Austrian companies in need of capital often resort to bank loans in view of lacking adequate alterna-tives. In order to provide domestic companies with new and attractive options for equity financing, a more active risk capital market in Austria would be extremely helpful.
For a long time inter alia experts from AVCO (Austrian Private Equity and Venture Capital Organisation) are demanding a new venture capital fund law with the primary intent to create a legal framework meeting international standards, too. That would certainly also strengthen Austria as a business hub.
In accordance with the visions of AVCO inter alia the following would need to be implemented in Austria:
- a new financial instrument - the venture capital fund - to provide venture capital to companies;
- an improvement in the equity structure of Austrian companies;
- an active venture capital market to attract foreign companies;
- transparency and legal certainty for venture capital;
- access for companies to off-market risk capital;
- attractive legal and tax framework conditions; and
- strengthening of the Austrian capital market.
For this purpose, the venture capital fund would be structured as a special fund, thereby also providing investors with a cost-effective and transparent structure. This should also make it easier to make contributions and returns on a more flexible basis. In addition, specific and internationally common regulations for management companies for venture capital would need to be established.
The venture capital fund should obviously also be attractive from a tax perspective. The proposal provides for the following:
- Taxable income will be generated from capital in accordance with § 27 Income Tax Act, whereby the uniform tax rate of 27.5 % will be applied;
- Impairment losses on assets are tax deductible / reduce the capital gain;
- loss compensation is possible at the level of the venture capital fund;
- tax obligation for distribution of profits only if such are higher than the contributions; and
- priority repayment of the investors' funds, thereby corresponding to a private equity and venture capital model.
It remains to be seen whether the Austrian legislator will soon take up the constructive proposal of AVCO to provide domestic companies with an alternative to cover their capital needs, and to render Austria more attractive as a business hub, thereby strengthening the pre-stockmarket in Austria as well.