VAT that is invoiced abroad must not be deducted by an entity as input tax in the VAT return in its country of residence. The system of refunding input tax ensures that this does not become a cost factor.
Services invoiced with foreign VAT
Some services that an entrepreneur procures from abroad will be invoiced with foreign VAT. The following are two specific examples of an input tax refund within the EU:
Example 1: Austrian entrepreneur in Italy
The Austrian businessman NÖ spends the night at a hotel in Milan. The hotel issues an invoice for the stay including Italian VAT. However, NÖ is not allowed to deduct the Italian VAT included in the invoice as input tax in his Austrian VAT return.
Example 2: Slovenian entrepreneur in Austria
The Slovenian haulier LJU refuels the company truck in Carinthia. Austrian VAT is shown on the invoice. LJU is not allowed to consider the Austrian VAT in Slovenia as input tax either.
In both cases the invoiced VAT, which is not deductible in the respective country of residence, would become a cost factor. Therefore, in order to ensure fair competition, a system of input tax refund is in place.
Applications for refund of Austrian input tax
Foreign entrepreneurs based in an EU Member State and without a permanent establishment in Austria (Example 2) may submit their refund applications for Austrian input tax for the year 2018 via the electronic portal provided by their respective Member State of residence until 30 September 2019. Foreign entrepreneurs must
- not have earned any revenues in Austria, or
- only tax-free revenues pursuant to Sec. 6 para. 1(3) of the VAT Act (UStG) (specific goods or passenger transport services) or
- only revenues subject to the reverse charge mechanism.
However, only deductible input tax incurred in Austria will be refunded. Hence, input taxes in connection with cars are not generally reimbursable in Austria.
Refund of input taxes within the EU
Austrian entrepreneurs (example 1) are able to make an electronic application via FinanzOnline for a refund of input tax incurred in another EU Member State. In this case, a separate application has to be submitted for each Member State from which an input tax refund is sought. It is no longer necessary to submit a certificate of entrepreneurial status (form U70). Nor is it generally necessary to submit the invoices. In certain cases, a copy must be provided at the request of the Member State providing the refund.
Minimum refund amount
The refund period must generally be at least three consecutive months and the amount to be refunded must be at least EUR 400. If the refund period is the entire calendar year or the last period of a calendar year, the amount to be refunded must amount to at least EUR 50.
TPA tip for tax refunds in the EU
After expiry of the deadline for submission on 30 September 2019 – which cannot be extended – the legal claim for a refund shall lapse: on 1 October 2019, it will be too late! Therefore, be sure to complete your applications in full and on time. We are happy to assist you. Experience has shown that at the end of September a system overload may occur so that you might miss the deadline. Basically, we recommend to file the application as early as possible for incomplete documentation to be subsequently completed before expiry of the deadline.