The supply of goods and services in Austria by an entrepreneur against consideration is in principle subject to Austrian VAT. The term "entrepreneur" means any entity which carries out an economic activity in a sustainable manner in order to achieve revenues, even if it does not aim at achieving profits. The general tax rate is 20%. With respect to the lease of real estate the VAT treatment is different depending on the usage of the real estate, e.g.:
- The lease of real estate for residential purposes, and the accommodation in furnished living rooms and bedrooms including related ancillary services (e.g., offering breakfast), are subject to a reduced tax rate of 10%.
- The lease of business premises is in principle exempt from VAT. However, in certain cases, the landlord may opt for taxation, in which case the regular tax rate of 20% applies. Making use of this option is normally recommended in order not to lose the right to claim a refund of input tax, if any, in connection with the acquisition of real estate. Such option for VAT on the letting of real estate is not available when the tenant is not fully taxable for VAT purposes (e.g., medical practitioners, banks and insurance companies).
- The lease of parking premises is subject to the regular VAT rate of 20%.
- Short-term letting of real estate is normally subject to the regular VAT rate of 20%.
The tenant may recover any VAT from the tax authority, if (i) the real estate leased will be used for a taxable supply of goods or services in the future and (ii) the remuneration for these services does not predominantly qualify as non-deductible expenses from an income tax perspective.
Note that the reserve charge system does not apply in case of a foreign landlord: Normally, the rendering of services is subject to the reverse charge system (i.e., VAT is owed by the recipient of the services) if (i) the entrepreneur rendering the services neither has its place of business nor a permanent establishment from which the services are rendered in Austria and (ii) the recipient of the services, inter alia, is an entrepreneur within the meaning of the Austrian VAT Act. However, in the view of the Austrian tax authorities the foreign landlord owing Austrian real estate is deemed a domestic landlord from a VAT perspective having to register for VAT purposes, declare and pay VAT.