GmbH-Neu: Easing Business Start-ups

On 22 March, Justice Minister Beatrix Karl and Economics Minister Reinhold Mitterlehner presented the government’s proposal for revised rules for setting up new companies in Austria – specifically lowering the required capital to register a GmbH or limited company, and reducing fees. The aim is to lower the barriers for starting new businesses.

“A strong economy is the engine of Austria’s prosperity,” Karl said at the presentation. “The GmbH-Neu makes access to [forming new] companies easier for young entrepreneurs.”

Indeed, the recent data of the Economics Ministry, published in the daily Der Standard, underlines the government’s concerns: In order to set-up a limited (Ltd) company in Austria, start-up capital of at least €35,000 has been required – more than three times as much as the EU average (€8,000). Since the 2008 financial crisis, the number of limited company start-ups has dropped to about 8,000 annually, among the lowest in the EU; even four years later, there has been no significant increase.

But it’s not only the high capital requirements that might put off potential entrepreneurs; the set-up costs of €1,181.50 plus a mandatory charge of €150 for the entry in the national commercial register are definitely on the higher end in Europe. While in the UK, for example, the initial registration of an Ltd. company with Companies House, the responsible government agency, costs between £15 to 40 (approx. €18 to €47), Austria requires entrepreneurs to take the legal set-up at a notary, hence the high costs.

The Austrian Government proposes lowering the registered ­capital to €10,000, cutting the set-up costs to €602 and dropping the registration charges altogether as of July 2013. Along with a significant reduction in the minimum corporate tax – from the current €1,750 to €500 annually – the proposal is a careful balance between encouraging potential entrepreneurs, thus improving Austria’s competitiveness, and the risk of early bankruptcy for new businesses.

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