Austria joined the EU (European Union) in 1995, in part to join the EU’s Single Market.
Today, companies from around the world sell to customers in Austria and must therefore comply with Austria's tax regulations, which align with those of other EU member states. Compliance means collecting and remitting value-added tax (VAT) when doing so is required.
VAT is a consumption tax similar to sales tax in the U.S. But unlike sales tax, it is paid at every stage of the supply chain, as value is added to a product. This guide will explain how VAT works in Austria, what your obligations are as a seller, and how to make sure you're in full compliance and audit-ready.
Austrian VAT
The European Union has created a VAT framework that member states adhere to. The general rule is that companies that sell goods or services to customers in EU countries must collect and remit VAT even if they do not have a physical presence in the EU.
However, each EU country is free to set its own tax rates and registration thresholds. So if your company is selling goods or services in Austria, you must know the tax rates to charge your customers, as well as when you become obligated to collect and remit tax to the Austrian tax authorities, based on the volume or value of transactions with Austrian customers.
Different VAT rates
In Austria, the standard VAT rate is 20%. Most goods and services are taxed at this rate. However, certain products have reduced rates of 10% or 13%. The 10% rate applies to:
- Most food products.
- Pharmaceutical products.
- Some passenger transport.
- Books, newspapers, and periodicals.
- TV licenses.
- Hotel accommodations.
- Restaurants.
- Repairs of shoes, clothing, household linens, and leather.
The 13% rate applies to:
- Some food products.
- Some types of passenger transport.
- Admission to plays and certain other cultural activities.
Within the Austrian municipalities of Jungholz and Mittelberg, a standard VAT rate of 19% applies. These two municipalities are located close to Austria’s border with Germany and are accessible by road only from Germany. For this reason, they are exempt from Austrian VAT and fully governed by German VAT law.
Reverse charge mechanism
In Austria, there are certain situations where the recipient of a good or service is required to pay the VAT instead of the seller. This is called a reverse charge. In Austria, the reverse charge mechanism applies when:
- A foreign taxable person supplies goods assembled in Austria or supplies most services to a taxable or legal person in Austria.
- A foreign taxable person supplies to a legal or taxable person any construction work that's treated as a supply of goods assembled in Austria.
- A foreign taxable person supplies gas, electricity, or heating or cooling energy to a taxable person identified for VAT purposes in Austria.
- A foreign taxable person supplies goods provided as collateral because they forfeited the collateral, or because of a judgment or compulsory sale.
Statute of limitations
There is a five-year statute of limitations for the collection of taxes in Austria. This period increases to 10 years in cases of tax evasion.
Taxing authorities can conduct an investigation into tax collection and tax payment issues before the statute of limitations expires.
Registering for VAT
Not every company doing business in a specific country or location is responsible for collecting sales tax or VAT on sales there.
Jurisdictions establish their own rules regarding the minimum volume of sales or minimum number of transactions a business must be involved in before it becomes responsible for registering and collecting taxes.
In Austria, the rules for when you must register differ depending on whether you are a resident or a nonresident business, as well as on whether you are conducting sales only in Austria or you are selling items in other EU countries.
Resident vs. nonresident businesses
Resident businesses have a physical presence in Austria, while nonresident businesses sell to Austrian consumers but do not have a physical presence in the country. A company may be considered to have a presence in Austria if:
- It has a physical store or warehouse within Austria.
- It holds goods in Austria on a consignment stock basis, except as part of a call-off stock arrangement.
- It organizes live conferences or exhibits with on-site payments.
Who needs to register for VAT in Austria?
The threshold for registering for VAT taxes in Austria varies, depending on whether your company is a resident business, is doing business only in Austria or in other EU member countries, or is a nonresident business. Specifically:
- If you are a nonresident business from outside of the EU and you make any taxable sales in Austria (except those where the reverse charge mechanism applies), then you must register to collect VAT from the very first transaction.
- If you are a resident doing business domestically in Austria and your turnover from taxable sales exceeds €55,000, you must register for VAT.
- If you are an EU-based business selling in multiple EU countries and hit a total threshold of €10,000, you can register in an EU country under the One-Stop Shop (OSS) scheme.
How do you register for VAT in Austria?
Registering for VAT collection in Austria requires first obtaining a VAT Identification number, which can be applied for using the Austrian tax office’s U15 or U15a form.
This form, which can be found on the website of the Ministry of Finance, must then be submitted to the Austrian tax office.
Registration must then be completed with the tax office in Graz, and nonresident businesses must appoint a tax or fiscal representative during this process.
When to appoint a tax or fiscal representative
When a non-EU company sells taxable goods or services in Austria, it must appoint a fiscal representative, which is an Austrian company or business that agrees to take responsibility for representing the non-resident company for VAT purposes.
The fiscal representative shares legal responsibility for all VAT obligations in Austria.
When to charge tax (and when not to)
Not every transaction is subject to VAT, as the rules depend on the type of product or service you are providing. Some items are exempt from tax, for example, while the rules can also differ depending on whether the transaction is made to a business or a customer directly.
Here's what you need to know about when to charge taxes:
Taxable vs. exempt
The majority of goods and services are taxed at the 10%, 13%, or 20% rate in Austria. Exempt goods and services include:
- Financial services.
- Educational services.
- Health, hospital, and social welfare expenses.
- Postal services.
- Renting immovable property.
- Gambling and betting.
- Business transfers.
- Art.
Some goods and services are also zero-rated. These include:
- Aircraft fuel.
- Central bank gold.
- International transport services.
- Domestic solar panels.
- Exports.
- Intra-community supplies.
- Pharmaceuticals.
- Sea vessels.
- VAT warehousing and goods under the control of customs.
No VAT is charged on exempt goods and services. Zero-rated products are different, in that a VAT of 0% is charged, allowing for the recovery of input VAT.
Digital products
Digital products, including e-books, software, and music, are subject to VAT in Austria.
B2B vs. B2C
Companies providing B2C (business-to-consumer) sales are generally required to comply with Austrian VAT tax obligations, including registering and collecting VAT once they have hit the registration threshold. For nonresident businesses, this obligation arises with the first transaction.
Foreign companies that are engaged in B2B (business to business) sales may find that the reverse charge mechanism applies, in which case the recipient, and not the seller, becomes responsible for VAT compliance.
VAT deductions
Austrian VAT can be deducted if it was incurred in a business transaction and if specific formalities are followed. When deducting VAT, you should make certain that you have an invoice with the name and contact details of the company providing the service and of the company receiving the service, as well as a detailed description of what was purchased.
Compliance requirements
Invoicing
Companies are required to issue and transmit e-invoices through the government portal Unternehmensservice or Peppol eDelivery Network if the transaction is a B2G (business-to-government) transaction or is related to the public sector. There are no mandatory rules regarding e-invoicing for B2B or B2C transactions, but businesses can follow this process voluntarily.
Filing VAT returns
VAT Returns must be submitted electronically via FinanzOnline.
Filing deadlines
If you are required to submit VAT returns to the Austrian government, you may be required to submit forms either monthly or quarterly, depending on annual turnover. Quarterly returns are allowed when the turnover during the prior calendar year is less than €100,000.
The deadline is the 15th day of the second consecutive month after the month when the goods or services were supplied. VAT returns must also be filed even if there were no taxable transactions.
Companies may also be required to submit an annual VAT return each year, summarizing the other VAT returns filed during the year.
Recordkeeping
Companies doing business in Austria should keep careful records of taxable transactions for at least seven years. This includes invoices prepared in accordance with the requirements of the Austrian VAT Act.
It is also advisable to collect customer addresses and keep tax IDs on file, and companies should validate VAT IDs for B2B transactions to confirm the customer's status and ensure that the reverse charge mechanism applies.
Risks of noncompliance
Noncompliance with Austrian VAT rules can result in serious consequences, including:
Audits
Austrian taxing authorities can conduct an audit of your business if officials believe you have failed to fulfill any tax obligations. This can involve an investigation of past transactions to determine whether you should have been collecting tax on sales in Austria but failed to do so.
If an audit reveals that you did not follow VAT tax rules, you can face serious consequences.
Penalties
Penalties for failure to collect required VAT or to submit VAT returns on schedule vary. They depend on the type of misconduct, as well as on whether the failure is a repeat offense.
In addition to any other penalties that apply, late submission of VAT returns can result in interest rates as high as 10%, while an additional interest charge of between 2% and 4% may be applied to past-due tax payments.
Simplifying the process
As you can see, following Austria's VAT rules can be complex, and nonresident companies may be obligated to comply with these rules immediately upon their first transaction with any customer living in the country.
Getting help understanding tax rules and regulations across different countries worldwide is essential if you are conducting business in multiple locations. Numeral can help.
We provide tax support for more than 55 countries, including Austria, so we can grow with your business and ensure that you are in full compliance around the world.
Numeral helps you determine when you must register, completes the registration process on your behalf, collects the required taxes due, submits tax forms on your behalf, and helps you comply with fiscal representative requirements.
With our help, you can focus on growing your international business while we take care of the sales tax issues.
