Deduction of import VAT in specific cases

The Ordinance published in Federal Gazette II No. 584/2003 constitutes a special rule for the deduction of import VAT and may be applied in the case of certain chain transactions and supplies of contract work taxable as supplies of goods by foreign entrepreneurs if the requirements mentioned on the following page are fulfilled.

Specific chain transactions

A chain transaction within the meaning of the Ordinance is a transaction where three entrepreneurs conclude supplies in respect of the same goods, and the first entrepreneur or the first recipient directly transfers to the final recipient in the chain the right to dispose of the goods.

In the case of such chain transaction it is the final recipient who is entitled to deduct as input VAT the amount paid as import VAT and not the entrepreneur for whose enterprise the goods have been imported, if:

1. the goods are introduced into Austria from a third State,

2. the final recipient in the chain is the debtor of the import VAT, and

3. the supply of goods to the final recipient is tax-exempt under the following provisions:

a) the first recipient in the chain

  • has neither his residence (registered office) nor a fixed establishment nor his habitual abode in Austria and
  • is not registered for VAT purposes in Austria

b) the final recipient in the chain would be entitled to full deduction of input VAT in respect of the supply of goods, and

c) no invoice is issued showing VAT separately.

In the case of such tax-exempt supplies of goods the following applies to the first recipient in the chain:

  • the deduction of input VAT is ruled out according to Sec. 12 (3) VAT Act 1994;
  • there is no obligation to keep records according to Sec. 18 VAT Act 1994;
  • there is no obligation to file returns in cases where only such tax-exempt supplies are made.

If one of the above requirements is no longer met, the tax liability arises and the deduction of input VAT must be corrected.

Supplies of contract work taxable as supplies of goods

Under the following conditions any parts of a supply of contract work taxable as a supply of goods are deemed to have been imported for the enterprise of the recipient of the supply and entitle him to deduct import VAT as input VAT:

  • a supply of contract work has been made in Austria which is taxable as a supply of goods (Sec. 3 (4) VAT Act 1994),
  • the person making the supply of contract work taxable as a supply of goods is an entrepreneur having no residence (registered office), habitual abode or fixed establishment in Austria;
  • parts of the work to be made have been imported from third States into Austria,
  • the person making the supply of contract work taxable as a supply of goods issues a separate invoice concerning such parts;
  • the import VAT has been paid by the recipient of the supply or on his account.

The reverse charge system does not apply to the imported parts.