Austria: No reverse charge mechanism in the case of rental revenues of foreign property owners

In the WTS Global VAT Newsletter #1/2022, it was already reported that, based on the ECJ’s Titanium case law (3 June 2021, C-931/19, Titanium Ltd), the reverse charge system must be applied for non-resident taxpayers who rent out Austrian property to entrepreneurs (in the case of B2C rentals, the reverse charge system does not apply). As a consequence, input taxes could only be claimed back by using the special VAT refund procedure.

Due to (negative) practical problems, a legal clarification has now been made in the Tax Amendment Act 2022 (Abgabenänderungsgesetz 2022). The Tax Amendment Act 2022 now returns the legal situation to "pre-titanium" by exempting the rental of Austrian property by foreign entrepreneurs from the reverse charge system in Section 19 para. 1 second clause of the Austrian VAT Act. Thus, the foreign lessor remains liable for the tax and must declare their turnover (and also input taxes) in the VAT assessment procedure.

Example

D (domiciled and habitually resident in Germany) rents business premises located in Austria to a real estate operating company and exercises the option for tax liability pursuant to Section 6 paragraph 2 of the Austrian VAT Act.

As there is no reverse charge system when renting to the real estate operating com­pany pursuant to Section 19 paragraph 1 second clause of the Austrian VAT Act, D must declare the turnover in the VAT assessment procedure. Input tax can also be claimed in the VAT assessment procedure.

The new regulation entered into force on the day following its publication in the Federal Law Gazette. The law was promulgated on 19 July 2022. This gives the affected entrepreneurs the opportunity to still make (rental) transactions in 2022 that exclude the refund procedure.

It must be clarified if the regulation applies for the entire year 2022, as otherwise the change would occur during the year, which could probably not be the intention of the legislator.

Read the WTS Global VAT Newsletter here.