On 4 April 2019 the Austrian Ministry of Finance submitted the draft Digital Tax Act 2020 to the public for evaluation. In addition to the introduction of a new digital tax on online advertising services, the Digital Tax Act 2020 will implement the EU e-commerce package into the Austrian Value Added Tax Act. Moreover, Austria aims to make electronic marketplaces more responsible for the collection of VAT.
Digital (online) advertising tax
Following the recent rejection of the Council Directive on the common system of a digital services tax on revenues resulting from the provision of certain digital services, the EU has failed to reach an agreement regarding the enforcement of a bloc-wide digital tax on tech “MNE giants” such as Google, Apple, Facebook and Amazon. Therefore, Austria plans to introduce its own national digital tax on online advertising services, which will enter into force on 1 January 2020. The draft proposal for the digital advertising tax is based on the rejected Council Directive.
Currently, sales of traditional advertising space, such as in print media, broadcasting, posters and billboards, are subject to Austrian advertising tax. Online advertising is not taxed by the 5 per cent Austrian advertising tax. Therefore, the planned new digital services (advertising) tax will apply at a rate of 5 per cent on digital advertising revenues for companies with worldwide revenues of more than EUR 750 million and Austrian digital advertising revenues of more than EUR 25 million. The new digital services tax should cover digital advertising services in the domestic market. This means that the digital advertising tax should apply to revenues generated in Austria through sales of online advertising space, such as banner advertising and search engine advertising. One main prerequisite is that the online advertising targets Austrian internet users and is displayed on an Austrian user’s device with a domestic Internet Protocol (IP) address.
The person liable for payment of the tax (tax debtor) is the online advertiser (i.e. the entity in receipt of the taxable revenues), which must calculate the tax and pay by the 15th of the second month following the date on which the tax claim arises. The tax claim arises at the end of the month in which the taxable service is rendered. Moreover, three months after the end of the financial year, the tax debtor must submit a digital services tax return for the previous year. Furthermore, the online advertiser is obliged to keep records of the online advertising services taken over, any other companies commissioned by it in this regard, the clients and the basis for calculating the digital tax.
The new regulations are due to enter into effect on 1 January 2020.
Implementation of the e-commerce package
With the Digital Tax Act 2020 the Austrian legislator will also implement the e-commerce package of EU Directive 2017/2455. The goal of the e-commerce package is to strengthen taxation in the destination state.
For example, one main change is that entrepreneurs – who facilitate distance sales of goods imported from third territories to a non-taxable person, where the individual value of the goods per supply does not exceed EUR150, by using an electronic interface, such as a marketplace, a platform, a portal or something similar – shall be treated as if they had received and supplied those goods themselves. The interface will therefore owe the VAT for the distance sales themselves, whereas the deemed supply of the supplier to the interface shall be exempt from tax.
Furthermore, deliveries from third countries are currently exempt from VAT if the value of the goods does not exceed EUR 22. This tax exemption for the import of small value items will be abolished. Consequently, in future, all sales will be taxed from the very first cent. However, a new distance selling regime will be simultaneously introduced. That means the import of goods with a value of up to EUR 150 will be exempt if a VAT identification number is provided in the import declaration and the supply of goods is taxed under a special regime (Import One Stop Shop – IOSS). The IOSS will apply to all services provided by a non-EU business to non-taxable persons within the EU.
The implementation of the e-commerce package shall enter into force on 1 January 2021.
Obligations for electronic marketplaces from January 2020
Operators of online platforms or electronic marketplaces enabling supplies or other services over it must record detailed information about individual traders using their site and forward the information to the Austrian tax authorities (electronically on request). One main prerequisite is that the operator does not itself become the debtor of the VAT. The recorded information must include, for example, annual turnover, customer names as well as records concerning stocks, and aims to ensure that VAT has been correctly accounted for. Details are regulated in the Value Added Tax implementing regulation (“SorgfaltspflichtenUmsatzsteuerverordnung”). If the obligations are not fulfilled, the operator of the electronic marketplace or online platform will be held liable for the tax. This rule shall concern, for example, services within the framework of the “sharing economy” or distance sales within the EU. If the e-commerce package enters into force in 2021, operators who become the debtor of the VAT shall no longer be subject to this obligation. The new regulations are due to enter into effect on 1 January 2020.