A subsidiary is a new Austrian company — normally a GmbH — that your company owns. A branch is not a company: under § 12 UGB the foreign entity itself goes on the Austrian Firmenbuch once it maintains a branch here. That single structural fact drives everything else. A subsidiary needs EUR 10,000 of share capital and a notarial deed, and it confines Austrian liabilities to itself. A branch needs no capital and no deed, and confines nothing: the liabilities are your company's, because the register entry is about your company.
The Short Answer
| Branch (Zweigniederlassung) | Subsidiary (usually a GmbH) | |
|---|---|---|
| What is registered | Your foreign company itself | A new Austrian company |
| Separate legal personality | No | Yes |
| Who bears the liabilities | The foreign company, without limit | The Austrian company, to its assets |
| Share capital | None — there is nothing to capitalise | EUR 10,000, of which EUR 5,000 in cash before registration |
| Formation instrument | Register application, with proof the entity exists | Notarial deed |
| Register entry names | Branch activity, personal statute, home register and number | The company's own particulars |
| Corporate income tax | Normally limited liability, on Austrian-source income | Unlimited liability, on worldwide income |
What a Branch Actually Is
A Zweigniederlassung is an Austrian register entry about a foreign company. Section 12 paragraph 1 UGB puts it plainly: where a legal entity's head office or seat lies abroad, the entity is to be entered in the Firmenbuch if it maintains a branch in Austria. The subject of the entry is the entity, not a new person.
That has a consequence founders regularly get wrong. A branch does not have its own shareholders, its own articles or its own balance sheet in the sense a company does. It has an activity, an address and people authorised to act for it — and behind all of them stands the foreign company with everything it owns.
Section 12 paragraph 2 adds the requirement that most often sets the timetable: on application, the existence of the entity as such must be proven. In practice that means current documents from the home register, in a form an Austrian court will accept, which normally means authentication and certified translation. Where the home jurisdiction is slow or its documents need legalisation, this is the step that decides how long the branch takes to open.
Liability Is the Decisive Difference
Everything else on the comparison table is a matter of cost or timing. This one is not.
Because the branch is the foreign company for register purposes, an Austrian creditor of the branch is a creditor of the foreign company. There is no Austrian balance sheet standing between them. A supplier dispute, an employment claim or a tax assessment arising out of Austrian operations reaches the parent's assets directly.
A subsidiary reverses that. The Austrian company answers for Austrian liabilities with its own assets, and the shareholder's exposure is what it put in. That is what the EUR 10,000 of share capital, of which EUR 5,000 must be paid in cash before registration, is buying. Founders sometimes describe the capital as a cost of the subsidiary route; it is more accurate to describe it as the price of the separation, and it stays inside the company rather than being spent.
Where the Austrian activity is small, low-risk and closely supervised from head office, that separation may not be worth its cost. Where it involves employing people, signing leases, or holding client money, the calculation usually goes the other way.
What Each One Has to File
The branch's register entry is wider than the equivalent for an Austrian company, because it has to describe a company governed by another country's law. Section 12 paragraph 3 requires the § 3 FBG particulars, and then adds three items specific to the branch:
- the activity of the branch;
- the personal statute of the entity — the law governing it, determined under §§ 9 and 10 IPRG;
- where that law provides for registration, the register holding the entity and its registration number.
A further rule narrows who appears: persons not authorised by law to represent the entity are entered only where their authority extends to the Austrian branch. A global attorney whose mandate does not reach Austria does not go on the Austrian register.
Otherwise, section 12 paragraph 4 applies the Austrian rules on applications, signatures, submissions, entries and publications by analogy — except where the foreign law compels a departure. In other words the branch is not a lighter regime; it is the same regime, applied to a company that is not Austrian.
How the Two Are Taxed
The trigger sits in § 1 Abs 2 KStG: a corporation is unlimitedly liable to Austrian corporate income tax if either its place of management or its seat is in Austria — and that liability then extends to all domestic and foreign income. The two limbs are alternatives, not cumulative conditions.
An Austrian subsidiary has its seat here by definition, so it is unlimitedly liable and taxed on worldwide income at the corporate rate of 23 per cent, with a minimum corporate income tax of EUR 500 a year whether or not it profits.
A foreign company with an Austrian branch, managed from abroad, has neither its seat nor its management here, and is therefore normally limited-liable — taxed in Austria on Austrian-source income only. What creates the taxable presence is the Betriebsstätte, which § 29 Abs 1 BAO defines as any fixed local facility or installation serving the carrying on of a business. A branch with premises and staff is one.
Two cautions belong here rather than in a footnote. First, the management limb bites: a company incorporated abroad but actually run from Vienna can be unlimitedly liable in Austria whatever its register says. Second, a double-tax treaty sits on top of the domestic rules and allocates taxing rights between the two states — its definition of a permanent establishment is not identical to § 29 BAO and can produce a different answer. Neither structure should be chosen on a tax assumption that has not been modelled on the actual facts.
Which One Fits Which Situation
A branch tends to fit a company testing the market with a small representative operation, a business whose Austrian activity is an extension of a single European contract, or a regulated entity whose home licence is being passported and where the supervisor expects to see the same legal person operating here.
A subsidiary tends to fit a business that will employ people, sign a lease, take on Austrian customers directly, or apply for an Austrian trade or financial licence. It also fits where the parent is not comfortable putting its own balance sheet behind an untested market, and where a local partner is to hold shares — which a branch cannot accommodate at all, because there are no shares.
One practical point is worth stating because it is rarely mentioned: a subsidiary can be sold. A branch cannot, other than by selling the business out of it as a set of assets. Where there is any prospect of the Austrian operation being disposed of, or of investment coming into it, the company is the structure that permits it.
When Neither Is the Answer
Both forms create a registered, filing, taxable presence in Austria. Some activities do not need one.
Selling to Austrian customers from abroad, with no fixed facility here, does not by itself require a branch or a company — though it can require an Austrian VAT registration, which is a separate obligation with its own trigger and is not evidence that a branch is needed. Employing one remote worker in Austria likewise raises payroll and social-insurance duties without necessarily creating either structure.
The mistake in the other direction is more expensive: opening a branch, or forming a company, in order to obtain something that does not follow from it. Neither form produces a residence permit for its owner, and neither guarantees an Austrian bank account — accounts are opened on the bank's own compliance assessment, not on the register entry.
Frequently Asked Questions
What is the difference between a branch and a subsidiary in Austria?
A subsidiary is a new Austrian company with its own legal personality — usually a GmbH — whose shares your company holds. A branch is not a new company at all: under § 12 UGB the foreign entity itself is entered in the Firmenbuch once it maintains an Austrian branch. The register entry is about your existing company, which means its liability, its assets and its legal identity extend to whatever the branch does.
Does an Austrian branch need share capital?
No. A branch has no share capital because it is not a company — there is nothing to capitalise. A subsidiary in the form of a GmbH needs EUR 10,000 of share capital with EUR 5,000 paid in cash before it can be registered. That difference is the most common reason a branch is chosen, and it is also the reason it offers no liability protection.
Is a branch cheaper than a subsidiary?
At registration, usually. Over time, not reliably. A branch avoids the share capital and the notarial deed, but § 12 Abs 2 UGB requires the existence of the foreign entity to be proven on application, which means authenticated and translated documents from the home register, and § 12 Abs 4 applies Austrian filing and publication rules by analogy. Where the home jurisdiction's paperwork is slow or its documents need legalisation, the branch can cost more to open than the company it was meant to be cheaper than.
Which one pays less Austrian tax?
Neither, as a rule. A corporation is unlimitedly liable to Austrian corporate income tax if its place of management or its seat is in Austria, and then on worldwide income. A foreign company operating through an Austrian branch and managed from abroad is normally taxed here only on its Austrian-source income, but the branch is a permanent establishment and its profits are Austrian-source. Treat the tax outcome as something to model on the facts with advisers in both countries, not as a reason to pick one form over the other.
Can a branch be converted into a subsidiary later?
There is no single act that converts one into the other, because they are different things: closing a branch is a register deletion, and starting a subsidiary is a formation. In practice the company is formed, the business is moved across, and the branch entry is removed. Moving the business is a transaction with its own tax and employment consequences on both sides and needs to be planned before the branch is opened, not after.