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?
Pursuant to Austrian tax law, business operators must pay value added tax (VAT) on all goods and services supplied in Austria against compensation as part of their business operations.
Artists who are self-employed and issue invoices are considered business operators and therefore generally subject to VAT.
Amount of VAT
Which tax rates exist and for which goods and services are they applied?
The standard tax rate in Austria is 20%.
Moreover, there is a reduced tax rate of 10% which is applicable, amongst others, to food, rent and books. As of 1 January 2016, the VAT rate for artistic activities is 13% (previously 10%).
It is important to note that artists cannot always charge 13% VAT automatically, but that different tax rates apply depending on their activity.
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|
|+ 10% VAT||EUR 40|
|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: (40 + 60 + 16)||EUR 116|
|VAT due to tax office||EUR 109|
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 a business operators is below EUR 30,000 a year, the small business regime (sec 6(1) 29 VAT Act) is applicable, according to which VAT need not be invoiced. In return, input tax may not be deducted for operating expenses (so-called non-genuine VAT-exemption).
Small business operators must include a note on their invoices stating that e.g. “pursuant to sec 6 (1) 27 VAT Act, this amount does not contain VAT”.
A tolerance applies to the EUR 30,000 annual turnover threshold: It may be exceeded once in five years by a maximum of 15% (net turnover of EUR 34,500).
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?
Business operators who are subject to VAT taxation are assigned a VAT identification (UID) number by the tax office. By stating the VAT number, the business operator indicates vis-à-vis business partners that he is subject to VAT. This is important in particular, if goods or services are supplied cross-border to other companies in the European Union. By stating the VAT number, the foreign (EU) business partner is informed that the transaction is one between business operators. (For more information see chapter VAT with international business transactions).
Small business operators usually do not have a VAT number, but must apply for one if they need it for business transactions with businesses in other EU countries. More
The VAT number is assigned by the tax office responsible for collecting VAT (i.e. the tax office of your place of residence or place of business). It the VAT number is not issued officially by the competent tax office when you start your business activities, it can be applied for using form U15 - Umsatzsteuer-Identifikationsnummer – Antrag auf Vergabe.
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).
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.