Investment in Progress
Part 2 – What to expect as an Investor
ECOVIS Austria is assessing the measures and the probability of the implementation
The recently presented government program includes numerous positive measures for start-ups and investors. It remains to be seen whether it will stimulate Austria’s investments for start-ups and KMUs.
Mobilisation of risk-capital
In order to promote Austria as a location for business and the establishment of new companies with innovative ideas and their growth, private risk capital is to be mobilised, e.g. by introducing and relaxing the possibility of offsetting losses on income from capital assets. Currently, private Investors can only offset their losses from the investment in start-ups with certain positive capital income and only in the same year. In the future the loss offsetting shall be possible within several years.
ECOVIS Assessment: The loss carry forward concerning capital income is an old demand by the start up industry! Probability of implementation: middle (will cost money!)
Tax relief for investments
The government is considering a tax deductibility of start-up and growth financing for innovative start-ups and SMEs with an upper limit per investment (e.g. EUR 100,000 deductible over 5 years) and an overall cap – modelled on the successful (Seed) Enterprise Investment Scheme (SEIS/EIS) in Great Britain.
ECOVIS Assessment: Already in April 2019 ECOVIS Austria in cooperation with aaia published an example calculation which shows the how the Austrian economy would benefit when introducing a similar tax regime for investments like in the UK (to find here) – this would have a huge impact on the investment figures in Austria!
Probability of implementation: Envy and jealousy are the real enemies – many politicians in the past said “Why should we finance the rich start up investors” – by ignoring the substantial positive effects for the Austria’s start-up scene and economy.
BUT: it is well understood that anti-abuse measures have to be installed to prevent negative side effects for the Austrian budget!
More Seed financing with institutional investments
Institutional investors such as pension funds, provident funds and insurance companies should be allowed to invest in long-term, innovative forms of investment (including ecological and social impact) (e.g. seed financing for start-ups and SMEs). The underlying catalogues of permissible investments should be adapted accordingly (in line with EU law).
ECOVIS Assessment: it’s a must! Probability of implementation: high
Increasing growth capital
Based on international models like in Switzerland or Denmark, the availability of growth capital shall be increased in cooperation with private investors through the establishment of corporate venture capital funds involving leading Austrian Companies or funds-of-funds.
ECOVIS Assessment: it’s a must! Probability of implementation: middle
The “Green Finance Agenda”
The government plans to create a framework for the mobilisation of private capital to solve social challenges, especially in the area of climate protection and energy, e.g. with a capital gains tax exemption for ecological/ethical investments.
ECOVIS Assessment: This is a great opportunity to establish Austria as the international leading “Greentech Hotspot”. Probability of implementation: high
Vision versus realisation
As always, all initiatives need to be implemented focused and within an acceptable time frame, which did not happen within recent governmental periods. We can only hope that the new government will take decisive and timely steps.
What’s definitely alarming: some of the mentioned measures are currently only “under review”, which does not have a very positive meaning for the Austrian citizen. There is also a lack of more concrete objectives for a strategically planned strengthening of Austria as a location for companies and investors.
David Gloser, Partner, Chartered Accountant and Tax Advisor
Barbara Hölzl, Tax Advisor from ECOVIS Austria