Input tax deduction for the letting of property for residential purposes by a private foundation

The letting and leasing is with 10% subject to VAT provided that a Entrepreneurial activity given that and the Residential rental occurs. The VwGH (File reference 2008/13/0046 of 19.10.2011) recently had to deal with the question of whether Rental (for residential purposes) through one Private foundation to the beneficiary an Entrepreneurial activity in this representation. provided that taxable rental income is present, since the one with the Establishment or. Renovation the property contiguous VAT as Input VAT to be deducted.

In the present case, the initial founder and subsequent Beneficiary donated a property to the foundation, which by the private foundation comprehensively renovated and then to the beneficiaries (original settlor and wife) To let was decided. The VwGH had to deal with the question of whether the Rental of a single property at the private foundation a Entrepreneurial activity represents and consequently the Input tax deduction justified. Specifically was particular Sharpness offered, as there was a very extensive renovation and consequently a Luxury apartment let to the beneficiary by the private foundation.

As previously decided, the VwGH recognised that the Rental a property for residential purposes also ongoing toleration payment even with a Private foundation one Entrepreneurial activity can be represented. However, a fundamental prerequisite is that this is not merely the favoured purpose of the foundation, but that a economic activity at the private foundation is available. The assessment shall be made by comparing the circumstances under which the residential building is handed over to the donor with the circumstances under which the corresponding ordinary economic activity exercised is of crucial importance. Feature to whether a market-rate letting given. It is on the Arm's length principle to stop denying entrepreneurship and input tax deduction from the outset, merely because it involves the rental of a luxury property from a private foundation to the beneficiary and Abusive practice could be assumed. The further consequences of this spectacular finding are yet to be seen – equally interesting are the Plausible consequences for designs between Limited company and Shareholder, provided that the arrangement between the private foundation and the beneficiary is tax-recognised.

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