Option for taxation in connection with real estate
The Federal Department of Finance updated the regulations on the VAT option for real estate services.
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The Federal Department of Finance has published a second draft on the option for taxing services related to real estate that are exempt from tax.
Option for VAT Deduction
The VAT Practice Info contains a change in practice for various items in already published VAT Infos and VAT Industry Infos, which address the topic of the option for taxing services exempt from tax in the real estate sector.
The current change focuses on the interpretation of use for "private purposes" according to Art. 22 Para. 2 Bst. b VAT Act. However, the change in practice has no influence on Art. 31 Para. 2 Bst. a VAT Act.
In previous practice, use for private purposes was understood as follows: rental or sale of premises that are used exclusively for residential purposes by the tenant/buyer. Likewise, the sale of a vacation apartment, which is used exclusively by the buyer for his own vacation and recreation purposes, falls under the term use for private purposes. The rental of a hobby room to an individual or the rental of a sports hall for a family celebration also falls under the use for private purposes.
Newly under Art. 22 Para. 2 Bst. b of the VAT Act, the private use for residential purposes is understood a bit differently. In principle, the use of the premises as a residence in the sense of Art. 23 et seq. of the Civil Code is considered use for residential purposes. Compared to the previous regulation, the change is that now opting for the rental of the hobby room described above is possible. The change in practice will take effect on 1.1.2014. Regarding the question of when which practice applies, the time of performance is decisive.