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 2024 World Investment Report, FDI to the country totalled only USD 4.6 billion in 2023, down from almost 9.3 billion one year earlier. Inward FDI stock reached USD 226.2 billion in the same year. Data from the National Bank of Austria show that Germany is by far the main investing country (28.3%), ahead of Russia (11.4%), Switzerland (8.3%), the U.S. (6.4%), Italy (6%), and the UAE (3.9%). Overall, the EU accounts for 50.8% of the total investment stock. Investments are mainly oriented towards professional, technical and scientific activities (60.1%), financial intermediation (10.4%), real estate (7.3%), trade (6.5%), chemicals, petroleum products, and pharmaceuticals (2.7%). According to the latest figures from OECD, in the first half of 2024, FDI inflows stood at USD 2.6 billion.

Austria's strengths in terms of FDI attraction include its stable economy, its location at the centre of Europe and its skilled and highly productive workforce. Austria enjoys political stability, well-developed healthcare, telecommunications, and energy infrastructure, and a high standard of living. However, with over 50% of its GDP coming from exports, Austria's economy is strongly interconnected with other EU economies, particularly Germany, its largest trading partner. 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. Austria does not discriminate against foreign investors, though businesses must comply with numerous local regulations. While Austrian participation in ownership or management is not required, at least one manager must meet residency and legal requirements. National security restrictions apply to investments in critical sectors, including infrastructure, technology, sensitive information, and media plurality. Government approval is required for foreign acquisitions of a 25% or higher stake, reduced to 10% for sensitive sectors such as military technology, critical energy, digital infrastructure, and medical R&D. Additional reviews apply if stakes exceed 25% or 50%, with the screening process typically lasting two months. Overall, Austria has a good business climate, and it ranks 20th among the 180 economies on the latest Corruption Perception Index and 33rd out of 184 countries on the Index of Economic Freedom.

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.