After the GmbH Light was adopted only six months ago, Minister of Economy Reinhold Mitterlehner announced the planned change of the reform once again. These changes, expected to come into effect on 1 March, have caused quite some uproar among the opposition, WKÖ, Junge Wirtschaft, and the Austrian startup scene. But what exactly are the changes for entrepreneurs who want to set up a Limited Liability Company?
Philipp Kinsky, CEO of the lawyer firm Herbst Kinsky, laid out the key aspects:
- The minimum required stock capital is going to be reversed – it will again go up to 35.000 euros; however, a new “privilege” for founders will be introduced, which would allow them to set up a GmbH with a minimum deposit of 5.000 euros in cash (instead of the original 17.500 euros from before the GmbH Light reform). However, if they choose to do so, this minimum deposit will have to increase to 17.500 euros in 10 years.
- The minimum required corporate tax is going to be reversed, again increasing from 500 euros to 1.750 euros per year.
- If the founder is taking on the “founding privilege” it will be added to the title of the GmbH until the 17.500 euros are paid off.
- The company also has to include a “founding deposit” and put 25% of the yearly profit into it until the 17.500 euros are paid off.
What is changing for startups?
- If startups were to decide to take on the “founding privilege”, they can found a GmbH with the minimum deposit of 5.000 euros. These are still improved conditions, however, business partners will know about the owner’s capital as it is added to the GmbH wording.
- If the company can’t pay off 17.500 euros after 10 years, it will fall into insolvency and the founder is held liable for paying the difference (max. 25.000 euros).
It seems that the changes are driven by the fact that already existing GmbHs lowered their minimum required stock capital from 35.000 to 10.000 euros to avoid paying higher taxes. Considering the tax policy, the planned changes are reasonable, Kinsky believes. “There have been more tax-free decreases of minimum required stock capital than newly found GmbHs,” Kinsky said. “However, the changes are going in the wrong direction. The concept of GmbH Light was good and necessary for the economy.” If the focus had only been on “fixing the tax leak” already existing companies took advantage of, GmbH Light would have been much clearer, he added.
“Marking founders down as second class”
During a press conference, Christoph Leitl, president of WKÖ (Austrian Chamber of Commerce), and Herbert Rohrmair, chairman of Junge Wirtschaft, recently presented statistics from 2013. Last year there were 28.565 new establishments, a plus of 1.640 (6.1%) compared to 2012. After years of decrease, the number of newly set up GmbHs went up to 3.498 last year. Particularly after the adoption of GmbH Light in July, more entrepreneurs founded companies. There were 1.450 new GmbHs in the second half of 2012, compared to 1.900 in the second half of 2013 – a plus of 31%. Leitl clearly ascribed this to the GmbH Light reform and emphasised the importance of keeping the minimum required stock capital at 10.000 euros. “If the reform were to change again, Austria would present itself with always-changing legislations, lose its appeal to start a business and wouldn’t be able to remain competitive,” Herbert Rohrmair of Junge Wirtschaft told inventures.eu.
“As a newly-founded company, it’s important to position yourself on the market as soon as possible,” Rohrmair continued. “The addition ‘founding privileged’ is marking founders down as second class and discourages customers as well as investors.”
NEOS pledge for GmbH Zero
NEOS, an entrepreneur-friendly liberal party that entered the parliament as a result of last year’s elections, are going to propose GmbH Zero during the next meeting of the National Assembly. “SMEs and single-member companies contribute tremendously to Austria’s economic prosperity,” Niko Alm of NEOS told inventures.eu. “We have to take the burden off them and not put it back on.”
Their proposal includes the following aspects:
- In their opinion, the minimum required stock capital should be decreased to zero. If this were to pass, there would be no stock capital required to set up a limited liability company (as it is standard in countries like the UK and Germany).
- Within the next 10 years, GmbH founders should then pay a minimum of 25% of their profit per year until a stock capital of 10.000 euros is reached.
- Abolition of the company tax
- Abolition of the minimum corporate income tax