VAT – Tax authority may retroactively demand a second net tax rate

Since 1 January 2023, the Federal Tax Administration can retroactively oblige companies to apply a second net tax rate (‘Saldosteuersatz’). This occurs if a company implements a sudden increase in the other activity or secondary activity. The activity is classified as a “new” activity and the tax administration assigns a new net tax rate to this activity.

A sudden increase in the turnover share of the other activity exists if:

• the original activity is temporarily or permanently discontinued, OR
• this activity is expected to generate at least 25% of the total turnover over the entire tax period.

In the case of mixed industries, there is a sudden increase in the secondary activity if:

• the main activity is temporarily or permanently discontinued, AND
• the secondary activity is expected to generate more than 50% of the total turnover over the entire tax period.

Previously, this provision only applied if the allocation of a second net tax rate rate was not negative to the taxpayer.

Since 1 January 2023, a second net tax rate is allocated, even if it is higher than the one that was previously given.