Substance Requirements for Non-Resident Directors in Austria and Germany
A non-resident individual can be the sole director of an Austrian GmbH or a German GmbH without ever relocating — neither the Austrian GmbHG nor the German GmbHG imposes a residency or nationality requirement on managing directors. The real risk is not the register entry but tax and labour-law "substance": if management is actually exercised from abroad, Austrian or German tax authorities can treat the company as locally resident, or a foreign authority can assert residence or a permanent establishment where none was intended. Avoiding that outcome requires documented local presence, not just a local address on letterhead.
1. Legal Form and Director Residency Rules Compared
Both countries use the limited-liability company as the default vehicle for foreign founders: the GmbH in Austria and the GmbH (or its low-capital variant, the Unternehmergesellschaft) in Germany.
| Feature | Austria (GmbH) | Germany (GmbH / UG) |
|---|---|---|
| Governing statute | GmbHG (Austria) | GmbHG (Germany) |
| Minimum share capital | EUR 10,000; at least EUR 5,000 payable in cash on incorporation | EUR 25,000 (GmbH); EUR 1 for the UG, which must reserve 25% of annual profit until EUR 25,000 is reached |
| Director nationality/residence | No statutory requirement; non-EU directors may need a residence/work permit only if they actually work in Austria | No statutory requirement; same practical caveat applies |
| Registered office | Must provide a domestic business address in Austria (Geschäftsanschrift) | Must provide a domestic business address in Germany (Geschäftsanschrift) |
The exposure instead sits in tax and social-security rules, covered below.
2. The "Substance" Problem: Why Residency on Paper Is Not Enough
Under OECD Model Tax Convention Art. 4(3) (2017), a dual-residence tie-breaker for companies is determined by mutual agreement of the competent authorities, taking into account factors such as the place of effective management; many older treaties still use a pure “place of effective management” test. Germany codifies a parallel domestic test in the Abgabenordnung §10 (Geschäftsleitung) and the permanent-establishment rule in §12 AO. Austria applies the equivalent "Ort der Geschäftsleitung" concept under the Bundesabgabenordnung (BAO). If the authorities establish that effective management is in their jurisdiction, they can tax the company there; if management is exercised from the director's home state, that state may assert residence or a permanent establishment — risking competing claims.
3. Registration Authority and Practical Incorporation Steps
Incorporation runs through a notary in both countries, followed by entry in the commercial register.
- Austria: notarial deed of the articles, capital confirmation by the bank, then filing with the Firmenbuch. Registration is often completed within a few weeks once documents are notarized and capital is confirmed.
- Germany: notarial deed, capital confirmation, filing with the local Handelsregister. Registration is commonly completed within a few weeks after notarization, depending on the court's workload.
A non-resident director will usually need to present identity documents and, where documents are executed abroad, have them apostilled or legalized depending on the country of issue before the notary will proceed. Online notarization is available for certain German GmbH formations, but scope and practice vary — confirm current practice with the notary before travel is booked.
4. Building Documented Local Substance
To withstand a place-of-effective-management or permanent-establishment challenge, founders should be able to show, on paper, that management decisions genuinely happen locally:
- A registered business address with real activity, not a mailbox-only formation-agent address.
- A resident managing director, or at minimum a local authorized signatory (Prokurist).
- Board minutes that record meetings actually held in-country, with dates, location, and attendance.
- A local bank account used for operating transactions, not just capital deposit.
- Local payroll and social-security registration once the company has employees.
5. Cross-Border Director Liability and Reporting Duties
Ongoing compliance is similar in both jurisdictions: annual financial statements (filed with the Firmenbuch in Austria; publication via the Bundesanzeiger/Unternehmensregister in Germany), a corporate income tax return, VAT registration where turnover thresholds or cross-border supplies require it, and beneficial-ownership filings under Austria's wiEReG or Germany's Transparenzregister. Directors in both systems carry personal liability exposure for late filings, failure to file for insolvency in time, or mismanagement — this is not displaced by living abroad.
6. Social Security and Immigration Triggers for Non-Resident Directors
EU/EEA citizens can generally travel freely to attend board meetings, but performing actual work in Austria or Germany still triggers social-security coordination questions, typically resolved through an A1 certificate confirming which state's system applies. Non-EU directors who exercise real management functions in-country — rather than attending occasional meetings — may need a residence or work permit; occasional short visits for board meetings are usually treated differently from habitual on-site management, but the line is fact-specific and worth confirming with immigration counsel before a pattern of travel is set.
7. Choosing Between Austria and Germany for a Non-Resident Founder
| Factor | Austria | Germany |
|---|---|---|
| Minimum capital | EUR 10,000 | EUR 25,000, or EUR 1 for UG |
| Registration timeline | Often within a few weeks | Often within a few weeks |
| Notarization cost level | Moderate to higher, capital-linked notary fees | Moderate, statutory fee scale |
| Ongoing compliance burden | Firmenbuch filings, wiEReG, annual accounts | Handelsregister filings, Transparenzregister, annual accounts |
| Typical use case | Holding structures, regional HQ functions | Trading subsidiaries, startups (UG entry route) |
8. Common Structuring Mistakes That Attract Scrutiny
- Appointing a nominee local director with no real decision-making authority or paper trail.
- Using a registered address at a formation agent with no genuine business activity at that address.
- No local operating bank account, with all payments routed through a foreign account.
- Board resolutions signed abroad with no evidence that any deliberation occurred in-country.
FAQ
Can a non-EU citizen be the sole director of an Austrian or German GmbH without living there?
Yes, neither the Austrian nor German GmbH statute requires director residency; the exposure is tax and immigration-related, not corporate-law related.
Does a non-resident director create a permanent establishment for the company in Austria or Germany?
Not automatically. If management is habitually performed in a different state than the one claimed as the company's residence, that other state can assert residence or a permanent establishment. Many treaties now resolve dual-residence through competent-authority agreement under OECD Model Art. 4(3), with place of effective management as a key factor.
What local address requirements apply to a GmbH's registered office if the director lives abroad?
The registered office must provide a domestic business address in Austria or Germany suitable for service; a mailbox-only address with no activity undermines substance arguments even though it may satisfy the bare registration formality.
How much share capital must actually be paid in before registration in Austria compared to Germany?
Austria: at least EUR 5,000 cash of the EUR 10,000 minimum capital must be paid in before registration. Germany: for a GmbH, at least EUR 12,500 of the EUR 25,000 must be paid in cash before registration; for a UG, the EUR 1 must be fully paid in and 25% of annual profit reserved until EUR 25,000 is reached.
Do non-resident directors need a local work or residence permit to manage the company?
EU/EEA directors generally do not, though social-security coordination rules still apply when work is actually performed locally; non-EU directors exercising ongoing management functions in-country typically do need a permit, while occasional meeting attendance is usually treated more leniently.
Next Step
The right structure depends on the director's tax residence, the company's actual business activity, and where income will ultimately be generated — this article cannot substitute for that fact-specific analysis. Schedule a consultation so we can map your specific situation against Austrian and German substance requirements before you incorporate.
Sources
- ris.bka.gv.at
- gesetze-im-internet.de
- oecd.org
- justiz.gv.at
- handelsregister.de
- bundesanzeiger.de
- transparenzregister.de
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