July 28, 2010
Vienna, Austria
Austria has significant opportunity for anyone who wants to plant multiple flags.
As one of the world’s 12 richest countries, Austria’s 8.3 million people enjoy a very high standard of living with relatively low unemployment. I find the country to be as nice as Switzerland, but without the Swiss prices, and as efficient as Germany, but without the German socialism.
As a place to live, Austria gets very high marks from me. The country is exceedingly beautiful with some of the best mountains and skiing you could ever hope for. Vienna is great because it’s a major city, yet literally within a 20 minute drive you can be out in the country in the middle of nowhere.
It’s also a great place to base yourself as a PT; you can fly to just about anywhere in the world from Vienna on Austrian Airlines. If you travel frequently on the continent, Vienna is also THE hub for travel to all the smaller capitals and towns of Eastern Europe.
As for cost of living, Austria is quite reasonable. Property prices in Vienna and Salzburg are very moderate, often less than $3,500 per square meter (about $325 per square foot); a comfortable 2-bedroom apartment rents for less than $1,200/month.
As a place to plant a banking flag, Austria also gets very high marks. Austrian banks are based on the Swiss system of personalized, private banking. Until recently, the country had some of the world’s strictest banking privacy laws, perhaps even more black box than Switzerland was.
Today is a different story unfortunately. There is very little legitimate banking privacy left in the world… but this isn’t the reason that you want to bank overseas. Offshore banking isn’t about hiding money or keeping it a secret, it’s about diversifying your sovereign risk.
If you live in North or South America, for example, and you bank in Austria, your funds are safe from your government’s and court system’s interference. No three letter agency in your home country will be able to punch a few keys on a computer and lock you out of your account.
In this respect, I think Austria’s banking system will continue to maintain a high degree of procedural independence from foreign governments, therefore it is quite useful as a banking jurisdiction.
Recently, some of Austria’s largest financial institutions have come under fire for having too much exposure to the rocky debt situation in Eastern Europe– specifically in Hungary and Ukraine.
This is probably true for Austria’s largest banks. Many of the smaller boutique banks, however, have very little exposure to Eastern Europe, and their balance sheets are quite strong.
As a place to store gold, Austria also receives high marks. One of my favorite offshore gold storage locations, Das Safe, is located in Vienna. You don’t need to worry about transporting gold here, either; you can buy gold coins at just about any bank in town.
Planting a tax residency flag in Austria, however, is probably not a good idea. Residents are taxed on their worldwide income at a headline rate of up to 50%. Capital gains are taxed as ordinary income.
Austria does have double tax treaties with the United States, Canada, UK, Australia, and New Zealand; this means that, more than likely, if you paid income tax in Austria, you would not have to pay any additional income tax in your home country.
Fortunately, the Austrian government defines tax resident as any individual who spends more than six months per year in the country. This allows PTs or seasonal travelers the opportunity to spend half the year in Austria, then move somewhere else for six months without getting caught up in the tax net.
As a place to plant a citizenship flag, Austria may have some opportunity for you. The passport is among the best in the world, and the Austrian government has an economic citizenship program available for very high net worth investors who are willing to invest several million dollars in the country.
In some cases, it is also possible to declare residency and be naturalized in a total of six years; in this case, though, I would recommend Belgium over Austria because the duration is much shorter.
