“FlexKapG” is coming | New legal form, less capital: government approves start-up package

These are young, technologically innovative companies, most of them globally oriented and growth-oriented that operate as startups. According to the Austrian Startup Observatory, more than 3,300 startups have been founded in Austria since 2011. About half of them are based in Vienna, followed by Styria and Upper Austria in second and third place among the federal states. About 25,000 people currently work in these companies.

This is a demand that Austria’s startup sector has expressed for a long time. This is what is being achieved now. Literally, in the last few metres, the government actually wanted to secure the package very early, most recently on Wednesday. On Friday, the two government parties finally agreed on the start-up package, as confirmed to the Klein Zeitung newspaper. The parliamentary legislative process has begun “immediately” and the package is scheduled to come into force at the beginning of 2024.

The legal certificate is sufficient from now on

An important part of this is the “flexible company” as a completely new corporate form. Its purpose is to offer an “internationally competitive option,” especially for early-stage startups. Formal requirements are reduced. “Share transfers and takeover announcements in the event of a capital increase can now be carried out not only through a notarized document, but also through a notarized or legal document,” the government says.

“FlexKap” is implemented within the framework of the Companies Law Amendment Act 2023 (GesRÄG 2023). At the same time, government parties generally reduce the minimum capital for limited liability companies from €35,000 to €10,000 and make it possible to issue “shares at the value of the company”.

Taxes are deferred

Another part of the startup package: From now on, “tax relief for employee contributions” will be consolidated, as promised by government partners.

Three necessary points:

1. Create a tax deferral upon receipt of company shares. Until the shares are actually sold.
2. Introducing flat rate regulation within the tax framework. The cash benefit from the sale of 75 percent shares will be recognized after at least three years at a fixed rate of 27.5 percent. The remaining 25 percent of the shares are invoiced at the regular tax rate.
3. Creating preferential treatment in the area of ​​social security contributions and additional wage costs.

the conditions

There’s a problem: employee engagement in a startup requires a few points. For example, a company cannot be very large. A maximum of 100 employees may be employed and the turnover may not exceed 40 million euros. In addition, the shares must be sold within ten years of incorporation and it must be agreed in writing between the employee and the employer that the sale or transfer can only be accomplished with the employer’s consent.

Additional requirements for the preferential tax rate: The shares have been held for at least three years and the duration of the employment relationship is at least two years. Last but not least, the regulation applies exclusively to shares issued for the first time as of January 1, 2024.

Three ministries bargained

“We want to make our country more attractive for startups,” says Finance Minister Magnus Brunner. His ministry worked on the law with the Ministries of Economy and Justice until the end. “Startups are an important economic factor,” Brunner continues. “They play an increasingly important role in economic life, as they not only create jobs, but also contribute to the development of new technologies, foster innovation and create competition.”