The new GmbH “light”

Back to News

After many years of negotiations and discussions the amendments of the Austrian GmbH Act have now been written into law and came into force on July 1, 2013. The amendments foresee, that it is now possible to establish a so-called Gmbh “light” and the major amendments of the GmbH Act are as follows:

Minimum share capital

The statutory minimum share capital has been reduced from previously € 35.000,-- to now € 10.000,--.

What was not changed is the possibility to establish an Austrian GmbH (company with limited liability) with a paid in share capital of 50 % of the statutory minimum share capital which was € 17.500,-- before the reform and which is now € 5.000,--.

Tax consequences

The reform of the Austrian GmbH Act was accompanied by some amendments in tax law.

The Austrian Corporate Income Tax Act governs, that a GmbH (company with limited liability) or an AG (stock corporation) have to pay a minimum corporate income tax which can be carried forward for an indefinite period of time and which is credited against later corporate income taxes coming due from the ordinary business of such a corporate entity.

The minimum corporate income tax a GmbH has to pay amounts to 5 % of the statutory minimum share capital. The statutory minimum share capital being € 35.000,-- until now led to a minimum corporate income tax of 5 % of € 35.000,--, i.e. € 1.750,-- per year and is now only € 500,-- per year which is 5 % of the new statutory minimum share capital of € 10.000,--.

Retroactive reorganizations of companies

The Austrian Reorganization Tax Act foresees that the reorganization of companies can be carried out up to nine months back retroactively for tax purposes.

One of the most popular reorganisations forms is the contribution of a sole proprietorship or partnership shares in exchange for shares in a corporate entity.

Provided that such a reorganisation is carried out in August with retroactive effect as per January 1, 2013 and, as part of this reorganization, a new GmbH is established to which the sole proprietorship or the partnership shares are contributed in exchange for shares, then already the new regulations regarding the GmbH “light” are applicable.

Even if for tax purposes it is deemed that this new company has already been existing on January 1, 2013. This is of course true for any other date which is in the period of nine months back.

Reduction of the share capital of already existing GmbH’s

From July 1, 2013 onthe Austrian GmbH Act foresees a statutory share capital of only € 10.000,--. Therefore the shareholders of an Austrian GmbH which has been

established before July 1, 2013 have now the possibility to reduce the share capital of their company.

This is also possible for those GmbH’s where the shareholders only paid in 50 % of the share capital, that means that the paid in share capital is only € 17.500,--.

This amendment of the GmbH Act also gives way to achieve a fully paid in share capital very easily either in form of a shareholder’s resolution that the already paid in € 17.500,-- shall be considered as a fully paid in share capital or the shareholders agree upon that the initially foreseen statutory minimum share capital of € 35.000,-- is reduced to the new statutory minimum share capital which is € 10.000,--

The difference between the initially paid in share capital and the amount of share capital the shareholders have foreseen in their resolution which has to be a minimum of € 10.000,-- anyway is considered as a tax-free redemption of the initially paid in share capital.

Reduced establishment cost

The amendments of the Austrian GmbH Act foresee a minor reduction of cost which come due when such a company with limited liability is established. It is no longer obligatory that the establishment of such a company is published in the Official Austrian Gazette which leads to a reduction of cost of appr. € 100,-- to € 150,--.

Other new regulations laid down in the GmbH Act

Apart from the most significant amendment of the GmbH Act, namely the reduction of the statutory minimum share capital from € 35.000,-- to € 10.000,-- the other amendments in the GmbH Act increase the potential risk of shareholders and managing directors of such a GmbH of getting personally liable.

The obligation that the shareholders assembly has to be called in provided that more than 50 % of the share capital has been consumed by losses stays unchanged.

What is new is, that the managing directors and under certain circumstances also the shareholders assembly are obliged to constantly calculate certain indicators.

These indicators are laid down in the Austrian Enterprise Reorganization Act. These indicators laid down in this Act foresee, that if the percentage of equity is below 8 % and the deemed period of debt redemption is more than 15 years the enterprise requires a reorganisation and the managing director is obliged to initialize such a reorganisation.

Until now these indicators were only calculated after the annual accounts were set up, the amendment in the GmbH Act foresees, that this has also to be done during the business year.

Unfortunately the Act does not define when and how often these indicators have to be calculated, it is recommended to do it at least once per quarter to avoid such personal liabilities.

Summary

The government has tried to meet the wishes and requests of the business society for a cheaper way to establish a company with limited liability and now offers the possibility to establish a GmbH “light” with a statutory minimum share capital of € 10.000,-- of which at least 50 % , i.e. € 5.000,--, have to be paid in in cash.

What is yet unclear is up to which extent a corporate entity with a paid in share capital of € 5.000,-- is accepted as a business partner by others.

Vienna, July 2013