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FREELANCING

What is a regulated business licence in Austria and who needs one?

Starting a business in Austria is notoriously complicated, but the amount of bureaucracy will depend on whether you need a business licence or not. Here’s what you need to know.

Published: 17 May 2023 14:51 CEST
What is a regulated business licence in Austria and who needs one?
Some professions in Austria require a regulated business licence before you can register as self-employed. (Photo by George Milton / Pexels)

Not every business owner or freelancer in Austria needs a business licence, but for those that do, there are two types – free and regulated.

The right one – and whether you need a business licence at all – will mostly depend on the profession and the type of work you do.

So if you think you might need to apply for a business licence but are unsure about the process, here’s an overview of how it works in Austria.

READ ALSO: EXPLAINED: How to register as self-employed in Austria

What is a business licence?

A business licence is a licence to trade in Austria, although not everyone needs one to start working independently.

If a profession falls under the new self-employed (Neue Selbständige) category, like artists, writers, lecturers, scientists and psychologists, then a business licence is not required.

But other professionals will need a licence before they can operate commercially, with the free business licence being the most common type issued in Austria.

What is the difference between a free and regulated licence?

For both types of business licences, applicants have to show proof of residency and age (at least 18), as well as provide a criminal record check. 

To get the regulated licence though, applicants have to submit proof of qualifications related to the business, have relevant working experience in the field and in some cases, even pass an exam. Professions that need a regulated business licence include hairdresser, florist, masseuse, mechanic and business consultant.

FOR MEMBERS: Digital nomad visas: How does Austria compare with other countries

For some international residents in Austria, this can be a tricky part of the process, especially if their qualifications and experience are from another country.

Vienna-based business consultant Miglena Hofer told The Local: “Many foreigners come to Austria qualified to do what they are good at but can’t make money [through self-employment] because they have to undergo this procedure.

“If they don’t have the experience, the best way is to find a job with that profession in Austria and then switch to self-employment later, perhaps one to three years depending on what is required.”

However, with the free licence, there is no requirement to have qualifications or relevant experience before registering a business, which makes the entire process quicker and easier.

Examples of professions that fall into this category include digital marketer, web developer, translator and photographer.

How long does it take to get a regulated business licence?

The process of getting a regulated business licence can take some time, depending on the evidence an applicant has to submit and where in the country they apply.

Miglena works with many international residents in Austria that want to set up a business and said she had noticed an increase in the number of clients in recent months, as well as the time it takes to process applications. 

She said: “Currently it takes five to seven months for an application to be processed in Vienna.

“It can be easier to register for a business licence in other provinces. In Vienna, they have the biggest number of applications, which is part of why the delay is so long.”

READ ALSO: The ‘easiest’ entry jobs to get in Austria if you don’t speak German

To speed up the process, Miglena advises prospective entrepreneurs to collect as much paperwork as possible in advance. This includes references from previous employers and any certificates for relevant qualifications, including any necessary translations.

In Vienna, the Department for Commercial Law, Data Protection and Civil Status (MA 63) is responsible for assessing applications for a regulated business licence.

Additionally, applying for a business licence (either free or regulated) also requires membership in the Austrian Chamber of Commerce, known as the WKÖ, which is subject to an annual fee. This can vary depending on the type of business.

Useful words and phrases

New self-employed – Neue Selbständige

Regulated businesses – Reglementierte Gewerbe

Entrepreneur – Unternehmer/Unternehmerin

Business registration – Gewerbeanmeldung

Business licence – Gewerbeberechtigung

Useful links

List of businesses that need a regulated business licence in Austria (in German)

How to register as self-employed in Austria?

Business Service Portal

Self-employed in Austria

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For members

WORKING IN AUSTRIA

Why are people in Austria paying more taxes despite federal reforms?

Workers in Austria are still among those with the highest tax burdens in the world, with the taxes and contributions taking more than 40 percent of wages even as the country introduced sweeping tax reforms.

Published: 26 April 2024 12:21 CEST
Why are people in Austria paying more taxes despite federal reforms?

It’s often said that Austria is a country with high quality of living and high taxes, but a new OECD study shows just how high the tax burden is here compared to other OECD countries.

According to the report, Austria has the third-highest tax burden on workers and the so-called “tax wedge”, how much of a worker’s wage is taken by the government,  increased as well.

According to the OECD, in most countries, the increase in labour taxation was primarily driven by increases in personal income tax.

This is because nominal wages increased in 37 out of 38 OECD countries as inflation remained above historic levels. However, since most of these countries do not have automatic indexation of tax systems, high inflation tends to increase workers’ tax liabilities by pushing them into higher tax brackets. 

However, Austria’s federal tax reforms removed this in the country in 2023. This means that once inflation rises, the tax brackets that define how much taxes you will pay on your income will also rise – and they have risen in 2023 and in 2024 since the change. 

The measure was known as the “end of the cold progression” in Austria and should have protected workers’ incomes from inflation losses.

READ ALSO: The tax benefits that parents and families receive in Austria

What is the tax ‘wedge’?

The OECD defines a tax wedge as “income tax plus employee and employer social security contributions, minus cash benefits.” 

In other words, if an employer has a labour cost of €100, how much will they actually see in their pockets, and how much of this goes to the state? According to the organisation, the percentage is the tax wedge.

In Austria, €100 earned by a single employee without children was taxed at an average of €47.2 last year. The amount was only smaller than in Germany (47.9 percent) and Belgium (52.7 percent) and it rose compared to the previous year when it was still at 46.9 percent.

The average of the 38 OECD countries was 34.8 percent.

Married single-earner couples with two children also have high tax burdens, with a tax wedge of 32.8 percent (OECD average: 25.7 percent), which is the eleventh-highest tax and contribution burden within the OECD for this group (2022: 13th place). For married dual-earner couples, the wedge was 40.6 percent.

The tax wedge for individuals or households with children is generally lower than those without children, as many OECD countries grant households with children a tax advantage or cash benefits.

READ ALSO: Why it’s worth filling in your annual tax return in Austria

Why is Austria’s tax burden higher this year?

Despite the tax reform presented by the government, Austria’s tax wedge has increased compared to the year before. 

The reason is the relief granted in Austria in 2022 in the form of one-off state payments. With the rising cost of living, the federal government released several temporary measures to help people in the country cushion the effects, including the popular €500 Klimabonus payment every person who had been a resident of Austria for at least six months was entitled to. 

These payments and increases in family allowances reduced the tax burden in 2022 – but they no longer exist or were drastically cut in 2023. Because of that, the tax burden is rising again. 

“The abolition of cold progression and the other measures have merely prevented the tax burden from rising more sharply,” Wifo economist Margit Schratzenstaller told Der Standard.

The report said the increased tax issues show that there is still a need for action. Compared to other industrialised countries, Austria’s tax burden on work for a single person without children is ten percentage points higher. Of course, the expert noted, the fact that many industrialised countries have a different social system with fewer publicly funded benefits also plays a role here. However, labour is also expensive in Austria compared to the EU average.

READ ALSO: What foreign residents in Austria should know about taxes

“The fact that the tax burden on the middle classes has increased is due to the government’s failure. Instead of structural relief, there have been one-off payments that have evaporated,” said Lukas Sustala, head of Neos-Lab, the think tank of the liberal opposition party.

NEOS representatives have urgently called for a ‘comprehensive tax reform’ to alleviate the heavy labour burden, with a significant reduction in non-wage labour costs, according to an ORF report.

In addition, NEOS proposes the creation of ‘tax incentives for full-time work’ – including a full-time bonus and tax exemption for overtime pay. Simultaneously, NEOS aims to eliminate ‘part-time incentives of any kind’, offering a potential boost to the economy and workers’ incomes.

Economist Schratzenstaller also recommends action: She suggests reducing social insurance contributions, for example, for health insurance companies. However, it’s important to note that intervening in this area could affect the largely autonomous financing of Austria’s healthcare system, which is funded mainly through workers’ and companies’ payments via social insurance contributions. 

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