An Austrian sole proprietorship cannot be turned into a GmbH by conversion — there is no such act in Austrian law. What exists instead is the Einbringung under Article III of the Umgründungssteuergesetz: the business is contributed into a company, and where the statutory conditions hold, the transfer is not taxed as a sale. Three conditions carry most of the weight. The business must have a positive fair value on its own. The transaction must be documented by a written contribution agreement and a contribution balance sheet. And it must be filed or reported within nine months of the contribution date. Miss the last one and the relief does not disappear, but the date you were relying on does.
The Short Answer
The Einbringung is the route Austrian tax law provides for putting an existing business inside a corporation without realising its hidden reserves. It is a tax-law mechanism sitting on top of an ordinary company-law act: the GmbH receives the business either as a contribution in kind on formation, or as a contribution in kind on a capital increase.
| Requirement | What it means in practice | Source |
|---|---|---|
| Written contribution agreement | An Einbringungsvertrag, also called a Sacheinlagevertrag. An oral arrangement or a board minute is not enough. | § 12 Abs 1 |
| Contribution balance sheet | An Einbringungsbilanz prepared under § 15. | § 12 Abs 1 |
| Positive fair value | The assets must be worth more than nothing on their own, at the contribution date and at the latest on the signing date. | § 12 Abs 1 |
| Qualifying assets | A business, part of a business, a partnership interest, or a shareholding of at least a quarter. | § 12 Abs 2 |
| Nine-month filing or report | Firmenbuch application or notification to the receiving company's tax office. | § 13 Abs 1 |
What May Be Contributed
Article III UmgrStG does not accept any asset a founder cares to move. Section 12 paragraph 2 lists three classes and nothing else counts.
The first is businesses and parts of businesses producing income under § 2 Abs 3 Z 1 to 3 of the Einkommensteuergesetz — agriculture and forestry, independent professional work, and trade or commerce. The condition attached to it is easy to overlook: a balance sheet under § 4 Abs 1 EStG must exist for the whole of the contributor's business at the date chosen. A sole trader who accounts on a cash basis therefore has a preparatory step before the mechanism is even available.
The second is partnership interests, where a partnership balance sheet exists at the chosen date.
The third is shareholdings — but only where they amount to at least a quarter of the nominal capital, or where, alone or together with shares the receiving company already holds, they confer or extend a majority of the voting rights in the company whose shares are being moved.
For a sole trader the first class is the relevant one, and the practical question is whether what is being moved is a business rather than a collection of assets. A client list, a lease and a van may or may not amount to one. That judgment is made on the facts before the agreement is drafted, not afterwards.
The Business Must Be Worth Something
Section 12 paragraph 1 requires that the assets carry a positive fair value for themselves alone — für sich allein einen positiven Verkehrswert — at the contribution date, and in any event on the day the contribution agreement is concluded. Both dates matter, because a business that was solvent at the chosen year end and is not solvent by the time the deed is signed fails the test.
Where the figure is in doubt, the statute puts the burden on the contributor: the positive value must be proved by a reasoned report from an expert. In practice that means a valuation, and it means budgeting for one whenever the business carries significant debt or its worth rests on goodwill rather than on assets a balance sheet already shows.
Note what the test is not. It is not a profitability test. A business that made a loss last year can still have a positive fair value, and a business that is trading profitably can fail if it is carrying more liabilities than the assets and goodwill support.
The Nine-Month Deadline
The contribution date — the Einbringungsstichtag — is the day the assets are to pass with tax effect, and section 13 paragraph 1 allows it to be set at a point before the contribution agreement is signed. That backdating is what makes the mechanism useful: a business can move into a company with effect from the previous financial year end while the documents are executed in the following spring.
The condition attached is a hard one. Within nine months after the end of the contribution date, computed under § 108 BAO, one of two things must happen:
- the contribution is filed for entry in the Firmenbuch, as a contribution in kind on formation or on a capital increase; or
- in the remaining cases, the contribution is reported to the tax office responsible for collecting the receiving company's corporate income tax.
Filing or reporting late does not void the transaction. It moves the date: the day the contribution agreement was concluded becomes the substitute date, the Ersatzstichtag. That substitute date has to be reported to the same tax office within nine months of its own end, and the § 12 Abs 1 conditions — including the positive value — must be satisfied on it. A backdating that was worth doing for a reason tied to a particular year end is generally worth nothing once it has slipped forward.
One further constraint sits in section 13 paragraph 2: the date chosen must be one on which the assets were actually attributable to the contributor. A date before the business was acquired is not available.
What the Transfer Costs in Tax
Section 22 UmgrStG settles three transaction taxes, and it settles them differently.
VAT: none. Contributions under § 12 are not taxable supplies within the Umsatzsteuergesetz, and the receiving company steps directly into the contributor's VAT position. Nothing is invoiced and no input-tax adjustment follows from the transfer itself.
The contract fee: exempt, conditionally. Contributions and the consideration granted for them are exempt from the fee under § 33 TP 21 of the Gebührengesetz 1957 — but only where the assets being transferred have belonged to the contributor for more than two years on the day the agreement is signed. A business founded eighteen months ago does not meet it. This is the condition most often missed, because the exemption is usually described without it.
Real-estate transfer tax: charged. Where land passes as part of the business, Grunderwerbsteuer is computed under § 4 in conjunction with § 7 of the Grunderwerbsteuergesetz 1987. The contribution does not exempt it, and a business whose value sits largely in a property should be costed on that basis before the structure is chosen.
On the income-tax side, section 14 makes the effect retrospective: for businesses and parts of businesses the contributor's financial year ends on the contribution date, and the contributor's income for the contributed assets is computed as if the transfer had taken place at the end of that day.
Why the New-Business Fee Relief May Not Apply
Austria's Neugründungs-Förderungsgesetz waives court fees, federal stamp duties and administrative charges for a genuine new business, and waives certain wage-based employer contributions for the month of formation and the following 35 calendar months. Founders converting an existing business routinely assume it covers the GmbH they are about to register.
It may not. The relief requires the creation of an operating structure that did not previously exist, and it is expressly not available for a mere change of legal form or a transfer of ownership. A sole proprietorship that has been trading for years and is now being placed inside a company is, on its face, closer to the second description than the first. Whether a particular case qualifies is a question for the NeuFö2 declaration and the authority receiving it — the point here is that the exemption should be treated as an open question in a conversion, not as a given, and the fee budget should assume it does not apply until it is confirmed.
When Converting Is the Wrong Move
The mechanism works. That does not make it the right answer, and there are three situations where it is not.
The business is too small to carry a company. A GmbH files annual accounts every year, dormant or trading, and pays a minimum corporate income tax of EUR 500 a year regardless of profit. A sole proprietorship earning below the level at which the corporate rate beats the personal scale is simply buying compliance. Run the arithmetic on actual profit before assuming the company saves tax.
The value sits in the founder, not the business. Where the earnings come from one person's personal work and would stop if that person did, there may be little to contribute that has a fair value independent of them — and the positive-value test is applied to the assets, not to the person's earning capacity.
The two-year clock has not run. If the business is younger than two years on the signing date, the § 33 TP 21 fee exemption is unavailable. Where the transaction is otherwise unhurried, waiting can be cheaper than proceeding.
There is also a straightforward alternative that is sometimes better: form the company and start trading through it, leaving the old business to wind down on its own terms. It forfeits the retrospective effect and the continuity of the balance sheet, and it costs nothing in valuation fees.
Frequently Asked Questions
Can I convert my Austrian sole proprietorship into a GmbH?
Not by conversion in the literal sense — Austrian law has no act that turns a sole trader into a company. What it has is the Einbringung under Article III of the Umgründungssteuergesetz: you form or use a GmbH, then contribute the business into it under a written contribution agreement and a contribution balance sheet. Done inside the statutory conditions, the transfer is not treated as a sale and no gain is realised on the hidden reserves.
How long do I have to complete an Einbringung?
Nine months from the end of the contribution date. Within that window the transaction must either be filed for entry in the Firmenbuch, as a contribution in kind on formation or on a capital increase, or reported to the tax office responsible for the receiving company's corporate income tax. Miss the window and the contribution is not void, but the date moves to the day the agreement was signed, and that substitute date has to be reported within nine months of its own end.
Can the transfer be backdated?
Yes, and that is the point of the mechanism. The contribution date may be set at a point before the agreement is signed, so a business can be moved into a company with effect from, say, the previous 31 December while the paperwork is executed months later. The nine-month deadline is the price of that backdating, and the date chosen must be one on which the assets were actually attributable to you.
Does the business have to be profitable?
It does not have to be profitable, but it does have to be worth something. The statute requires the assets to carry a positive fair value on their own, at the contribution date and in any case on the day the agreement is signed. Where that is in doubt, the contributor has to prove the figure with a reasoned expert's report. A business whose liabilities exceed its assets cannot be contributed under this route as it stands.
Will I pay VAT on moving the business into the company?
No. Contributions under § 12 UmgrStG are not taxable supplies for VAT, and the receiving company steps directly into your VAT position. The contract fee under § 33 TP 21 of the Gebührengesetz is also waived, but only where the assets transferred have belonged to you for more than two years on the day the agreement is signed. If land forms part of the business, real-estate transfer tax is charged and the contribution does not exempt it.