Investment in Progress
Under the SPÖ-ÖVP government, a package of measures to support start-ups was launched in 2017. A central point was a risk capital premium for investors of a maximum of 20 percent of the investment up to maximum EUR 250k.
The catch was that this premium for the investor was included in the de minimis limit of the start-up: So what’s meant to be a financial support for the investors, was at the same time a reduction of the financial resources for the start-up. However – as fast as the start-up package was invented, as fast it disappeared in January 2018.
Therefore, unlike in other European countries, there is currently no incentive of venture capital for innovative young companies or SMEs in Austria, which reduces their chances of success. So there is definitely a need of an investment incentive scheme that is not reducing the start-ups’ possibilities for other public grants.
Easy and effective – what would be a proper investment incentive scheme?
Analogue to the SEIS/EIS system in the UK, a similar scheme of a tax credit for investors would fit in Austria. A simple calculation (made by ECOVIS in cooperation with aaia) shows, that this incentive would have huge positive effects for the Austrian tax & social security system.
The idea is to grant a tax credit of the tax burden in Austria of 50% of the investment (limits: per investor 100k per year, per start-up 500k per year).
According to the information the most active Austrian Business Angels, a total investment volume of EUR 35 Mio was raised in 2018. Under a conservative calculation of 2/3 of the investment fulfill the necessary requirements and do not exceed the limits, the tax credit for the investors (and therefore costs for tax authority) would be about EUR 12 Mio a year (= fiscal burden).
This EUR 12 Mio correspond to the payroll related costs (wage tax, wage related taxes and social security contributions) for 8 employees (with a gross salary of EUR 2,000 per employee) for approx. 100 start-ups in Austria – thus, the additional costs for the Austrian tax system (EUR 12 Mio) would be covered by the arising wage taxes, wage related taxes and social security contributions. These calculations have been made in a conservative way: no other positive (tax) effects for the fiscal system (corporate tax, VAT etc.) have been calculated.
Dear members of the Austrian Government: Doesn’t that sound like a win-win for all?
Download the full calculation of the investment incentive scheme (in German) here.
Barbara Hölzl, Managing Director and Tax Advisor ECOVIS Austria & David Gloser, Partner, Chartered Accountant and Tax Advisor