GEOGRAPHIC PERSPECTIVE
H. Nagl - AUSTRIA AS A BUSINESS LOCATION

Austria is performing very well in economic terms. The unemployment rate is low, at 4.3 per cent in 2007 (forecast of the Austrian Institute for Economic Research), with economic growth of 3.2 per cent expected for 2007, surpassing the EU average. In addition, productivity, the export quota and industrial production are rising. The plans announced by the new Austrian government, which was sworn into office in January 2007, embody a commitment to economic growth as the basis for the economic and social policy measures which will be implemented.

TAX INITIATIVES

The tax reform package which took effect in 2005 made a considerable contribution to economic growth and expanding investment activity. The corporate tax rate was reduced from 34 per cent to 25 per cent. At the same time, neither a trade tax nor wealth tax is levied in Austria. Furthermore, Austria introduced a group taxation scheme, which allows the losses of foreign subsidiaries to be offset against the business results of the parent company located in Austria. The decision of the new government to abolish the inheritance tax and the subsequent tax relief for family-owned companies is another incentive for private international investors to select Austria as their business location.
The new government’s action plan also includes a series of liberalization and deregulatory measures. Accordingly, the maximum legally allowed daily and weekly working hours have been raised to 12 and 60 hours respectively.

An above-average number of multinational firms have established their research and development departments in Austria. At the end of 2006, the research quota comprised 2.43 per cent of the country’s gross domestic product, higher than the EU average of close to 2 per cent. The government’s stated target is to raise the research quota to 3 per cent of GDP by the year 2010, based on an annual 10 per cent increase in research expenditures. This research initiative is designed to serve as an incentive for stimulating as much private R&D investment as possible. The declared goal is to achieve a sustainable ratio of one third publicly financed research expenditures to two thirds privately financed investments in research and development.

Austria’s economic standing can also be attributed to the intensive and early exploitation of business opportunities in the Central and Eastern European markets since 1989. In addition to financial institutions, primarily small and medium-sized companies invest in these countries, setting up production facilities and expanding trade ties. Austrian firms have also benefited form the enlargement of the European Union in 2004. The volume of Austrian direct investments in Central and Eastern Europe amounted to about EUR 3.45 billion in 2005 alone (Source: Austrian National Bank). Furthermore, Austrian firms have set up more than 16,000 joint ventures with Eastern European partners. As a consequence, Austria is the largest single investor in Central and Eastern Europe on a per capita basis. It also offers in-depth competence as a service hub with outstanding CEE know-how in different areas, above all in the field of financing. Austria is increasingly emerging as a financial center for Eastern Europe, with the Vienna Stock Exchange playing a particularly significant role.

CEE HEADQUARTERS IN AUSTRIA

Austria is recognized as the pre-eminent business location for building up business connections to Eastern and South East Europe. More than 1,000 international companies coordinate their Eastern European business operations from Austria. Approximately 300 of
these firms across all sectors have set up their CEE headquarters in Vienna, such as the chemicals multinational Degussa-Hüls, pharmaceutical firms Beiersdorf and Eli Lilly, the beverage giant Coca Cola, which manages close to 50 markets in Central and Eastern Europe, and Henkel, global manufacturer of brand-name products.

WHO WE ARE AND WHAT WE DO

ABA-Invest in Austria is the first point of contact for international investors aiming to set up a company in Austria. We are owned and operated by the Republic of Austria, and report directly to the Austrian Ministry of Economic Affairs and Labor. All services provided by ABA are free of charge. We advise companies interested in establishing business operations in Austria on all relevant business location issues, provide information about Austria as a business location, and actively approach potential investors.