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.