Document #1054798

USDOS – US Department of State (Author)

Investment Climate Statements for 2016 - Austria

Executive Summary

The Austrian government welcomes foreign direct investment, particularly those investments with the potential to create jobs in high technology fields, support capital-intensive industries, and enhance R&D activities.

Austria, with its well-developed market economy, skilled labor force, and high standard of living, is closely tied to other EU economies, especially Germany's. Its economy features a large service sector, a relatively sound industrial sector, and a small, but highly developed agricultural sector.

Economic growth has been relatively weak in recent years, approaching 0.9% in 2015. Austria's 5.8% unemployment rate, while low by European standards, is at its highest rate since the end of World War II, driven by an increased number of refugees and EU migrants entering the labor market.

The country’s geopolitical location between Western European industrialized nations and the growth markets in Central, Eastern, and Southeastern Europe (CESEE) has led to a high degree of economic, social, and political integration with fellow European Union (EU) member states and the CESEE. Border controls between Austria and all of its eight neighboring countries have been lifted under the EU's Schengen Agreement, though partial and sporadic border checks reintroduced since the start of the refugee crisis in August 2015 may slow surface traffic. EU enlargements in 2004, 2007, and 2013 strengthened Austria's attractiveness as an investment location by increasing access to markets in Eastern Europe, but expansion also bolstered Austria's competitors in that region in such a manner that nearby Budapest, Prague, and Bratislava now compete directly with Vienna for foreign investment.

Some 320 U.S. companies have investments in Austria; many have expanded their original investment over time. Altogether, Austria offers a stable, advantageous, and attractive climate for foreign investors, albeit one with increasing challenges.

The most positive aspects of Austria’s investment climate include:

  • Relatively high political stability and harmonious labor-management relations, low incidence of labor unrest;
  • Skilled labor in many sectors;
  • High productivity and international competitiveness;
  • Rule of law;
  • Excellent quality of life, personal security, high-quality health, telecommunications, and energy infrastructure.

Negative aspects of Austria’s investment climate include:

  • A high overall tax burden (despite an attractive corporate tax model and lower income taxes as of 2016);
  • Low innovation dynamics;
  • A substantial public sector and a complex regulatory system with excessive bureaucracy (also for established businesses).

Key sectors that have historically attracted significant investment in Austria:

  • Automotive sector;
  • Pharmaceuticals;
  • Financial sector;

Key issue to watch:

  • The influx of 88,000 asylum seekers in 2015 and a continued flow of asylum seekers and economic migrants might enlarge the diversity of the available work force, and affect unemployment, social friction, and personal safety concerns.

Table 1

Measure

Year

Index or Rank

Website Address

TI Corruption Perceptions index

2015

16 of 168

http://www.transparency.org/cpi2015

World Bank’s Doing Business Report “Ease of Doing Business”

2016

21 of 189

doingbusiness.org/rankings

Global Innovation Index

2015

18 of 143

globalinnovationindex.org/content/page/data-analysis

U.S. FDI in partner country ($M USD, stock positions)

2015

USD 12,926

https://www.oenb.at/en/Statistics/Standardized-Tables/external-sector/foreign-direct-investment/inward-direct-investment.html

1. Openness To, and Restrictions Upon, Foreign Investment

Attitude toward Foreign Direct Investment

The Austrian government is welcoming of foreign direct investment, particularly when such investments has the potential to create new jobs in high technology fields, promote capital-intensive industries, and enhance links to research and development (for which special tax incentives are available). Officials are also conscious of ensuring that investments avoid a negative impact on the environment. Austria is a high-tax country overall with a heavy personal income tax burden. However, due to a relatively low 25% corporate tax rate, it is attractive as a business headquarters location. Including tax base adjustments, experts estimate the effective corporate tax burden at no more than 22%.

The corporate tax regime also offers a highly favorable framework for group taxation, unique in Europe, which allows businesses to offset profits and losses of group operations (requiring direct or indirect participation of more than 50%, but no other financial, economic or organizational integration) in Austria and abroad. This group taxation system offers opportunities for American investors, especially joint-venture structures, merger and acquisition transactions, and corporate headquarters. The eligibility for foreign tax group members is restricted to those resident in the EU or in a country which has concluded a comprehensive administrative assistance agreement regarding the exchange of information with Austria, such as the United States. The deductibility of losses from the Austrian group’s tax base for foreign group members is limited to 75%; the amortization of goodwill-for-share deals was abolished.

All companies active in Austria are affected by a new regulation limiting the tax-deductibility of expenses for high salaries (cash and non-cash benefits) paid to top-level employees earning up to €500,000 (about US$560,000 at the current exchange rate). Austria has no wealth tax, trade tax, or inheritance/gift tax.

Austria’s macroeconomic fundamentals are relatively healthy; however, post-Great Recession fiscal pressures persist, as do repercussions from the Hypo Alpe Adria bank collapse. The economic climate affecting national and international investors will likely be characterized by continued modest economic growth averaging 1-2% through 2018 and a slowly rising unemployment rate of 5.8%. All forecasts are currently beset by high variability due to the fallout of the refugee crisis, the Ukraine/Russian crisis, and related geopolitical risks.

A tax reform package implemented in 2016 is intended to stimulate the economy by reducing income taxes by €5 billion annually; however, most of this amount will be made up through a reduction of tax deductions, an increased land-transfer tax, a higher value-added tax on selected products, an increased withholding tax on dividends, unspecified administrative savings, and stepped-up efforts against tax fraud. Thus, while the idea of stimulating the economy may prove successful, the tax reform will only have a minimal impact on Austria’s high tax quota of around 44% of GDP, which is unlikely to decrease significantly in the near term.

There are no sectorial or geographic restrictions on foreign investment. In some regions, the government offers special facilities and services ("cluster packages") to foreign investors. For example, these can include incentives for automotive producers, manufacturers of high-tech products, or environmental technologies.

American investors have not complained of discriminatory laws or practices against foreign investors. However, potential investors should factor in Austria's strict environmental regulations and environmental impact assessments into their investment decision-making. Austria's Energy Efficiency Law of 2014, which requires energy providers to create incentives for customers to implement energy savings measures, creates a potential, additional burden for investments in the energy sector. Strict liability and co-existence regulations sharply restrict research and virtually outlaw the cultivation, marketing, or distribution of biotechnology crops.

Other Investment Policy Reviews

Not applicable.

Laws/Regulations on Foreign Direct Investment

There is no discrimination against foreign investors, but businesses are required to follow numerous regulations. Although there is no requirement for participation by Austrian citizens in ownership or management, at least one manager must meet Austrian residency and other legal requirements. Non-residents must appoint a representative in Austria. Expatriates are allowed to deduct certain expenses (costs associated with moving, maintaining a double residence, education of children) from Austrian-earned income. Austrian immigration law requires those applying for residency permits to take German language courses/exams, but a university degree automatically fulfills this requirement.

Business Registration

Austria’s national investment promotion company, the Austrian Business Agency (ABA), is the first point of contact for foreign companies aiming to establish their own business in Austria. It is owned and operated by the Austrian government. ABA provides consulting services to firms interested in setting up business operations in Austria, focusing on all issues relevant to selecting an appropriate location. In addition, they provide information about Austria as a business location, and proactively approach potential investors. There are several forms of companies that can be set up in Austria. Foreign investors need a trade license, must register with the tax and social security authorities, and become mandatory members of the Austrian Economic Chamber. There is no special treatment for small and medium-sized companies. ABA can provide the necessary information. Their website contains further details and contact information:

http://investinaustria.at/en/.

Industrial Promotion

ABA provides promotion in form of investment consulting, site selection, handling formalities and support after project completion particularly in the automotive, chemicals, environmental technologies, industrial equipment, and metal manufacturing sectors.

Limits on Foreign Control and Right to Private Ownership and Establishment

For non-EU citizens to establish and own a business, the Austrian Foreigner’s Law mandates a residence permit that includes the right to run a business. The right to run a business in many sectors is only granted when preconditions are met, such as certificates of competence, and recognition of foreign education. There are no limitations to ownership of private businesses, and to our knowledge no American investors have alleged sector-specific restrictions.

Privatization Program

The government has not privatized any public enterprises since 2007. Austrian public opinion regarding further privatization remains skeptical and the senior governing coalition partner Social Democratic Party (SPÖ) is on record opposing additional privatizations. The current government program does not identify any public enterprises for privatization, but the government may reduce some of its shareholdings while retaining a blocking minority share. In past privatizations, foreign and domestic investors received equal treatment. Despite a historical government preference for maintaining blocking minority rights for domestic shareholders, foreign investors have successfully gained full control of enterprises in several strategic sectors of the Austrian economy, including telecomunications, banking, power generation, and infrastructure.

Screening of FDI

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

For the purposes of the FTA regime, EU, European Economic Area, and Swiss citizens are not considered foreign.

There are two different procedures under the FTA: (i) an ex ante approval, and (ii) an ex officio review. The ex ante approval procedure takes one month from submission of the application to approval (phase I) and, in case of an in-depth review, an additional two months (phase II).

Under the ex ante approval regime, the potential acquirer must submit the application before (i) entering into a legally binding commitment to acquire the relevant stake or (ii) announcing the launch of a public tender offer with respect to such target. During a phase I review, the transaction must be approved or a phase II review will be initiated.

A decision by the Ministry of Economy must be published. If it issues no decision during the one-month timeframe, the transaction is deemed as approved. The FTA does not, however, pro­vide for any procedure for a (non-binding) assessment or a negative clearance. An investor would thus have to initiate the formal approval process to obtain legal certainty.

Competition Law

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

Companies must inform the FCA of mergers and acquisitions (M&A). Special M&A regulations apply to media enterprises. A cartel court is competent to rule on M&A notifications from the FCA or the FCP. For violations of anti-trust regulations, the cartel court can impose fines of up to the equivalent of 10% of a company's annual worldwide sales. An independent energy regulator separately examines antitrust concerns in the energy sector, but must also submit cases to the cartel court.

Austria's Takeover Law applies to friendly and hostile takeovers of corporations headquartered in Austria and listed on the Vienna Stock Exchange. The law protects investors against unfair practices, since any shareholder obtaining a controlling stake in a corporation (30% or more in direct or indirect control of a company's voting shares) must offer to buy out smaller shareholders at a defined “fair market” price. The law also includes provisions for shareholders who passively obtain a controlling stake in a company, i.e. not by buying additional shares, but because another large shareholder has reduced his/her shareholding. The law prohibits defensive action to frustrate bids. The Shareholder Exclusion Act allows a primary shareholder with at least 90% of capital stock to squeeze out minority shareholders. An independent takeover commission at the Vienna Stock Exchange oversees compliance with these laws.

2. Conversion and Transfer Policies

Foreign Exchange

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

Remittance Policies

Not applicable.

3. Expropriation and Compensation

According to the European Convention of Human Rights (applicable in Austria) and the Austrian Civil Code, property is inviolable in Austria. Expropriation of private property in Austria is rare and may proceed only on the basis of special legal authorization, primarily for infrastructure projects. The government can initiate it only in the absence of any other alternative to satisfy the public interest; when the action is exclusively in the public interest; and when the owner receives just compensation. The expropriation process is non-discriminatory toward foreign, including U.S. firms. There is no indication that significant expropriations will take place in the foreseeable future.

4. Dispute Settlement

Legal System, Specialized Courts, Judicial Independence, Judgments of Foreign Courts

The Austrian legal system is based on Roman law. The constitution establishes a hierarchy, according to which each legislative act (law, regulation, decision, and fines) must have its legal basis in a higher instrument. The system provides an effective means for protecting property and contractual rights of nationals and foreigners. The judicial system is independent from the executive branch, but sensitive cases must be reported to the Minister of Justice who can issue instructions. Austria's civil courts enforce property and contractual rights and do not discriminate against foreign investors. Commercial matters fall within the competence of ordinary regional courts, except in Vienna which has a specialized Commercial Court, which also has Austrian-wide competence for trademark, design, model and patent matters. There is no special treatment of foreign investors.

Bankruptcy

The Austrian Insolvency Act contains provisions for business reorganization and bankruptcy proceedings. Reorganization requires a restructuring plan from the still solvent debtor. The plan must offer a quota of at least 20% of the debtor’s obligation and be adopted by a majority of all creditors and a majority of creditors holding at least 50% of all claims. Bankruptcy proceedings are in court and opened upon application of the debtor or a creditor; the court appoints a receiver for winding down the business and distributes proceeds to the creditors.

Investment Disputes

There has been no experience with investment disputes against Austria in the last decades. In 2015, for the first time, the Austrian government was sued by the offshore parent company of the Austrian Meinl Bank, Far East, before the International Center for Settlement of Investment Disputes (ICSID) of the World Bank in New York because of alleged damages arising from domestic prosecution. Many observers expect the case to be dismissed.

International Arbitration

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

ICSID Convention and New York Convention

Austria is a member of both the ICSID and the New York Convention on the Recognition and Enforcement of Foreign Arbitral Law, meaning local courts must enforce foreign arbitration awards in Austria. There is no specific domestic legislation in this regard.

Duration of Dispute Resolution – Local Courts

Not applicable

5. Performance Requirements and Investment Incentives

WTO/TRIMS

The Austrian government has not notified the WTO of any domestic measures inconsistent with Trade Related Investment Measures (TRIMs) requirements. U.S. Embassy Vienna has not been notified of any complaints or reports regarding any measures that are alleged to violate the WTO’s TRIMs obligations.

Investment Incentives

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

Financial incentives provided by Austrian federal, state, and local governments to promote investments are equally available to domestic and foreign investors and include tax incentives, preferential loans, loan guarantees, and grants. Most of these incentives are available only in the event that the investment meets specified criteria, including employment creation and use of high technology. Tax allowances for advanced employee training and R&D expenditures are also available, as are pre-seed and seed financing options for start-ups and cash grants up to 80% for later-stage companies.

Austria’s Wirtschaftsservice (AWS) is the government's institution that provides financial incentives. Additional information on targeted investment incentives (German language only) is available at http://www.awsg.at. Information on investment incentives in English language is available on the website of the ABA (see chapter 1.3.) at http://investinaustria.at/en/

Research and Development

Austria offers an attractive incentive system for research and development (R&D) activities from various government agencies. They are available for foreign-owned enterprises, as well. ABA (see above) is a good starting point. The agencies include:

  • The Austrian Research Promotion Agency (FFG) promotes R&D by companies along the entire innovation chain. Funding volume per year is up to $500 million. https://www.ffg.at/en
  • The Austrian Science Fund (FWF) is the country’s central body for the promotion of basic research. Funding volume per year is over $200 million. https://www.fwf.ac.at/en/
  • AWS (see above) is the funding bank for corporate business development. Total funding is over $900 million

Performance Requirements

There are virtually no restrictions on foreign investment in Austria and foreign investors receive national treatment. The Austrian government may impose performance requirements when foreign investors seek financial or other assistance from the government, although there are no performance requirements to gain access to tax incentives. There is no requirement that Austrian nationals hold shares in foreign investments or for technology transfer, and no requirement for foreign investors to use domestic content in goods or technology.

Austria offers several non-immigrant business visa classifications, including intra-company transfers/rotational workers, and employees on temporary duty. Recruitment of long-term, overseas specialists or those with managerial duties is governed by a points based immigration scheme to attract skilled workers and specialists in individual sectors (points are available for qualification, education, age, and language skills). This red-white-red (RWR) model has been designed to react flexibly to rising demand for talent in different occupations and is available to highly qualified individuals, qualified specialists/craftsmen in certain understaffed professions (qualified labor and registered nurse jobs), and key personnel/professionals. Applicants must have an offer of employment to apply for the RWR.

Highly qualified individuals may apply locally in Austria, or opt to find a potential employer from abroad and have the company apply in Austria on their behalf. Once the application is approved, the visa office authorizes the Austrian Embassy or consulate to issue the visa to enter Austria and to pick up the RWR card. Austrian immigration law requires those applying for residency permits to take German language courses and exams.

While principal RWR applicants are exempt from any language requirement, family members of RWR applicants must submit proof of basic language proficiency (“A1 level”) when first applying for residence permits and need to take advanced proficiency German language courses/exams ( “A2 level”) within a two-year time frame. Family members of highly qualified individuals (“Besonders Hochqualifizierte”) are exempt from the A1, but not from the A2 requirement. A university-degree automatically fulfills the A2 requirement.

Data Storage

The government does not follow a “forced localization” policy or force foreign IT providers to turn over source code or provide access to surveillance. Available communication data, however, must be transferred to the authorities following a court judgment for individual cases.

In principle, transfer of data to foreign countries is subject to authorization by the Austrian Data Protection Authority (DPA). Authorization is not needed for data that has been published in Austria in accordance with domestic laws, has been transmitted to a foreign country with the agreement of the data holder, or can only indirectly be defined as personal. Data subject to authorization must be published in a public data register. The transfer of data to U.S. companies in the United States should not be subject to authorization under the rules of the U.S.-EU “Privacy Shield” agreement once it enters into force. This agreement will replace the “Safe Harbor Agreement”.

The Austrian Data Protection Authority is charged with supervision of data protection in Austria. Phone: +43-1-53115-202525, e-mail: dsb@dsb.gv.at

6. Protection of Property Rights

Real Property

The Austrian legal system protects secured-interests in property. For any real estate agreement to be effective, owners must register electronically with the land registry. In case of rededication of land, approval of the land transfer commission or the office of the state governor is required. The land registry, overhauled in 2012 to speed up registration procedures and reduce costs, is a reliable system for recording interests in property, and access to the registry is public.

Intellectual Property Rights

Austria has effective laws to protect intellectual property rights, including patent and trademark laws, a law protecting industrial designs and models, and a copyright law. Austria is a party to the World Intellectual Property Organization (WIPO) and several international property conventions, including the European Patent Convention, and the Universal Copyright Convention. Since both the United States and Austria are members of the "Paris Union" International Convention for the Protection of Industrial Property, American investors are entitled to the same protection under Austrian patent legislation as Austrian nationals.

Austria is not listed in the USTR’s Special 301 report, but Austria’s trade secrets regime is a concern for some innovative U.S. businesses. While Austria offers protection for trade secrets, some U.S. companies complain that gaps in the system make it unlikely that confidential information will be safe from bad actors. For instance, if a party trusted with a “non-technical” secret, such as a go-to-market strategy or a list of customers, discloses it, there is no criminal liability. Similarly, a competitor can make use of confidential information he receives, as long as the party providing it originally received it legitimately. The Austrian government along with industry is reevaluating their trade secrets regime in order to address concerns.

Austria's Copyright Act is in conformity with EU directives on intellectual property rights and grants authors the exclusive rights to publish, distribute, copy, adapt, translate, and broadcast their work. The law also regulates copyrights of digital media (restrictions on private copies), works on the Internet, protection of computer programs, and related damage compensation. Infringement proceedings, however, can be time-consuming and costly. Film and music industry representatives have been in a legal dispute with Internet providers to block access to pirated audiovisual products over the Internet: In July 2015, the Austrian High Court confirmed the European Court of Justice (ECJ) ruling from 2014 that the Austria-based Internet provider UPC must prevent access to illegal streaming platforms once made aware of a copyright violation. In line with EU requirements, Austria also has a law against trade in counterfeit articles. In 2014 (latest figures), Austrian customs authorities confiscated pirated goods worth €5.7 million ($6.1 million).

Patent Prosecution Highway: Since 2010, a "Patent Prosecution Highway" (PPH) agreement between the United States and Austria is in force. PPH allows filing of streamlined applications for inventions determined to be patentable in other participating countries and is expected to reduce the average processing time. The program, which is based on information sharing between national patent offices and standardized application and examination procedures, should reduce costs and encourage greater utilization of the patent system. Austria is also participating in the Global Patent Prosecution Highway (Global PPH) pilot program, which started in January 2014.

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

Resources for Rights Holders

Contact Point at Post for IP Issues:
Jim Bangert, Economic Unit Chief
Embassy of the United States
Boltzmanngasse 16
1090 Vienna, Austria
Phone: +43-(0)1-313 39 – 2299
E-Mail: bangertj@state.gov

Country-specific resources:
American Chamber of Commerce in Austria
Porzellangasse 39/7
1090 Vienna
Phone: +43-(0)1-319 57 51
E-Mail: office@amcham.at

Link to Post’s list of local lawyers: http://austria.usembassy.gov/attorney.html

7. Transparency of the Regulatory System

Austria's legal, regulatory, and accounting systems are transparent and consistent with international norms. Ministries generally publish draft laws and regulations for public comment prior to their adoption by Austria's cabinet (Ministerrat) and/or Parliament. Such relevant stakeholders as the “Social Partners” (Economic Chamber, Agriculture Chamber, Labor Chamber, and Trade Union Association) and the Industrial Association are invited to provide comments and suggestions for improvement, which may be taken into account before adoption of laws. This mechanism encompasses investment laws, as well.

The government has made progress in streamlining its complex and cumbersome requirements for business licenses and permits. It claims to have reduced the processing time for permits to less than three months, except for large projects requiring an environmental impact assessment. The government's "one-stop shop" for business permits does not include plant and building permits. All licensed businesses in Austria (including foreign-owned enterprises) must be members of Austria's Economic Chamber and pay compulsory dues; the Chamber plays an administrative role in some areas (including retailing, tourism, and certification of skilled labor).

The government does not influence the allocation of investments among sectors. It uniformly applies tax and labor laws as well as health and safety standards. Austrian regulations governing accounting provide U.S. investors with internationally standardized financial information. In line with pertinent EU regulations, listed companies must prepare their consolidated financial statements according to the International Financial Reporting Standards (IAS/IFRS) system.

8. Efficient Capital Markets and Portfolio Investment

Austria has modern and sophisticated financial markets, to which foreign investors have access without restrictions. All financial instruments are available. Credit is available at market-determined rates. There are no signs of a credit crunch, although a tightening of credit standards for loans is notable as banks work to improve the quality of their loan portfolios.

Austria's Anti-Money Laundering/Combating Terrorist Financing (AML/CTF) regime is in line with Financial Action Task Force (FATF) standards. Criminal penalties apply to insider trading, money laundering (including self-laundering), and terrorist financing. Bearer shares are not allowed except for companies listed on a recognized stock exchange.

Money and Banking System, Hostile Takeovers

Austria has a highly developed banking system with worldwide correspondent banks, and representative offices and branches in the United States and other major financial centers. Large Austrian banks also have extensive networks in Central and Southeast European (CESEE) countries and the countries of the former Soviet Union. Due to U.S. government reporting requirements, some private banks do not accept personal accounts from U.S. citizens, though locally incorporated businesses belonging to U.S. investors have not reported problems in this regard. Austria's three largest banking groups (Erste Group, UniCredit Bank Austria, and Raiffeisen Zentralbank with Raiffeisen Bank International) comprise close to half of Austria's total banking sector assets. Several Austrian banks are currently restructuring and downsizing in an attempt to shed risky loans in certain parts of CEE and focus on a narrower but more stable portfolio.

To ensure the safety and soundness of the European banking system, the Euro-zone’s new single supervisory mechanism (SSM), one of the two pillars of the EU banking union, along with the Single Resolution Mechanism (SRM) have been established. The SSM, headed by the European Central Bank (ECB) in cooperation with the national competent authorities Financial Market Authority (FMA) and Austrian National Bank (OeNB), started operating November 2014. Six Austrian banks with assets in excess of €30 billion ($33 billion) are subject to the SSM, plus Sberbank Europe, AG, and VTB Bank (Austria), AG, which are Russian bank subsidiaries headquartered in Austria. All other Austrian banks continue to be subject to Austria's dual-oversight bank supervision system with roles for both the OeNB and the FMA, which are also responsible for policing irregularities on the stock exchange and for supervising insurance companies, securities markets, and pension funds.

9. Competition from State-Owned Enterprises

Austria has two major wholly owned state-owned enterprises (SOEs): The ÖBB (Austrian Federal Railways) and Asfinag (highway financing, building, maintenance and administration). Other government industry holding companies are bundled in the government holding company ÖBIB: www.obib.co.at. They include a 53% stake in the Post Office, 33% in the Austrian Casinos, 31.5% in the energy company OMV, 28% in the Telekom Austria Group, and a few other minor ventures. The federal government also owns 51% of the energy company Verbund AG. State governments own the majority of utilities and Vienna Airport. Private enterprises in Austria can compete with public enterprises under the same terms and conditions with respect to market access, credit, and other such business operations as licenses and supplies. As member of the EU, Austria is also a party to the Government Procurement Agreement (GPA) of the WTO, and the SOEs are at least indirectly covered (as far as they are entities monitored by the Austrian Court of Auditors).

After many successful privatizations in the last decade, SOEs are concentrated in utilities, hospitals, social insurance, infrastructure, and state monopolies (e.g., gambling). In many of these sectors (e.g., hospitals, utilities) private companies compete successfully; however, SOEs occasionally use political ties to prolong dispute resolution and appeal procedures and/or delay implementation of remedies, which in some markets can lead to significant uncertainties. While most SOEs must finance themselves under terms similar to private enterprises, some large SOEs (such as ÖBB) benefit from state-subsidized pension systems.

Since many public enterprises are outsourced and organized as stock corporations, senior management usually does not directly report to a minister, but to an oversight board. However, the government often appoints management and board members, who usually have strong political affiliations.

OECD Guidelines on Corporate Governance of State-Owned Enterprises

SOEs adhere to the OECD guidelines on Corporate Governance.

Sovereign Wealth Funds

Austria has no sovereign wealth funds.

10. Responsible Business Conduct

In recent years, awareness of corporate social responsibility (CSR) has risen among Austrian producers and consumers. Major Austrian companies follow generally accepted CSR principles and publish a CSR chapter in their annual reports; many also provide information on their health, safety, security, and environmental activities. CSR Europe (the leading European business network for CSR) has a local partner organization respACT (short for "responsible action").

Austria adheres to the OECD Guidelines for Multinational Enterprises; the Austrian national contact point has an office in the Federal Ministry of Science, Research and Economy and actively promotes the Guidelines to companies, universities and other stakeholders.

https://mneguidelines.oecd.org/ncps/austria.htm

The Austrian Kontrollbank, the Austrian export credit agency, likewise promotes information on CSR issues, principles and standards, including the Guidelines, on its website. http://www.oekb.at/en/about-oekb/sustainability/Pages/Sustainability.aspx

11. Political Violence

There have been no incidents of politically motivated damage to foreign businesses. Civil disturbances are very rare.

12. Corruption

Corruption does not significantly affect business in Austria and businesses have a high degree of confidence in the Austrian legal system. However, there is a small risk of corruption occurring in public procurement, most commonly in the form of criteria that is tailor-made for certain participants. More than one third of businesses believe nepotism to be widespread within the public administration. In order to combat this, the government has initiated reform projects, including one-stop-shops and e-government mechanisms to minimize encounters between government officials and companies in these instances.

Anti-corruption laws are generally implemented effectively although procedures are slow with some high-level cases lasting several years. Watchdog groups such as Transparency International are active, but play no formal role.

According to the European Commission’s first EU Anti-Corruption Report of 2014, Austria has strengthened its fight against corruption by efforts in prevention and prosecution. In this report, the Commission suggests that Austria makes access to bank account information easier in cases of suspected corruption. Polls by the Commission show that 66% of Austrians (76% of Europeans) agree that corruption is widespread in their home country and that 5% of Austrians (4% of Europeans) have been asked or are expecting to pay a bribe in the past year.

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

Criminal penalties for corruption include imprisonment of up to 10 years for all parties involved and fines can rise to as much as €1.8 million ($2 million). The jurisdiction of corruption investigations rests with the Austrian Federal Bureau of Anti-Corruption and covers corruption taking place both within and outside the country. The Lobbying Act of 2013 introduced binding rules of conduct for lobbying and requires domestic and foreign organizations to register with the Austrian Ministry of Justice; a law on financing of political parties requires disclosure of donations exceeding €3,500 ($3,860).

UN Anticorruption Convention, OECD Convention on Combatting Bribery

Austria has ratified the United Nations Convention against Corruption (UNCAC), the OECD Anti-Bribery Convention, the Council of Europe's Civil Law Convention on Corruption, and the Criminal Law Convention on Corruption. Austria is a member of the Group of States against Corruption (GRECO) within the Council of Europe.

Resources to Report Corruption

Contacts at government agencies responsible for combating corruption:

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

BAK – Bundesamt zur Korruptionsprävention und Korruptionsbekämpfung
(Federal Agency for Preventing and Fighting Corruption)
PO Box 100
1014 Vienna, Austria
Phone: +43-(0)1-531 26 - 6800
E-Mail: BMI-IV-BAK-SPOC@bak.gv.at
Internet: http://www.bak.gv.at

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

13. Bilateral Investment Agreements

The United States and Austria are signatories to a 1931 bilateral Treaty of Friendship, Commerce, and Consular Rights. Austria, along with all EU Member States, has signed a negotiating mandate for the European Commission to negotiate the Transatlantic Trade and Investment Partnership (TTIP) with the United States, which includes an investment chapter.

Austria has bilateral investment agreements in force with Albania, Algeria, Argentina, Armenia, Azerbaijan, Bangladesh, Belarus, Belize, Bosnia-Herzegovina, Bulgaria, Chile, China, Croatia, Cuba, Czech Republic, Egypt, Estonia, Ethiopia, Georgia, Guatemala, Hong Kong, Hungary, India, Iran, Jordan, Kazakhstan, Kuwait, Latvia, Lebanon, Libya, Lithuania, Macedonia, Malaysia, Malta, Mexico, Moldova, Mongolia, Montenegro, Morocco, Namibia, Oman, Paraguay, Philippines, Poland, Romania, Russia, Saudi Arabia, Serbia, Slovakia, Slovenia, South Korea, Tunisia, Turkey, Ukraine, United Arab Emirates, Uzbekistan, Vietnam, and Yemen.

Austria has signed an agreement with Nigeria, and signed and ratified agreements with Cambodia and Zimbabwe, but those agreements are still pending ratification by those countries and have not yet entered into effect. Until new agreements take effect, prior agreements with the former Czechoslovakia continue to apply to the Czech Republic and Slovakia, and that with the former Soviet Union to Russia.

Under all these agreements, if parties cannot amicably settle investment disputes, a claimant submits the dispute to the International Center for Settlement of Investment Disputes (ICSID) or an arbitration court according to the UNCITRAL arbitration regulations.

Bilateral Taxation Treaties

Austria and the United States are parties to a bilateral double taxation convention covering income and corporate taxes, which went into effect on February 1, 1998. Another bilateral double taxation convention (covering estates, inheritances, gifts and generation-skipping transfers) has been in effect since 1982. Austria and the United States signed the Foreign Account Tax Compliance Act (FATCA) Agreement on April 29, 2014, covering U.S. citizen account holders in Austria. The FATCA Agreement went into force December 9, 2014.

14. OPIC and Other Investment Insurance Programs

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

15. Labor

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

Austria’s labor market policy has for many years maintained unemployment at among the lowest levels in the EU. The unemployment rate of between 4.6–5.7% in 2011-2015 (in all five years among the lowest in the EU-28) may increase to around 6.0-6.3% in 2016 and 2017 due to moderate economic growth and a growing labor force, driven by a large influx of migrants. Migrant workers are largely from the CEE region though the recent refugee crisis has led to a large stream of asylum seekers from the Middle East entering the country and gradually becoming active on the labor market. While the majority of migrants tend to take on low-paid jobs in the construction and tourism sectors, there is a growing sentiment among the population that more qualified workers from CEE are displacing less qualified Austrians in the labor market.

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

In general, skilled labor is available in sufficient numbers. However, regional shortages of highly specialized laborers may occur in such careers as engineers, technicians, natural and physical scientists, metalworking, healthcare, and tourism. Additional labor supply due to the opening of the labor market to new EU member states, additional immigration, measures to curb early retirement and rising labor market participation of women should offset some of these issues. The tourism and healthcare sectors in particular are benefiting from migrant workers.

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

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

Collective bargaining revolves mainly around wages and fringe benefits. Approximately 80% of the labor force works under a collective bargaining agreement. Austria does not have an official minimum wage but all collective bargaining agreements now provide for a minimum wage of at least €1,300 (approx. $1,430) per month, though this may vary across sectors. Austrian law stipulates a maximum workweek of 40 hours, but collective agreements also provide for a workweek of 38 or 38.5 hours per week for more than half of all employees. Flexible work hour regulations allow firms to increase the maximum regular hours from 40 to 50 per week in special cases (and for a limited period up to 60 hours). Responsibility for agreements on flextime or reduced workweeks resides at the company level. Austrian employees are generally entitled to five weeks of paid vacation (and an additional week after 25 years in the workforce); the rate of absence due to illness/injury averages 12 workdays annually.

16. Foreign Trade Zones/Free Ports/Trade Facilitation

Not applicable

17. Foreign Direct Investment and Foreign Portfolio Investment Statistics

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

 

Host Country Statistical source*

USG or international statistical source

USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other

Economic Data

Year

Amount

Year

Amount

  

Host Country Gross Domestic Product (GDP)

($billions USD)

2015

370.9

2014

436.9**

www.worldbank.org/en/country

Foreign Direct Investment

Host Country Statistical source*

USG or international statistical source

USG or international Source of data:
BEA; IMF; Eurostat; UNCTAD, Other

U.S. FDI in partner country ($M USD, stock positions)

2015

12,926

2014

15,787

http://bea.gov/international/direct_investment_
multinational_companies_comprehensive_data.htm

Host country’s FDI in the United States ($M USD, stock positions)

2015

11,220

2014

6,887

http://bea.gov/international/direct_investment_
multinational_companies_comprehensive_data.htm

Total inbound stock of FDI as % host GDP

2015

44.9

2014

N/A

N/A

* GDP: Statistics Austria: http://www.statistik.at/web_de/statistiken/volkswirtschaftliche_gesamtrechnungen/index.html *Foreign Direct Investment: Austrian National Bank: http://www.oenb.at/

**Discrepancy of figures mainly due to exchange rate differences between 2015 and 2014.

Table 3: Sources and Destination of FDI

The table below reflects 2014 IMF figures for Austrian FDI, which encompasses all FDI including so-called special purpose entities (SPEs) with only limited business activity. http://cdis.imf.org

Direct Investment from/in Counterpart Economy Data

From Top Five Sources/To Top Five Destinations (US Dollars, Millions)

Inward Direct Investment

Outward Direct Investment

Total Inward

280,723

100%

Total Outward

324,870

100%

Germany

46,265

16%

Germany

29,175

9

Netherlands

29,372

10%

Netherlands

20.776

6

Russian Federation

23,157

8%

Czech Republic

12.391

4

Luxembourg

17,264

6%

Romania

11.148

3

Italy

16,966

6%

Luxembourg

9.307

3

"0" reflects amounts rounded to +/- USD 500,000.

Table 4: Sources of Portfolio Investment

Source: IMF: http://cpis.imf.org

Portfolio Investment Assets

Top Five Partners (Millions, US Dollars)

Total

Equity Securities

Total Debt Securities

All Countries

319,551

100%

All Countries

Amount

100%

All Countries

Amount

100%

Germany

55,894

17%

Luxembourg

30,925

31%

Germany

31,841

15%

Luxembourg

40,043

13%

Germany

24,053

24%

France

23,186

11%

United States

29,098

9%

United States

10,803

11%

Italy

20,778

9%

France

28,506

9%

Ireland

7,713

8%

United States

18,295

8%

Italy

21,506

7%

France

5,320

5%

Netherlands

17,739

8%

18. Contact for More Information

Jim Bangert, Economic Unit Chief
Embassy of the United States
Boltzmanngasse 16
1090 Vienna, Austria
Phone: +43-(0)1-313 39 – 2299
E-Mail: bangertj@state.gov

ecoi.net description:
Annual report on investment climate, incl. information on legal and regulatory system, political violence, corruption, labour and economic issues, etc. (as of March 2016)
Country:
Austria
Source:
USDOS – US Department of State (Author)
Original link:
http://www.state.gov/e/eb/rls/othr/ics/2016/eur/254337.htm
Document type:
Periodical Report
Language:
English
Published:
5 July 2016
Document ID:
1054798 (former ID 332466)

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