Background

Due to social fraud and the use of dummy companies in the construction industry, the public authorities lose a significant amount of annual taxes and social security contributions.

Dummy companies serve as a registration and billing vehicle. They register both persons actually employed and persons without actual employment with the social security authorities or the tax authorities. In this way, members of the latter, in particular, can obtain de facto comprehensive insurance cover. For persons who are actually employed, the real contracting party or employer is not usually disclosed.

New Legislation

To counter this problem, which has increased in recent years, a law to combat social fraud came into force in Austria on 1 January 2016.

Through the new Act, cooperation and information-sharing between relevant institutions will be promoted.

Furthermore, a set of parameters to determine the status of a dummy company has been created.

Once a company has been identified as a dummy company, the contracting party, in addition to the company, will become responsible for the payment of employees carrying out the contract. The former will be liable both as guarantor and payer, if it knew or should have known at the time the contract was executed that it was contracting with a dummy company.

In addition, dummy companies will now be registered on the website of the Finance Ministry. This web page serves as a source of information for companies, and is intended to publicise the above-mentioned potential liabilities. Currently there are a total of 12 dummy companies registered on the Finance Ministry website, including 7 located in Vienna.

Under existing companies legislation, all companies are required to be registered in the Commercial Register. If a legal entity is deemed to be a dummy company, this must now also be recorded on the Register.