Input VAT deduction

An entrepreneur is entitled to deduct input VAT where a delivery or other service in respect of which a proper invoice is available is carried out domestically on behalf of their company. Deliveries, other services and importing goods are deemed to be carried out on behalf of the company where these take place for the purposes of the company and where at least 10 per cent are used for business purposes.

For actual tax payers, whose turnover in the previous assessment period has not exceeded 2 million Euro – in this case turnover from the import of goods (import VAT) and from auxiliary business including business divestitures shall be excluded, an additional requirement for input VAT deduction is that payment has been made. The payment requirement for input VAT deduction does not apply where a transfer has been made of the amount of the total VAT due on the delivery or other service to the service provider’s tax account. There are special regulations for buildings.

Input VAT can also be deducted in the case of advance payments made (i.e. prior to the use of a service), when the advance payment is made and a proper invoice has been drawn up to this effect. Irrespective of the drawing up of an invoice, input taxes can be claimed where the other requirements are met, including in connection with imports from third countries (import VAT), intra-Community acquisitions (acquisition tax) or when transferring the tax liability to the recipient of the service.

Input VAT that accrues during the start-up phase of the business (i.e. prior to carrying out any transactions), can be claimed through the subsequent tax return (preliminary VAT return) at the tax office (e.g. for investments, drawing up of contract etc.).

In the case of business trips within Austria, input tax can be deducted and claimed on a pro rata basis from the flat-rate daily and overnight allowances.

No input tax deduction is possible for certain expenses. This is the case, for example, for advance travel servives, entertainment expenses and expenses in connection with cars, station wagons and motorcycles.

Legal bases

• Input VAT deduction:
  • section 12  of the Umsatzsteuergesetz (UStG)
  • Umsatzsteuerrichtlinien (→ BMF) Rz 1801 and following
• Transfer of VAT to service provider's tax account: section 215 paragraph 4 of the Bundesabgabenordnung (BAO)

In principle, the circumstances on the delivery date are crucial for the input VAT deduction. Where the relevant circumstances subsequently change, the enterprise has to correct the input VAT deduction.

The adjustment period for input tax for immoveable property (including expenses to be capitalised and the costs of major repairs) is 19 years. i.e. where, in the case of a property making up part of the fixed assets, the relevant circumstances change within the nineteen calendar years following the year of first use, a correction must be made for each year of the change in the amount of one twentieth of the tax deduction already received.

The input tax adjustment period for a subsequent transfer of ownership due to a claim for subsequent transfer in residential property – except for business premises – (including expenses to be capitalised and the costs of major repairs) is nine years. I.e. if a transfer of apartments (tax-exempt sale) is carried out by a non-profit building association, a change in the circumstances relevant for the deduction of input VAT occurs. For each year of the change, an adjustment amounting to one tenth of the input VAT deduction already claimed must be made.

Legal bases

• section 12 paragraphs 10 to 13 of the Umsatzsteuergesetz (UStG)
• Claim for subsequent transfer in residential property: section 15c of the Wohnungsgemeinnützigkeitsgesetz (WGG)

Domestic companies that purchase supplies or other services in other EU countries can reclaim the foreign input VAT invoiced under certain conditions. The application must be submitted by September 30 of the following year.

Applications for input VAT refunds from EU member states must be submitted in the country in which the company is based. Austrian companies must submit the applications via FinanzOnline, from where they are sent directly to the other member states. The decisions are then also transmitted electronically.