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The Austrian Offshore Advantage

Written by Subject: Economy - International

This week, I'm writing to you from the departure lounge of the Vienna International Airport.

I lived in Austria from 2003-2005. I returned not only to renew old friendships, but to see firsthand the latest developments in this small country, which only a century ago dominated much of Europe.

The airport has changed a great deal in the nearly 10 years since I left. It's expanded and made itself much more accessible to business travelers like me.

And Austria itself has changed too. Judging from what I've seen, the population is remarkably tolerant of cultural and political differences. Indeed, the most famous Austrian today appears to be a transvestite who calls herself Conchita Wurst.

But xenophobia is on the rise in Austria (as in much of Europe). The anti-immigration, rightwing Freedom Party (FPÖ) made big gains in the 2013 elections.

In recent years, immigrants, both legal and otherwise, have overwhelmed Austria. It's easy for citizens of EU countries to relocate to, and work in, the country. Thousands of people from the newest EU members – Romania and Bulgaria – now make their home here.

Yet with continuing illegal immigration from Russia, Libya, and other countries, this influx has imposed great strains on Austria's generous social services network. As a result, it's become harder for "outsiders" without EU passports to obtain residence visas.

In most cases, residence applications from outside the EU are subject to quotas. And to stay in Austria legally, you must eventually become proficient in German.

I left Austria in 2005, because I couldn't find a way to qualify for residence without spending a great deal of money in legal fees. But every time I return, there's a part of me that wishes I had stayed.

Mercer's, a major human resources consultancy, ranks Austria's historic capital of Vienna as the world's most livable city. As a former resident, I can attest to the fact that Vienna is an extraordinarily attractive place to live – and to visit.

On the evening I arrived last week, I walked from my hotel in the central district to the City Hall (Rathaus). Every summer evening, weather permitting, musical and theatrical productions are screened on an open-air video wall in front of this immense neo-Gothic building. Admission is free, and dozens of food stalls serve food and drinks. There's nothing like settling in for an opera screening, accompanied by Wiener Schnitzel and an Ottakringer beer.

If you qualify, after 10 years of permanent legal and uninterrupted residence, you can apply for Austrian citizenship and passport. You must demonstrate fluency in German; pass a test on Austria's history, constitution, and geography; have a clean criminal record in the country; and possess a "positive attitude" toward Austria.

Austria also has an accelerated citizenship option in its immigration law, although it's not a "program," as such. You may qualify for "instant" Austrian citizenship and passport by performing extraordinary achievements in the interest of Austria. If you're a famous scientist, opera singer, or sportsman and relocate to the country, you may qualify. But most of the handful of individuals awarded citizenship annually under this option make a hefty contribution to support or rehabilitate an Austrian cultural, religious, or historical facility or location – generally in the €2 million (US$2.7 million) range.

Booming Economy

Austria's official economic forecast predicts the nation's economy will grow only 2-3% in 2014. But in Vienna, business is booming. Of course, visiting this city in the midst of tourist season exaggerates the underlying economic activity. Even beyond the tourism-focused city center, the signs of growth are everywhere. Vienna recently extended its U-Bahn (subway) network. One route now extends northwest out to a new city being built from the ground up: Seestadt, or Lake City. Here, more than 10,000 new apartments are being built with an estimated 20,000 jobs created.

It makes sense to build on the city outskirts, as land and property in the center have become very expensive. A real estate magazine in my hotel room featured dozens of listings in the city center… with a starting price of €1.9 million. But prices are rising in the suburbs as well. A friend I met for dinner told me that the apartment he had purchased in 2005 about six miles outside the city center for €160,000 had nearly doubled in value.

Banking Options for Americans

Austria has also evolved into a sophisticated international banking center. While Austrian banks don't have as many foreign clients as Swiss banks, virtually every banking and brokerage service you can imagine is available. Banks in Austria offer similar services as those in Switzerland, but at a lower cost and, historically, with a somewhat lower profile.

Unfortunately, the vast majority of Austrian banks – and non-US banks in general – no longer deal with Americans. I wrote about the reasons for this exclusion here. During my visit to Austria, I met with the two banks in Vienna that I have confirmed will work with US clients. One of them does so with reluctance and requires a personal visit – although the minimum investment is as low as €1,000. The second bank works through a network of agents – including The Nestmann Group – but requires a minimum investment of $500,000.

But if you're simply looking for a place to store your valuables – precious metals, jewelry, etc. – there are opportunities to do so that are far more accessible to US clients. I met with two private vault services during my visit that offer affordable, secure, and (in one case) completely anonymous storage opportunities.

Little Austria has come a long way since the last Soviet soldiers pulled out in 1955. While it's hardly a tax haven, over the decades, it's become an extremely attractive place to live, invest, and do business. If you haven't been here, I highly recommend a visit… and while you're here, raise a Prost (toast) to this unique country.

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