The decision of the Supreme Administrative Court 7 Afs 143/2025 confirms a strict trend that has been evident in the jurisprudence of administrative courts for a long time, especially for services that are difficult to prove only with accounting documents. Therefore, companies should continuously set up internal processes so that there is sufficient written documentation regarding the performance of external services.
At the same time, one cannot think about the documentation only when the tax audit begins. For services whose result is not easy to grasp at first glance, it is advisable to keep documentation capturing the assignment, the course of cooperation and its results on an ongoing basis. The contract and invoice themselves may not be sufficient in the event of a dispute with the tax administrator.
What did the SAC deal with?
The company was assessed additional VAT for several tax periods because, according to the tax administrator, it did not prove the actual receipt of IT services from the declared supplier. In particular, the company submitted invoices, a contract and proof of payment. However, the tax authorities pointed to a number of contradictions, such as the general description of the supply, constantly the same invoiced amounts, ambiguities in the witness testimonies and the fact that the company’s employees practically did not know the supplier.
The company argued that without an external supplier, it would not be able to meet its obligations to clients. However, according to the SAC, this circumstance in itself does not prove that the performance was actually provided by the declared supplier. Even if it was not possible to meet all the requirements with its own capacities, it was necessary to prove that the performance was actually provided by the declared supplier, not only that the company used any external support.
The SAC confirmed that the right to deduct VAT is not based only on a formally correct tax document. The decisive factor is to prove the actual state of affairs. At the same time, the court rejected the argument that the reporting of the performance in the control statements itself proves its implementation. The control statement only confirms the formal reporting of the transaction, not that the service was actually provided in the declared form and by the declared supplier.
The SAC also reminded that the tax administrator does not have to prove that the performance did not take place at all or that the documents are false. Its task is to prove the existence of serious and reasonable doubts about the compliance of formal documents with reality. If it succeeds, it is up to the taxpayer to dispel these doubts.
At the same time, the SAC emphasized that the tax administrator did not require the company to prove the entire subcontracting chain or to identify all specific persons who actually performed the services. The essential thing was that the evidence submitted as a whole did not remove doubts as to whether the performance was provided by the declared supplier. The part of the judgment concerning the loss of data after a hacker attack is also interesting. The company claimed that it lost some of the evidence because of the attack. However, the SAC stated that this circumstance in itself does not change the distribution of the burden of proof.
If a taxpayer claims the right to deduct VAT, it must take into account that it will be necessary to document the existence of the supply later, and it should also adapt its internal archiving and backup procedures accordingly.
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