Insights
VAT
Grants as VAT‑liable rent pre‑payments
The Administrative Court (VwGH) has ruled that advances, such as rent pre‑payments, are subject to VAT where the underlying service is sufficiently specified. This also applies where grant funds are paid directly to the landlord.
The VwGH referred to the fact that VAT always arises where a service exchange takes place and a service is provided for consideration. Advances can also be taxable provided the underlying service is sufficiently defined. Only those payments for which, at the time of receipt, it is still unclear whether they relate to a service at all or to which service they are intended, are not subject to tax.
In a decided case it was clear that the payments were linked to refurbishment costs and later increased rent payments. The grant funds paid directly to the public‑law corporation (Körperschaft öffentlichen Rechts, KöR) and forwarded in this abbreviated manner were therefore to be regarded as rent pre‑payments by the GmbH and, as such, subject to VAT at the KöR.
Sachverhalt
The centre of the proceedings was a public‑law corporation (KöR) that owned 100 % of a non‑profit GmbH operating a nursing home. The associated property was owned by the KöR and was let by it to the non‑profit GmbH. In addition to rent, the GmbH bore all running operating costs of the nursing home. The GmbH requested the KöR to carry out refurbishment measures on the building. At the same time, a higher rent was agreed between the parties, through which the refurbishment costs were to be amortised over the long term.
In this context the province of Lower Austria granted the GmbH a subsidy, which, however, was not paid to the GmbH but directly to the KöR. The parties agreed that the subsidy should be used to cover the refurbishment costs and taken into account when calculating the rent increase.
The tax office treated these payments to the KöR as VAT‑liable consideration. The grant amounts were to be regarded economically as advances on the increased rent. The KöR argued that the subsidies had not been received by the GmbH and therefore could not be qualified as rent payments.
In the view of the Federal Fiscal Court (BFG) the GmbH was clearly the recipient of the subsidies. This followed from the grant applications, which had been submitted and signed exclusively by the GmbH. The grant agreement also existed solely between the province of Lower Austria and the GmbH. That the money was transferred directly to the KöR was assessed as an “abbreviated payment route”.
Since the GmbH, according to the agreement, was ultimately to bear the investment costs via the increased rent, the BFG qualified the grant funds, from an economic perspective, as rent pre‑payments, which are subject to VAT at the KöR.
In a decided case it was clear that the payments were linked to refurbishment costs and later increased rent payments. The grant funds paid directly to the public‑law corporation (Körperschaft öffentlichen Rechts, KöR) and forwarded in this abbreviated manner were therefore to be regarded as rent pre‑payments by the GmbH and, as such, subject to VAT at the KöR.
Sachverhalt
The centre of the proceedings was a public‑law corporation (KöR) that owned 100 % of a non‑profit GmbH operating a nursing home. The associated property was owned by the KöR and was let by it to the non‑profit GmbH. In addition to rent, the GmbH bore all running operating costs of the nursing home. The GmbH requested the KöR to carry out refurbishment measures on the building. At the same time, a higher rent was agreed between the parties, through which the refurbishment costs were to be amortised over the long term.
In this context the province of Lower Austria granted the GmbH a subsidy, which, however, was not paid to the GmbH but directly to the KöR. The parties agreed that the subsidy should be used to cover the refurbishment costs and taken into account when calculating the rent increase.
The tax office treated these payments to the KöR as VAT‑liable consideration. The grant amounts were to be regarded economically as advances on the increased rent. The KöR argued that the subsidies had not been received by the GmbH and therefore could not be qualified as rent payments.
In the view of the Federal Fiscal Court (BFG) the GmbH was clearly the recipient of the subsidies. This followed from the grant applications, which had been submitted and signed exclusively by the GmbH. The grant agreement also existed solely between the province of Lower Austria and the GmbH. That the money was transferred directly to the KöR was assessed as an “abbreviated payment route”.
Since the GmbH, according to the agreement, was ultimately to bear the investment costs via the increased rent, the BFG qualified the grant funds, from an economic perspective, as rent pre‑payments, which are subject to VAT at the KöR.