All depends on what kind of inspection your area does. Here in AZ, anything with OBDII just gets a scanner plugged in. No codes and all sensors Emissions ready = pass.

In CA they do a visual inspection, code scan, AND Dyno sniffer... you'd fail.

 

My daughter's 2003 Jetta just had that exact code.
They replaced the rear cat.
FWIW it's a known problem with VW/Porsche/Audi.

In your case I would turn it off or get MILs.
Essentially what it is saying is that your cat is not working up to snuff.