The introduction of excise duty on kratom, the conclusions of the Coordination Committee meeting between the GFD and the Chamber of Tax Advisors of the Czech Republic, and the latest case law of the Court of Justice of the EU – these are the topics we bring in the October VAT news.
Activities of the tax administration
The Ministry of Health has submitted a draft amendment to the Act on Addictive Substances and on the Amendment of Related Legislation, which envisages the introduction of excise duty on kratom. The proposal also includes an increase in the VAT rate, which could lead to a higher tax burden on these products. The amendment to the Act has now been submitted to the Chamber of Deputies for discussion, while the proposed changes are expected to take effect from 1 January 2027.
Within the Coordination Committee between the GFD and the Chamber of Tax Advisors of the Czech Republic, contributions concerning the VAT regime for medical examinations provided on the basis of a customer/patient (self-payer) request and also the disposal of goods with the subsequent sale of material obtained during disposal were discussed and concluded. Another paper discussed described the situation of the use of unfinished property outside the economic activity of the VAT payer and the determination of the tax base, however, this contribution was withdrawn.
- In the case of the VAT regime, for examinations provided on the basis of a customer/patient (self-payer’s request), the GFD assessed the predominant purpose of the service. It concluded that laboratory tests indicated by a doctor (or tests supplemented by a professional interpretation of the results) are exempt from VAT. However, in the case of self-paying tests without a professional indication by a doctor, the GFD is of the opinion that the conditions for VAT exemption are not met.
- With regard to the application of VAT to goods intended for disposal with the subsequent sale of material obtained during liquidation, the GFD stated that the material could be a partial consideration for the liquidation service and the rules for barter should then be applied (unfortunately, the GFD did not clarify in which cases this may occur). The GFD further concluded that it is necessary to objectively assess whether the liquidated goods do not constitute scrap with a mandatory reverse charge regime in accordance with the rules for customs classification of goods.
CJEU case law
- In case T-84/26 Rotex Europe, the General Court dealt with the conditions for exercising the right to deduct VAT on goods acquired before the taxable person’s registration. The General Court found that the right to deduct cannot be limited by the requirement that the assets are part of the taxpayer’s business assets on the date of registration, provided that the substantive conditions for deduction are met. Such a condition, according to the General Court, goes beyond the scope of the VAT Directive and is liable to unduly restrict the principle of fiscal neutrality. That conclusion may have an impact on the approach used in practice.
- In case T-366/25 Szytelbiecka, the General Court ruled on the application of the rules on the transfer of a business in a situation where there was a gift of an undertaking to two natural persons, each receiving 50% and each subsequently making a contribution to a joint venture. The General Court concluded that the donation of an undertaking to two persons who subsequently contribute their shares to a company continuing to operate the business did not constitute a transfer of the business for VAT purposes. The General Court emphasised that, in order to apply the rules on the transfer of a business, the continuity of the transfer of the business to a specific acquirer who is immediately carrying on an economic activity must be maintained.
- The possibility of retrospectively applying the simplification for triangular trade by means of a correction of invoices was addressed by the General Court in its judgment in case T-773/25 Finanzamt für Großbetriebe. If the initial invoices did not contain a mandatory note on the reverse charge to the customer, the conditions for triangulation were not met, according to the General Court. However, a subsequent correction of invoices cannot have retroactive effects and cannot give rise to a claim to benefit from the triangular trade regime even at a later stage. In this case, the General Court confirmed the previous approach resulting from previous case-law.
- In its judgment C-565/24 P‑GmbH, the CJEU dealt with the application of the special travel arrangement (TOMS) to tours organised in connection with demonstration events. It stated that the parties are not obliged to purchase the goods offered and that the package may constitute a separate destination for them. Therefore, in its view, the travel service cannot be regarded as an ancillary supply to the supply of goods. Such tours are therefore subject to the TOMS scheme, irrespective of their loss-making nature or the fact that the economic benefit derives from the subsequent sale of the goods. At the same time, the Court confirmed that a negative margin under the TOMS scheme does not give rise to a VAT refund and that the principle of fiscal neutrality cannot lead to a derogation from the rules of this special scheme. The court’s conclusions correspond to the usual interpretation of the rules for travel services under the Czech VAT Act.
