income and property. Indirect taxes are MA CM 5 (Tax Law) 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 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 23 2.4.3. VAT While Selma and Sebastian are determined to market their goods cross-border, they accept that they are probably not able, at least not for the time being, to profit from international tax havens (and who knows how much profit they will be making anyway). They have heard, though, that VAT is really difficult for e-commerce traders, in particular when trading cross-border. So they are worried whether they will be able to cope. … VAT in domestic cases Sole proprietors, partnerships and corporations must pay turnover tax, which is passed on to customers as value added tax (VAT) on all supplies and services provided. In most cases, VAT amounts to 20% of the net remuneration.

Starting an E-Commerce Business in Austria PDF 2024

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