The right to claim and deduct input tax with respect to the acquisition of real property is available in the year of acquisition, provided there is a great probability of the property’s taxable use. A recent opinion of Austria’s supreme administrative court (VwGH) addresses what happens when the requirements for the deduction are not initially satisfied.
The sale of real estate is, in principle, exempt from turnover tax—that is, value added tax (VAT) in connection with the sale is not deductible. In addition, there may be a need to adjust certain pre-tax credits already claimed for the acquisition and production or concerning major repairs. The seller can elect to treat the amount realized on the property’s transfer as being subject to the normal tax rate of 20%. For the buyer, the possibility of deducting input tax depends on the intended use of the property. If the property is to be used for taxable transactions, the input deduction generally is available (provided there is adequate documentation). If the taxpayers fail to take a VAT deduction at that time, the VwGH case law clarifies that the deduction is not permanently lost.
Read a July 2017 report (German) prepared by the KPMG member firm in Austria
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