For real estate and other investment goods, however, the VAT law provides for a revision period. During this period, the initial VAT deduction can be revised if the real estate is no longer used for VAT-able activities. The revision period for real estate was recently extended from 10 to 20 years, bringing it into line with the maximum revision period allowed in the EU VAT Directive. The revision period for other investment goods is 5 years.
If, from a VAT perspective, the use of real estate changes within 20 years of its acquisition, construction or refurbishment, an input VAT adjustment for the respective year is needed: one-twentieth, or 5 percent, of the input VAT has to be paid back for each remaining year of the revision period.
For example: Entrepreneur A acquires real estate and uses it for VAT-able business purposes. However, after 10 years he/she begins to use the real estate for private purposes only. So, from year 10 until year 20 (the end of the revision period), he/she must pay back annually one-twentieth of the input VAT initially claimed from the tax authorities. Overall, entrepreneur A is allowed to claim 45 percent of the total input VAT amount.
Changes to VAT status of leased real estate
Another recent change to the VAT Act concerns the option of applying VAT on the rental of real estate. In principle, leasing real estate is VAT exempt (except if leasing real estate for residential purposes). The lessor cannot claim any deduction of VAT incurred in relation to the real estate. However, lessors can opt to apply VAT, with the consequence that input VAT then becomes deductible. With the recent changes, the option for VAT liability will only be allowed if the lessee uses the leased real estate almost exclusively (at least 95 percent) for taxable supplies that entitle him/her to claim input VAT deduction. The lessor has to prove that the requirements for exercising the option are fulfilled. Practically, opting for VAT will no longer be possible if the property is leased to banks, insurance companies or certain public sector entities.
Electronic invoicing
Currently, only electronic invoices containing an electronic signature, invoices issued via Electronic Data Interchange, or invoices submitted by fax, are valid from a VAT point of view. Only these forms of electronic invoice entitle their recipients to deduct input VAT.
However, under changes brought in by EU Directive 2010/45 which must be implemented by 1 January 2013, any electronic invoice that fulfils the criteria of authenticity, integrity and readability, will be accepted as an invoice for VAT purposes.