Insights
TAX & BUSINESS
Tax evasion through incorrect VAT returns
A temporary tax advantage is sufficient for tax evasion.
The starting point of a current proceeding before the Administrative Court (Verwaltungsgerichtshof, VwGH) was a lawyer who submitted several VAT advance returns (Umsatzsteuervoranmeldungen, UVAs) in which she claimed excess input tax. The lawyer had renovation work carried out on her residence, which also served as her office premises. However, she did not reduce the input tax claimed in the UVAs by the corresponding private portion, i.e. the share of the costs attributable to the private dwelling.
When questioned by the tax office, the lawyer stated that she had not been able to submit a correct UVA, the correction would have been made with the annual return. Consequently, the Fraud Prevention Office initiated proceedings for tax evasion.
Tax evasion through incorrect input‑tax deductions
Tax evasion can occur in various forms. In the present case, tax evasion exists where tax credits that are not to be granted by assessment are deliberately claimed unlawfully or in excess. According to the VwGH, a tax revenue is not only reduced when it is not received at all, but also when it does not reach the tax authority at the time it was legally entitled to it under the relevant tax law. The objective element of tax evasion was therefore satisfied by the filing of incorrect UVAs in which excessive input tax was claimed, because a – albeit temporary – tax advantage was obtained.
Furthermore: If private expenses are deducted as business expenses while the private nature is known, this demonstrates deliberate conduct. The lawyer’s argument that she was unable to submit correct UVAs is not a justification, but rather shows that she was aware of filing the incorrect UVA.
Note
Despite filing incorrect UVAs, tax‑free status could ultimately be achieved by submitting a correct VAT annual return as a form of voluntary disclosure. However, the strict conditions for a voluntary disclosure must be met. If these are not fulfilled, the tax office would be informed of the offence, but the voluntary disclosure would not provide immunity. Therefore, a professionally prepared and executed disclosure is strongly recommended in this situation.
When questioned by the tax office, the lawyer stated that she had not been able to submit a correct UVA, the correction would have been made with the annual return. Consequently, the Fraud Prevention Office initiated proceedings for tax evasion.
Tax evasion through incorrect input‑tax deductions
Tax evasion can occur in various forms. In the present case, tax evasion exists where tax credits that are not to be granted by assessment are deliberately claimed unlawfully or in excess. According to the VwGH, a tax revenue is not only reduced when it is not received at all, but also when it does not reach the tax authority at the time it was legally entitled to it under the relevant tax law. The objective element of tax evasion was therefore satisfied by the filing of incorrect UVAs in which excessive input tax was claimed, because a – albeit temporary – tax advantage was obtained.
Furthermore: If private expenses are deducted as business expenses while the private nature is known, this demonstrates deliberate conduct. The lawyer’s argument that she was unable to submit correct UVAs is not a justification, but rather shows that she was aware of filing the incorrect UVA.
Note
Despite filing incorrect UVAs, tax‑free status could ultimately be achieved by submitting a correct VAT annual return as a form of voluntary disclosure. However, the strict conditions for a voluntary disclosure must be met. If these are not fulfilled, the tax office would be informed of the offence, but the voluntary disclosure would not provide immunity. Therefore, a professionally prepared and executed disclosure is strongly recommended in this situation.