In the course of the Austrian Abgabenänderungsgesetz 2016 – AbgÄG 2016 the definition of the term “immovable property” for VAT purposes has been adapted according to EU provisions. This concerns the supply as well as the lease of immovable property as of January 1st, 2017. Furthermore, changes of the small business regulation and changes regarding short-term letting have been effected.
1. Changes regarding the term “immovable property”
In the course of the Abgabenänderungsgesetz 2016 – AbgÄG 2016 the definition of the term “immovable property” for VAT purposes has been adapted according to EU provisions. This concerns the supply as well as the lease of immovable property as of January 1st, 2017.
1.1 New definition in Austria
The main point of the changes is the autonomous definition of immovable property. Immovable property can be defined as
a) any specific part of the earth, on or below its surface, over which title and possession can be obtained;
b) any building or construction fixed to or in the ground above or below sea level which cannot be easily dismantled or moved;
c) any item which forms an integral part of a building or construction, such as doors, windows, roofs;
d) any item, equipment or machine permanently installed in a building or construction which cannot be moved without destroying/altering the building or construction.
In general, a building is defined as a construction (erected by human beings) with a roof and walls (which may offer at least temporary protection to people).
The term construction is the broader term and includes, for instance, also roads, silos, railway tracks, bridges, airports, ports, dikes, pipelines, water and sewage systems, power plants, wind turbines or refineries.
Regarding the classification of a building or construction as immovable property, it is decisive whether the building or construction can be easily dismantled or moved; the same is true for buildings erected on land owned by another person (“Superädifikate”).
Items, which are actually movable (e.g. kiosks, boats, stalls, prefabricated houses or caravans), can be fixed to the ground in such a way that they are considered immovable property for VAT purposes. A non-separable connection is not necessary; only the technical effort, the time and financial expenses required in connection with the subsequent removal of the construction is relevant in this context.
1.2 Services connected with immovable property
A direct/immediate connection between the service supplied and the respective immovable property can be assumed if the immovable property itself forms an integral part of the service. Among other things, the supply of the following services is considered to be connected to immovable property:
- Creation of blueprints for specific immovable property – irrespective of the subsequent actual construction of the building;
- Property management services;
- Services of architects, property developers and surveyors if they are connected with the construction of a specific building – again irrespective of whether or not the respective plan will be subsequently realized;
- Construction of a building, construction and demolition work, maintenance, renovation and repair work performed on (parts of) of building (incl. cleaning, tiling, parquetting and papering);
- Installation or assembly of machines or equipment;
- Maintenance and repair of machines or equipment qualifying as immovable property owing to their permanent installation;
- Provision of accommodation in sectors similar to the hotel sector;
- Timesharing in immovable property;
- Surveying and assessment of immovable property;
- Valuation of immovable property (e.g. for insurance purposes or to determine the value of a property as collateral for a loan);
- Lease of actually movable property classified for VAT purposes as immovable property (e.g. kiosk, caravan);
- Legal services relating to a change of the legal status of immovable property (drawing up of sales and lease contracts, notary work as well as registrations in the land register) – even if the underlying transaction is ultimately not carried out.
1.3 Services not connected with immovable property
The following services are not connected with immovable property:
- Provision of advertising (e.g. publication of property advertisements);
- Provision of an exhibition stand;
- Intermediation in the provision of hotel accommodation or a similar accommodation business (e.g. holiday camp, camping site);
- Consultancy or financial services (no change of the legal status);
- Investment advice;
- Portfolio management in connection with shares in real estate;
- Tax consulting.
Regarding the sale of immovable property as of January 1st, 2017, it should be borne in mind that the exemption of § 6 (1) item 9 lit a VATA 1994 cannot be applied to the transfer of specific rights (e.g. land servitude or property-related rights) not connected with the supply of immovable property. The granting or transfer of a right to build is equated with the supply of immovable property and continues to be exempt from VAT (with the option to subject the sales to VAT).
2. Other important changes in Austria
Other important changes are
2.1 Short-term letting is subject to tax
Also the short-term letting of 14 days at most is now subject to tax if the entrepreneur uses the immovable property only for
- sales which do not exclude input VAT deduction,
- short-term letting, and/or
- meeting his own requirements of accommodation (§ 6 (1) item 16 VATA 1994).
To determine whether short-term or long-term letting in the sense of this provision is effected, the individual rental revenues have to be considered separately.
This new provision shall prevent the need for an allocation of input VAT and potential input VAT corrections (e.g. lease of conference rooms) of entrepreneurs entitled to full input VAT deduction.
2.2 Changes for small businesses
Furthermore, the small business regulation has been expanded to persons subject to limited tax liability – insofar as they operate a business in Austria. Thus, persons subject to limited tax liability may also make use of the exemption regarding the lease of domestic immovable property (§ 6 (1) item 27 VATA 1994).
Moreover, as far as freelancers in particular are concerned, their tax-exempt freelance sales and sales from letting and leasing real estate may no longer be added up.
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