VAT interest – innovation through the AbgÄG 2022

On 19 July 2022, the Tax Amendment Act 2022 (AbgÄG 2022) was published in the Federal Law Gazette (Bundesgesetzblatt), which provides for an interest rate regulation in the area of turnover tax by way of an amendment to the Federal Tax Code (Bundesabgabenordnung, BAO). The interest rate of the VAT interest to be credited and charged is 2 % above the base interest rate per year.

The European Court of Justice (ECJ) has already addressed the issue of interest on late payment of VAT credits (excess input tax) in the light of the fundamental neutrality of VAT in the corporate sector on several occasions.

In its judgment of 12 May 2021 (Case C-844/19, TechnoRent International), the ECJ has now ruled that interest on VAT claims is required, in particular, in order to uphold the principle of fiscal neutrality under EU law. And national law must be applied in such a way that no result is achieved that is contrary to EU law. The new regulation of section 205c BAO by the AbgÄG 2022 has now implemented this ECJ case law.

Section 205c BAO now provides that credit notes may be used

• from the 91st day after receipt of an advance return (UVA) until the surplus is booked to the tax account or
• on the basis of a tax assessment (surplus has been claimed), interest must be paid between the 91st day after receipt of the VAT return until the notification of the decision or ruling.
• Credits due to a tax assessment as a result of an annual VAT return (surplus was claimed) shall bear interest from the 91st day after receipt of the annual return until the notification of the notice or ruling.

In the case of subsequent claims, on the other hand, it is standardised that

• an advance payment resulting from a belatedly filed advance return shall bear interest from the 91st day after the due date of the advance payment until the receipt of the advance return, or
• an additional claim based on a tax assessment shall bear interest from the 91st day after the due date of the advance payment until the notification of the assessment or ruling.
• In contrast, additional claims based on a tax assessment as a result of an annual VAT return shall bear interest from 1 October of the following year until the notification of the notice or ruling.

In addition, pursuant to section 205c (2) BAO, interest is also to be paid on differences in turnover tax resulting from the difference between a tax assessment notice or an annual turnover tax notice and a subsequent notice or ruling, according to a separate logic in the case of credit notes (insofar as the surplus was claimed) as well as on subsequent claims.

The interest rate is 2 % pa above the current base rate (note: from 27 Jul 2022 thus increase to 1.88 % pa).

Pursuant to section 205c (4) BAO, interest on credits may be refused if taxpayers do not comply with their duty to cooperate (submission of documents, provision of information) within the set period.

Interest on turnover tax shall be determined by means of a separate interest notice, whereby interest of less than EUR 50 shall be disregarded.

For additional claims resulting from the assessment, the new regulation is already applicable from the assessment year 2022. If, on the other hand, additional claims result from the ongoing submission of VAT returns, the new regulation is applicable to those periods for which the due date is after 20 July 2022 (entry into force after announcement).
In the case of credit notes, however, the new regulations of section 205c BAO are to be applied to all procedures still open on the day after the announcement (with 20 Jul 2022).

Conclusion

In principle, the new regulation is to be welcomed, as it closes the previous regulatory gap in the area of turnover tax. However, in view of the different interest regulations, the details are of particular importance. Finally, it should be noted that the new regulation works both in favour of and against taxpayers, since VAT credits and back payments will be subject to interest in the future.