Value Added Tax liability

An enterprise within the meaning of Value Added Tax (VAT) exists if a commercial or professional activity is carried out independently. Commercial or professional activity is any sustainable activity for the purpose of generating revenue, even if there is no intention of making a profit. In addition to traders, this also includes journalists, lecturers and landlords, for example.

Accordingly, an entrepreneur or enterprise can be any natural person or any business entity that provides services on a sustainable, independent basis in return for payment and appears to the outside world.

Legal basis

Section 2 Umsatzsteuergesetz (UStG)

Not only deliveries of goods and services are subject to Value Added Tax (VAT). It also applies to self-supply and imports of goods from third countries or the EU.

More specifically, the following circumstances exist:

• Supply of goods (an enterprise transfers the power to dispose of an item to a customer) and other services (e.g. services provided by freelancers, craftsmen's services, but also renting, leasing and licensing) that are carried out in Austria in return for payment as part of an enterprise
• Self-supply
• the import of goods from a third country into the country
• the intra-community acquisition

In addition to the above-mentioned circumstances, a tax liability may also arise due to incorrect or unauthorised billing.

The tax base for Value Added Tax is the remuneration or, in the case of self-supply, the purchase price or the cost price.

Legal basis

• Sections 1, 3a Umsatzsteuergesetz (UStG)
• Article 1 Umsatzsteuergesetz (UStG) – Anhang Binnenmarkt

The tax base for Value Added Tax on supply of goods and services is the remuneration. Remuneration is everything that the client has to pay (including voluntary payments) in order to receive the delivery or other service provided. This also includes service charges (expenses) passed on to the customer, such as packaging, transport and postage costs, service surcharges, taxes (e.g. consumption tax, advertising tax), which are made in own name.

In practice, the Value Added Tax therefore depends on the agreed purchase price or fee. Only in certain cases is “the normal value” to be used as the tax base.

Actual and target taxation

For companies that do not exceed the accounting threshold, the Value Added Tax liability arises at the end of the month in which the payment is received (taxation according to the remuneration received). This system is known as actual taxation and has the advantage that Value Added Tax does not have to be paid on outstanding receivables.

Actual taxation is also always permitted for turnover from freelance professions, regardless of the amount of turnover. In the case of turnover from other activities, such as renting, the company can only apply it if the turnover limit of 110,000 Euro is not exceeded.

In contrast, for companies that are required to keep accounts, the Value Added Tax liability arises at the end of the calendar month in which the delivery or other service was carried out; the time of receipt of payment is irrelevant (taxation according to agreed remuneration). In the case of so-called target taxation, Value Added Tax is therefore payable on outstanding amounts. Only advance payments are an exception. If the bill is not issued in the same month but at a later date, the date on which the tax liability arises is postponed by a maximum of one month.

Advance payments

If a company receives an advance payment for a service to be provided in the future, the amount of money received is already subject to Value Added Tax for the month in which it is received.

If the payer is a company, an invoice must be issued in which the Value Added Tax is shown separately. If the other legal requirements are met, this entitles the customer to deduct input VAT.