Austrian Federal Fiscal Court (BFG) Decision on Distinguishing Between Production and Service Companies and Defining “Predominant Activity” under the Austrian Energy Tax Rebate Act (“EAVG”)

In its decision dated 1 July 2026, RV/7103210/2023 and RV/5100860/2024, the Austrian Federal Fiscal Court (BFG) clarified that a de-coating and processing business qualifies as an eligible production company and is therefore, in principle, fully entitled to the energy tax rebate. Furthermore, the BFG rejected the interpretation of the term “predominant activity” in connection with the production of tangible assets set out in the Austrian Energy Tax Guidelines, and determined that a predominant activity within the meaning of section 2 para. 1 EAVG is, in any case, deemed to exist – among other things – where more than 50% of revenue is generated from the production of tangible assets.

Facts of the Case

The appellant primarily operates in two main business areas, which together accounted for roughly two-thirds to over 70% of total revenue in the relevant years (2012 to 2015 and 2016 to 2021):

• Removal of defective coatings: Customers supplied incorrectly coated metal parts that were unusable for the end product due to visual and technical defects (risk of rust). The company stripped the coating from these parts so that they could be repainted and incorporated into end products.
• De-coating of metal components (standard parts): The company removed coating from auxiliary tools contaminated during the coating process – such as paint hooks, gratings, and lifting chains – which were worthless in that condition. After the cleaning, the metal components were functioning like new again. The company was in a direct competition with the producers that distribute new hooks and standard parts.

Moreover, the business was classified under the sector “Surface Finishing and Heat Treatment” (part of manufacturing) according to ÖNACE classification of economic activities by Statistics Austria (Statistik Austria).

The appellant applied the energy tax rebate for the period concerned. The Austrian tax office rejected this application and reasoned that the company operated a purely service-based business.

Decision of the BFG

In order to verify whether the appellant is entitled to the energy tax rebate, the BFG addressed two sub-questions:

1. Is the appellant engaged in an activity that could be qualified as “production of tangible assets” and thus as production company?

In connection with the production aspect of removing defective coatings, the BFG determined that this activity constitutes a product-related processing step, which is part of the creation process of an end product later traded on the market. Without this step, the defective parts would have been unusable. If the end product will actually be traded on the market at a later time, is not decisive, because actual subsequent trade does not need to be in the sphere of the processing company. In fact, the intention of the commissioning company to trade on the market at a later point in time is sufficient. From an economic perspective, this intention is expressed through the commissioning of the processing entrepreneur.

In connection with the production aspect of de-coating standard parts, the BFG decided that this activity is equivalent to a value-preserving or value-restoring repair and leads therefore to a preparation or processing that results in a change in marketability of the goods. For the definition of the term “preparation and processing”, the BGF refers to the term in section 3 para. 6 UStG (Austrian Value Added Tax Act) and determined that every treatment of the subject, which, according to the prevailing opinion, results in a new marketable good, is considered as preparation and processing. Moreover, the company is in direct global competition with the producers of new goods. As foreign producers are not often subject to energy taxes, the purpose of the EAVG supports classifying this activity as production activity, thereby avoiding competitive disadvantages.

2. Are the previously mentioned activities to be seen as predominant activity of the company defined under the EAVG?

The term “predominant activity” is not defined in the EAVG. The BFG indicates that the determination of the predominant activity should be based on the overall picture of the circumstances. In this context, the relationship of the revenues and the ÖNACE classification must be considered in any case. Therefore, the BFG rejected the opinion according to the Austrian Energy Tax Guidelines that a predominant activity only exists where more than 80% of revenue is generated from the production of tangible assets.

In the present case, the BFG came to the conclusion that the predominant activity of the appellant is in the production of tangible assets, because more than 50% of the revenues result from the previously mentioned activities and the ÖNACE classification also indicates that the predominant activity is in the production of tangible assets.

Notes in practice

The BFG clarifies that the intention of the commissioning company for subsequent trade on the market is sufficient for the qualification as activity for production of tangible assets. Thus, an activity qualifies as the production of tangible assets if the preparation and processing result in an asset with different marketability. By referring to the UStG for the interpretation of the term “marketability”, the BFG clarifies the importance of the UStG for the interpretation of the terms according to the EAVG.

The decision of the BFG also rejected the strict opinion set out in the Austrian Energy Tax Guidelines that an entitlement to an energy tax reimbursement exists only if the predominant activity of the eligible applicant is in the production of tangible assets and such activity only exists, where more than 80% of revenue is generated from the production of tangible assets.

According to the BFG, for the qualification as predominant activity, 50% of revenue in the area of production of tangible assets is sufficient.

It remains to be seen whether the Austrian Supreme Administrative Court (VwGH) agrees with the opinion of the BFG.