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Holding Companies – VAT Treatment in Austria
Holding companies play a central role in corporate structures, acting as pure investment holdings, management holdings, or mixed holdings. Their VAT treatment depends primarily on the nature and scope of their activities.
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When does a Holding Qualify as a Taxable Person?
According to Section 2 (1) Austrian VAT Act, a taxable person is any person who independently carries out a commercial or professional activity. The EU VAT Directive (2006/112/EC) defines a taxable person in Article 9 as any person who independently carries out in any place any economic activity, whatever the purpose or results of that activity. For holding companies, mere shareholding does not constitute an economic activity and falls outside the business sphere. A holding becomes a taxable person only when it provides services for consideration—such as management services or personnel secondment.
When Are Holding Services Taxable?
Services rendered for consideration are generally taxable under Section 1 (1) No. 1 Austrian VAT Act. According to Article 2 of the VAT Directive, the supply of goods and services for consideration within the territory of a Member State by a taxable person is subject to VAT. Tax liability depends on whether an exemption applies. Particularly relevant for holding companies is section 6 (1) No. 8 lit. g Austrian VAT Act, which exempts transactions involving shares and their brokerage from VAT. However, management of shareholdings is typically taxable, especially when performed on a fiduciary basis.
When is the input VAT Deduction allowed?
Input VAT deduction is permitted only if purchased goods or services are directly linked to taxable output transactions (Section 12 Austrian VAT Act). In the case of mixed activities (taxable and exempt supplies) input VAT must be apportioned. Input VAT related to exempt supplies, such as mere (passive) shareholding without active service provision, is not deductible.
Incorporation and Capital Measures – Deduction Possible?
Expenses related to the incorporation of companies, admission of new shareholders, or IPOs are considered general business costs and allow input VAT deduction—provided the holding company generates taxable supplies.
How should practical examples be assessed?
Pure Investment Holding (Passive Holding)
This company limits its activities to acquiring and holding shares in other entities. As it does not qualify as a taxable person, no input VAT deduction is available.
Example: A holding company owns 100% of the shares in three subsidiaries without providing any services.
Management Holding (Active Holding)
The holding company provides services for consideration to its subsidiaries, such as strategic consulting, accounting, or personnel secondment. These activities constitute taxable economic activities subject to VAT, and input VAT deduction is possible.
Example: A holding company provides monthly management services to its subsidiaries.
Fiduciary Holding
The company acquires and manages shareholdings in its own name but for the account of third parties. Fiduciary management for consideration is subject to VAT.
Example: A holding company purchases shares in a start-up and manages them on behalf of an investor.
Mixed Holding
The company holds shares and carries out economic activities. If the shareholdings serve the operational business and the holding company provides services for consideration to its subsidiaries, e.g., strategic consulting, accounting, or personnel provision, economic activities subject to VAT exist, and input VAT deduction is possible. Input VAT on capital measures is deductible if related to taxable services.
Example: A company operates a manufacturing business and holds subsidiaries responsible for distribution in various markets. Input VAT deduction is generally possible, and no apportionment is required since the shareholdings are connected to the operational business.
