The system of value added tax in Austria in general
What is subject to VAT? Who has to invoice VAT? ➢ Tax liability
Which tax rates exist and for which services are they applicable? ➢ Amount of VAT
What is input tax, how does input tax deduction work? ➢ Deduction of input tax
Who qualifies as a small business, what is standard taxation and when does it make sense? ➢ Small business regime & Application for standard taxation
What does the VAT number serve for and how can I obtain it? ➢ VAT number
When, how and where do I have to file a return? ➢ Preliminary VAT return and annual VAT return
What does an invoice have to contain to be eligible for input tax deduction? ➢ Proper invoice
Who is subject to VAT? Who must invoice VAT?
According to Austrian tax law, entrepreneurs must pay value-added tax (VAT) on all supplies and services that they provide in Austria for consideration as part of their business.
Artists who are self-employed and invoice fees or art objects are considered entrepreneurs and are therefore, in principle, also subject to VAT.
Amount of VAT
Which tax rates exist and for which goods and services are they applied?
The standard VAT tax rate in Austria is 20%.
In addition, there is a preferential tax rate of 10%, which is applied to food, rent and books, among other things. Non-profit associations may also apply the preferential tax rate of 10% to income that is not subject to preferential taxation.
As of 1.1.2016, dThe VAT rate for artistic activities is 13 %. (previously 10%).
It is important to note here that artists are not automatically always allowed to charge 13% VAT, but that different tax rates may apply depending on the nature of their activities.
A choreographer issues an invoice for a choreography she has written. This being an artistic activity, she may charge 13% VAT. In addition, she gives weekly dance classes in a dance studio. Since teaching is not an artistic activity, she must charge 20% VAT.
Input tax deduction
What is input tax, how does input tax deduction work?
The intrinsic aim of value added tax is to burden only the final consumer. Therefore, business operators have the possibility of being refunded by the tax office for VAT which they paid to other business operators as “input tax”.
This means that when businesses buy goods or services, they have to pay VAT, but can offset input tax paid against VAT they have to pay for their own activities when declaring VAT. Depending on whether the VAT payable or the deductible input tax is higher, this will result in a debit or a credit.
Input tax deduction is allowed only for purchases made by business operators for business purposes. If a painter who is subject to VAT buys a work desk for her studio, she can deduct the input tax included in the amount. If she buys a dining table for her private home, input tax is not deductible.
Example for input tax calculation
A musician gives a performance in January, his fee is EUR 500. From teaching activities he has earned EUR 800 net that month:
|Fee performance||EUR 500|
|13 % VAT||EUR 65|
|Income teaching||EUR 800|
|20% VAT||EUR 160|
His expenses in January were as follows:
|Net rent||EUR 400|
|+ 20% VAT||EUR 80|
|Graphic designer fee||EUR 300|
|+ 20% VAT ||EUR 60|
|Printing costs for a folder||EUR 80|
|+ 20% VAT||EUR 16|
Calculation for the tax office:
|VAT received: (65 + 160)||EUR 225|
|Deductible input tax: (80 + 60 + 16)||EUR 156|
|VAT due to tax office||EUR 69|
Small business regime & Application for standard taxation
Who is considered a small business, when does standard taxation make sense?
If the annual net turnover of an entrepreneur is less than 35,000 euros per year, the so-called small business regulation applies (§ 6 Abs 1 Z(1) 27 UstG), which means that no VAT has to be invoiced. In return, no input tax deduction can be claimed for business expenses (so-called non-genuine VAT exemption). Small entrepreneurs must make a note to this effect on their fee invoices, e.g. "Pursuant to § 6 Abs 1 Z(1) 27 UstG this amount does not include VAT".
There is a margin of tolerance for the limit of 35,000 euros annual turnover: it may be exceeded once in five years by a maximum of 15% (turnover 34,500 euros net).
Net turnover in this context means that the sales tax that would be incurred for the activities can be fictitiously added. If only artistic activities are performed, with a tax rate of 13%, the real limit of revenues is 35,000 + 13%, i.e. 39,550 euros.
With small businesses being VAT-exempt, they are not entitled to deducting input tax. However, you may voluntarily subject yourself to VAT taxation by filing an application for standard taxation. This entitles you to deduct input tax.
If you have decided to opt for voluntary VAT liability, you are bound for five years. After the end of this period, you may again enjoy tax exemption for small business. For this purpose, you need to explicitly revoke your application for standard taxation. Revocations must be made by the end of January for the year they are to apply to!
What does the VAT number serve for and how can I obtain it?
Entrepreneurs who are liable to VAT are assigned a VAT identification number (UID number) by the tax office. By stating the UID number, an entrepreneur identifies himself or herself to business partners as liable to pay VAT. This is particularly important when cross-border deliveries or services are made to other companies in the EU. The UID number indicates to the foreign (EU) business partner that the transaction is between entrepreneurs. (For more information, see the chapter on VAT in foreign transactions).
As a rule, small entrepreneurs do not have a VAT number, but must obtain one if they need it for business relations with entrepreneurs in other EU countries.
The UID number is issued by the tax office responsible for levying VAT (i.e. the tax office at the place of residence or business). If the UID number is not issued by the competent tax office ex officio upon commencement of the activity, it must be applied for using form U15 - VAT identification number - application for allocation.
Preliminary VAT return and annual VAT return
When, how and where do I need to hand it in?
Preliminary VAT return
Depending on the amount of turnover in the previous year, you need to send in a preliminary VAT return (Umsatzsteuer-Voranmeldung, UVA) either monthly or quarterly to the tax office.
If your turnover in the previous year was up to EUR 100,000, the preliminary VAT return is due on a quarterly basis, payments must be made by certain cut-off dates, i.e. 15 May for the period January to March, 16 August for the period April to June, 15 November for the period July to September, and 15 February for the period October to December. Alternatively, the preliminary VAT return may be filed monthly, again if your turnover in the previous year was up to EUR 100,000.
If your turnover in the previous year was over EUR 100,000 you need to send the preliminary VAT return at any rate on a monthly basis, payments in this case must be made by the 15th day of the second following month, i.e. VAT for January needs to be declared and paid by 15 March at the latest.
Small business operators – even if they have applied for standard taxation – do not need to file preliminary VAT returns.
The VAT return must be filed with the competent tax office by 30 April of the following year (30 June via FinanzOnline).
VAT-exempt small businesses generally do not need to hand in an annual VAT tax return, unless VAT was payable during the calendar year (e.g. because of taxable intra-Community acquisitions).
The recapitulative statement must be submitted quarterly up to a turnover of 100,000 euros, at the end of the month following the end of the quarter (30.04, 31.07, 31.10, 31.01).
What does an invoice have to contain to be eligible for input tax deduction?
Business operators are obliged to issue an invoice for goods or services rendered. For the recipient of the invoice to be able to deduct input tax, an invoice or statement of fees must contain the following:
- Name and address of the service provider or supplier
- Name and address of the recipient
- Nature and scope of service provided and/or amount and specification of the goods supplied
- Date of performance and/or period during which the service was performed
- Remuneration or fee (=net amount)
- Tax rate and amount of tax
- Date of issue of invoice
- Serial invoice number
- VAT number of the service provider
- With invoices of more than EUR 10,000 also the VAT number of the recipient.
Invoices for petty amounts
With invoices up to a total amount of EUR 400 (including VAT), the name and address of the recipient and the itemisation of the tax amount may be dispensed with, it is sufficient to indicate the tax rate next to the gross amount.
Invoices which are made available by email or as web downloads equally entitle to input tax deduction. They need to contain an electronic signature.