Passenger cars purchased or leased by companies or entrepreneurs for business purposes are regarded as business assets up to acquisition costs in the amount of about €34,000 including VAT.
Any acquisition costs exceeding this threshold or relating proportionate leasing and operating costs like insurance expenses, repair expenses are not deductible for income tax purposes (luxury threshold).
The acquisition costs that are deemed to be business related can be amortized tax deductible over a period of eight years only. In case of leasing of business passenger vehicles, for tax purposes the lease payments are considered tax deductible based on an eight-year amortization.
Special provisions apply to used cars and taxis and other special purpose cars. If the business vehicles are used for private use of the entrepreneur the relating costs (proportionate amortization, operating expenses etc) must be added back to taxable profit.
The provision of a company car to an employee even for private use free of charge is considered as income in kind. The company car is subject to wage tax in the amount of 1.5% of the vehicle´s acquisition costs (including VAT if not deductible and Austrian car license duty) per month but in the amount of €510 per month at the maximum. The income in kind can be reduced upon proper evidence on a minimum private use of the car. Special provisions apply to used cars.
If an employee who uses his private car for business purposes receives a mileage allowance from his employer, this mileage allowance is not considered as taxable income up to an amount of currently €0.36 per km.
The mileage allowance covers any expenses related to the use of the car, such as amortization, fuel, repair, motor vehicle tax, and road fees. Evidence on the distance covered and on the business purpose of the trip must be provided by a special logbook.
Any VAT incurred on purchase, lease and use of passenger cars is not deductible.
On the other hand no VAT becomes due on the sale or private use of these vehicles. The reason for this is that according to the Austrian VAT law the purchase, lease and operation of passenger cars is regarded as being outside the scope of Austrian VAT.
The Austrian Minister of Finance issues a list of small busses and trucks that are not regarded as passenger vehicles in this respect.
This list was subject to review by the European Court of Justice and the scope of vehicles for which input VAT can be recovered was extended due to the stand still clause of the 6th EC VAT Directive.
VAT is recoverable in connection with taxis, demonstrator cars, and other special purpose cars, cars for commercial resale or leasing etc.
Basically, the place of supply of the hiring out of means of transport is deemed to be where the supplier has established his business or has a fixed establishment.
If according to this rule the leasing of the car is subject to VAT in a country, which grants VAT refund to Austrian lessees the Austrian lessee must self-account for Austrian VAT on the cross-border leasing of the vehicle. The Austrian VAT is not recoverable and represents a cost element for the Austrian lessee. This provision seems to be not in line with the 6th EC VAT Directive and is currently subject to review by the European Court of Justice.
Austria consulted the EC VAT Committee and retains the exclusion from VAT deduction for cyclical economic reasons until December 31, 2005. With regard to non-EC suppliers and non-EC lessees Austria applies a use and enjoyment rule.
EC VAT rules on the intra-Community supply of new cars and on margin schemes for used vehicles are implemented into Austrian VAT law.
The first registration of passenger vehicles according to the Customs Tariff Code in Austria is subject to a car license duty (Normverbrauchsabgabe). Exemptions apply to taxis, demonstrator cars, etc. The car license duty is based on the acquisition costs or in certain cases on the fair market value of the vehicle.
The duty rate is determined by the average fuel consumption according to EC standards and may amount to up to 16%. Based on a decision of the ECJ the car license duty must be refunded proportionately if the vehicle is permanently brought to another EC Member State after registration in Austria.
The operation of a car in Austria is subject to motor vehicle tax (Kraftfahrzeugsteuer). For passenger cars insurance companies collect the tax as part of motor vehicle insurance.