Startup highlights from the government program 2025-2029

The new Austrian federal government (ÖVP, SPÖ, and NEOS) recently presented its government program for 2025–2029. Below, we have summarized the startup highlights of the planned tax changes. However, the extent to which these plans will actually be implemented remains to be seen (as some of them are also subject to budget constraints).

Relevant general changes

• Tax-free employee bonus

  • In recent years, the temporary option of tax-free payment of an employee bonus of up to EUR 3,000 has been introduced.

    • The option to pay a tax-free bonus for employees up to EUR 1,000 (without collective agreement) is now to be extended to the years 2025 and 2026 (a possible extension will be evaluated).

• Research bonus

  • In principle, the tax-free research premium (currently 14%) is a central instrument for R&D funding, which can be applied for both for in-house research and for contract research.

    • The research premium is to be safeguarded in its current form as an important location factor in order to give companies more planning security.

• Cross-border home office

  • Foreign employees who are directly employed by an Austrian startup can, under certain circumstances, establish a (home office) permanent establishment for income tax purposes abroad, thus leading to a proportional – albeit often low – tax liability abroad. Therefore, a preparatory analysis is essential. However, since the administrative burden of home office permanent establishments is disproportionate to the taxes levied and there is still no uniform regulation, there is an urgent need for action in this regard.

    • In this context, the new government intends to work at the international level (OECD, EU) to improve the framework conditions for cross-border home office work.

• Exit tax

  • For various reasons, a temporary stay abroad or a permanent relocation may occur (in relation to founders or employees, e.g., cross-border expansion of a startup, new professional priorities following an exit transaction at home or abroad, family reasons). This may give rise to questions related to exit taxation.

    • With regard to exit taxation, the new federal government is committed to a more effective approach. It remains to be seen what concrete measures are planned.

• Non-wage labor costs

  • By the middle of the government's term, non-wage labor costs are to be reduced – depending on economic and budgetary developments. The goal is then to provide further gradual relief exclusively within the framework of the "Family Burden Equalization Fund (FLAF)" (3.7%), while maintaining FLAF benefits.

    • It remains to be hoped that the targeted reduction in non-wage labor costs will be implemented quickly, as Austria currently has a significant locational disadvantage in this regard.

Startup-relevant changes

• Option to capitalize internally generated intangible assets

  • According to the Austrian Commercial Code (UGB), the capitalization of research and development costs for so-called intangible assets (e.g., patents, licenses, and the like) is prohibited. Thus, the costs are not spread over the expected useful life (but rather reduce the company's profit in full in the year in which they are incurred), even though development companies, for example, use the software they develop to generate income in subsequent years. Since startups in the tech sector in particular often do not generate any significant income in the first few years, this results in losses, which in many cases lead to negative equity and thus to balance sheet over-indebtedness.

    • In the future, there will be an option to capitalise internally generated intangible assets, and in this regard, consideration is also being given (through a balance sheet distribution ban or other appropriate measures)

• FlexCo development

  • For a long time, the GmbH (limited liability company) was predominant in the startup sector and clearly favored by investors. Since 2024, the flexible corporation (FlexCo) has also been available, which is in direct competition with the GmbH in terms of legal form and offers startups more flexibility. However, there are still issues that would contribute to a more practical design.

    • The new government has therefore decided to evaluate FlexCo and, if necessary, to further develop it accordingly.

• Employee participation programs

  • Incentivizing key employees is a key issue for startups. In this context, employees can be granted either virtual shares or real shares. Especially with "real" shares (or participation rights), the current tax framework is not yet entirely optimal. In addition to workarounds to avoid "dry income" (e.g., agreeing on negative liquidation preferences), a new employee participation regime (Section 67a of the Income Tax Act) now also exists. However, the new employee participation regime still has room for improvement in terms of optimal implementation (e.g., a large number of application requirements; excessively long retention periods; a permanent option to switch from a virtual to a real participation program, etc.).

    • In this context, the government's program aims to further enhance the attractiveness of employee participation programs. It remains to be hoped that the right measures will be taken.

Conclusion:

The new federal government has ambitious plans and has not lost sight of the startup sector. It remains to be hoped that these announcements will now be quickly followed by action to further enhance the startup ecosystem's appeal.

This article was written by David Gloser (Partner, Tax Advisor and Auditor) and Christoph Puchner (Partner and Tax Advisor) of ECOVIS Austria. ECOVIS Austria is one of Austria's leading tax consulting firms in the startup sector. www.ecovis.at