Foreign direct investment (FDI) in Austria

FDI in Figures

Austria has traditionally attracted a significant amount of FDI owing to its geographical location as an intersection of Eastern and Western Europe. According to UNCTAD's 2022 World Investment Report, FDI in Austria returned positive in 2021, at USD 5.8 billion, after a negative flow of USD 15 billion one year earlier. FDI stock reached USD 198.3 billion in the same year.
Germany, Russia, and Switzerland account for more than half of Austria's FDI stock. The U.S., Italy, the Netherlands and the UAE are other major investors. Investments are mainly oriented towards professional, technical and scientific activities, finance and insurance, trade, real estate, chemistry and pharmacy (data National Bank of Austria). According to the latest figures from OECD, in the first half of 2022 FDI inflows reached USD 2.3 billion.

Austria's strengths are its stable economy, its location at the centre of Europe and its skilled and highly productive workforce. In order to encourage foreign investment, Austria provides welcoming conditions for foreign companies that want to invest in capital-intensive industries and in research and development, for which considerable tax breaks are available. Financial incentives and business subsidies are provided by Austrian federal, state, and local governments to promote investments and include tax incentives, preferential loans, loan guarantees, and grants. Furthermore, the 2022 tax reform foresees a new 10-15% eco-investment tax allowance for purchasing new commodities or business assets that have a positive ecological impact and a life span of at least four years. In 2020 the Austrian Parliament adopted a new FDI screening act (Investitionskontrollgesetz, "ICA"), following the EU Regulation (2019/452) setting a new framework for foreign investment screening. The law introduces a review of foreign investment in business activities including R&D of pharmaceuticals, vaccines, medical devices and personal protective equipment and critical infrastructure in the healthcare sector. The threshold at which government approval of the transaction is required has been lowered to 10% foreign ownership for sensitive sectors. Austria ranks 63th out of 82 countries in the Economist Business Environment ranking. The country stands at 20th place in the Foreign Direct Investment Confidence Index 2022,losing one position compared to one year earlier.

What to consider if you invest in Austria

Strong Points

Advantages for FDI in Austria:

• Austria ranks 27th out of 190 economies with regard to ease of doing business in the World Bank's Doing Business 2020 ranking
• Well-developed infrastructure
• Skilled and competent work force and high productivity
• Austria also has a significant pharmaceutical industry, thus developing a focus of biotechnological skills and attracting the big companies of this sector
• Good quality of life (Vienna is in first position in the world ranking established by Mercer)
• Good regional (European Union) and international integration. Austria benefits in particular from its strategic geographical location between western, central and eastern Europe
• Substantial current account surplus
• Austria is a desirable tourist destination
• High level of public investment in R&D
• Political stability and personal security are especially strong in Austria

Weak Points

Austria’s weak points for FDI are:

• Rigid labour practices and complex regulations
• A lack of risk taking in capital finance
• Restrictive immigration laws
• Trade dependence on Germany
• The country is strongly dependent on central and eastern Europe, where numerous investments have been made, which has weakened the banking sector
• Small domestic market

Government Measures to Motivate or Restrict FDI

Export incentives, political stability and low telecommunication costs make the Austrian business climate favourable. Generally, the Austrian government favours FDI targeting the high-tech sector. Federal, state, and local governments provide investment incentives at the same conditions to local and foreign investors, including tax incentives, preferential loans, loan guarantees, and grants. Tax incentives are available for projects in economically underdeveloped and rural areas, for job-creation and for investment in R&D. The governmental institution that provides financial incentives for businesses is the Wirtschaftsservice (AWS). Foreign investors may also claim government support measures designed for companies affected by the COVID-19 epidemic.
For further information, refer to the portal InvestInAustria.

Bilateral investment conventions signed by Austria

Visit the UNCTAD website.