Tax audit and commercial lease agreement
June 14, 2011 | 50,00 EUR | answered by StB Manuela Ponikwar
Hello,
I am currently undergoing a tax audit (2007-2009). I run an online business and also rent a store. My landlord has opted for VAT. Since 2007, my partner has been subletting space in my store, paying half of the rent. Because she claimed the small business regulation in 2007, I was unable to opt for VAT with her. I also neglected to amend the lease agreement with my partner and opt for VAT for 2008 and subsequent years. Now I am being asked to repay the input tax for my store rent for all those years. My partner sells the same range of products in the store as I do, but more accessories while I sell furniture. Many customers visit the store, look at the furniture, and then order from me.
I have read that according to section 148a of the VAT Act, 5% tax-exempt turnover of the total turnover is inconsequential for the denial of input tax. My partner pays 4800 euros in rent per year, which is 5% of 96,000. In total, I have a turnover of 250 - 300 thousand euros. However, the invoices are under the name of the online shop, as this is easier for me. Now my questions:
1. How can I demonstrate to the tax office that a portion of my turnover is generated through the store and not the online shop, or how do I need to prove this?
2. Would it be possible to retrospectively amend the lease agreement at least for 2008 and subsequent years, and pay the VAT retroactively? Could my partner then also claim the input tax?
Or is there another way to resolve this situation?
Thank you.
Dear inquirer,
Thank you for your inquiry, which I would like to answer as part of an initial consultation considering the appropriate fee as follows:
Various topics to be examined arise from your question:
1)
In principle, your landlord should have checked whether you generate exclusively taxable turnover with the rented premises.
A minor use for excluded turnover can be assumed if, in the case of taxable leasing, the VAT on the rent for the property or part of the property would be excluded from the input tax deduction in the tax period (calendar year, § 16 para. 1 sentence 2 UStG) at most 5% (de minimis threshold from R.148a UStR).
This 5% limit must be checked per room and is therefore only relevant for mixed-use rooms at all, because if your partner has rented individual rooms, you generate exclusively non-deductible turnover with these rooms, so the 5% limit does not need to be checked for the rooms, as the individual room was then used 100% non-deductibly.
Only if you share the rooms with your partner as a whole, without an allocation into individual rooms, is the 5% limit relevant for your landlord.
However, as your partner pays 50% of the rent, she probably also uses 50%, so 50% of your rent payment would be excluded from the input tax deduction, far more than the 5% de minimis threshold.
But that's just a side note, as it doesn't help you and in my opinion, you can't claim any refunds from it.
2)
You yourself did not opt for VAT towards your partner. In 2007, you could not have done so, as your partner was not liable for VAT and therefore not entitled to deduct input tax.
If your partner became liable for VAT from 2008, you could have waived the VAT exemption for the leasing turnover.
However, there is no deadline for this option. As long as the annual tax assessment has not become final or is subject to review (which is obviously the case in the event of a tax audit), it can be made at any time. The contestability and thus the option possibility are also revived if a tax assessment is revoked or amended (UStR 2008 R148 para. 3). Likewise, the BMF letter of 1.10.2010, IV D 3 - S 7198/09/10002.
As a result, you would have to correct the contract, your partner would have to make payments, deduct input tax, while you pay VAT.
As a result, at least from 2008, your turnover would be completely subject to VAT and therefore 100% entitled to input tax deduction.
3)
Without using the option (so in any case for 2007), you carry out VAT-exempt turnover through the leasing.
This means that the purchased service (leasing from your lessor) is only partially used for the provision of taxable services and therefore the relevant input tax must be divided into deductible and non-deductible input tax (§15 para. 4 UStG).
The division of deductible and non-deductible input tax is done according to VAT guidelines R.207 and R.208.
For buildings, the input tax must be divided according to the ratio of the actual usable areas, the turnover key is only permissible if no other method of economic allocation is possible.
So if you use the shop as suspected in 1. half the time, you can only deduct 50% of the input tax.
Of course, you can also make a different room distribution credible. If you can justify and prove this convincingly, the tax office cannot assume that the 50% rent = 50% area must be.
I hope this helps you. The topic is very complex, if you have any further questions, please do not hesitate to use the appropriate function.
Best regards,
Manuela Ponikwar
Tax consultant
www.ponikwar.de
