Amendments to the VAT Act

From January 2024, a single reduced tax rate of 12% is introduced in the Czech Republic for selected goods/services, and a new exemption is applied for the supply of books and similar publications. In this area, the GFD information has been issued describing some aspects of the application of the correct VAT rate (or VAT exemption). The information simply summarises the text of the law and the explanatory memorandum thereto and clarifies some problematic issues. These mostly concern the application of the rate to supply or serving of beverages. For example, infant follow-on formulae, although it has consistency of a liquid with a high water content ready for immediate consumption, should continue to be foodstuff subject to the 12% VAT rate for the purposes of the VAT Act. Milk coffee drinks should be subject to the reduced VAT rate, while coffee, on the other hand, should be subject to the standard VAT rate regardless of the amount of milk added. Syrups, loose teas, and coffee beans will also be subject to the reduced rate.

The amendment has also introduced a limit on the VAT deduction for the purchase of passenger cars of the M1 category. At the time of the editorial deadline, the General Financial Directorate was preparing the information according to which, in the case of these types of cars leased under a finance lease, the limit should be applied only on the part of the lessee, not the lessor. We expect this information to be issued in the coming days.

In a separate amendment effective from January 2024, the rules for determining the date of the taxable event on the supply of electricity, gas, gas, heat, cold or other performance provided under the terms of the Energy Act have been revised. Therefore, the change should affect only producers or distributors of these commodities. The amendment will allow them to pay VAT later than under the current rules.

Judgements of the CJEU

• The CJEU’s decision in Case C-288/22 TP concerning the taxability of the performance of the office of a member of the statutory body of a legal entity for remuneration brought a considerable number of innovative conclusions in the area of a taxable person’s status and economic activity from the VAT perspective. In addition to the fact that the CJEU has almost always placed the performance of the office of a member of a statutory body of a legal entity outside the scope of VAT (which may be perceived as contradictory to the established case-law of the Supreme Administrative Court of the Czech Republic), the CJEU has also commented on more general matters concerning the taxability of a certain activity. Among the criteria of taxability, it included, for example, the regularity of remuneration to be received by a person for their activity.
• In Case C-532/22 SC Westside Unicat SRL, the CJEU examined the determination of the place of taxable transactions in the case of interactive video chat recording by a studio for a third party (who then live-streams the chats). The Court held that this service is not the right of admission to entertainment events and is therefore subject to the basic rule on the determination of the place of taxable transactions. At the same time, the CJEU held – beyond the present case – that if the service were the right of admission to entertainment events, the place of taxable transactions would not be the place of the provider’s registered office.