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by WhyComboNadir
15 days ago
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re: #4 Maybe it’s easier if you grow up in the system and know how to navigate the written and unwritten rules, but as a dual Canadian-American who recently gained Austrian citizenship, the regulatory friction is absolutely real. I decided to launch a new venture through an Austrian GmbH. There are supposedly streamlined paths for local residents, but I had to go through the standard corporate pipeline. I spent three months fighting a bizarre catch-22 between my notary (who cost €3k+) and the bank. To open the account, I had to prove I deposited €10k in capital. But I couldn't make the deposit without an active bank account. On top of that, the bank's compliance team kept arbitrarily canceling my application due to "incorrect answers"... refusing to tell me what the errors actually were and forcing me to restart the entire process ab initio. I finally just gave up. I wrote off the €3,000 notary fee and €1,000 in registered office costs as a sunk cost, and incorporated a US LLC instead. It took under 10 minutes, no notary, fees of $25 since I did it myself, plus another 20 minutes to open the business bank account. There was no commercial reason to choose Austria; it was purely sentimental. My ancestors were entrepreneurs in Linz and Vienna, and I loved the idea of renewing that legacy. But the sheer weight of the bureaucracy managed to kill about 99% of the early-stage startup enthusiasm you normally rely on to get a new project off the ground. |
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It's a bizarre system that Switzerland uses too. I've done it twice. Unfortunately the German speaking world has a lot of rules that are trying to eliminate all risk for investors and employees. The GmbH/AG capital requirements are just the start.
The next fun thing you might have encountered, at least in Switzerland, are rules that literally say your company's assets can't fall below 50% of your initial capitalization. If it does you're supposed to raise funds or make more investment of your own private capital and this rule pierces the usual liability requirements. Even more fun: it turns out that this law isn't actually enforced and locals regularly ignore it. But bad accountants won't tell you that. They'll just inform you of the law when you do your yearly accounts.
Then you have wealth taxes that cover the valuation of a startup as if it were a cash position. So if you raise $100M in investor funding then whatever shares you have left over are considered to be liquid assets you can offload at will, and are wealth taxed as such. The fact that the shares don't trade in a liquid market is irrelevant to the tax authorities. In Zürich at least that got patched by the local tax office deciding that startup shares aren't counted for the wealth tax, but this just means you have to be able to convince the tax authority that your company is a startup. The way they determine this is more or less just the opinion of whoever at the tax office assesses your case. Does it sound "startuppy" enough?
Fixing this stuff isn't hard, but it never gets fixed because European politics is both quite stagnant and dominated by people who view hostility to business as a virtue signal. They don't want to fix it because they think businesses are sort of like oil fields. They just exist, lying around naturally, and the only question is how to maximally exploit them.