Amendment to the VAT Act in 2025

An extensive amendment to the VAT Act, introducing changes in areas such as VAT deduction claims, adjustments for bad debt taxation, real estate transfer taxation, corrections to the tax base, assessing the tax base for the sales of selected goods to employees and financial services, is set for discussion in the Chamber of Deputies during its third reading. As of the dReport submission deadline, the specific date for the discussion has not yet been announced.

Judgements of the CJEU

• In its ruling C-429/23 NARE-BG, the CJEU confirmed that after the expiration of the tax assessment period, the right to a tax deduction cannot be claimed, nor can it be increased through corrections to the tax deduction. This rule appears to be in line with the approach of the Czech VAT Act.
• In case C-243/23 Drebers, the Court addressed the issue of the time limit for adjusting a tax deduction related to the major renovation of a building. In its ruling, the Court clarified that Member States have the authority to evaluate the renovation of older buildings but cannot differentiate between investments in new construction and major renovations of existing buildings. The Czech VAT Act aligns with the Court’s decision and does not deviate from this interpretation.
• In case C-475/23 Voestalpine Giesserei Linz, the CJEU ruled that a taxpayer is entitled to deduct tax on the acquisition of a tool if the cost of the tool is a co-determinant of the price of the transaction. According to the CJEU, the right to deduct cannot be denied even if the taxpayer has provided the tool to their supplier to process the taxpayer’s goods. In our opinion, this is an approach which corresponds to the common practice in the Czech Republic, but the Court has nevertheless indicated certain restrictions on the deduction. The taxpayer would be required to reduce its claim for deduction if the provision of the tool “goes beyond what is necessary for the processing of the taxpayer’s goods”.
• The CJEU addressed the issue of the abuse of law in the SME exemption scheme in its ruling C-171/23 UP CAFFE, where it held that abuse may occur if the taxpayer transfers the business to a new company simply because the turnover of the non-taxpayer exceeds that of the taxpayer. The absence of national legislation addressing the abuse is irrelevant. The tax authorities are entitled to refuse the application of this scheme and to reclassify the transaction.
• In case C-60/23 Digital Charging Solutions (“DCS”), the CJEU ruled that the supply of electricity for charging an electric vehicle at a charging point constitutes a supply of goods. The Court confirmed that the conditions for a commission contract were satisfied under a model where the electricity supplier billed DCS monthly for the electricity consumed, and DCS, in turn, billed the final customers monthly for both the consumed electricity and its own remuneration through a flat monthly rate. The Court clarified that these conditions are met even if the lump sum payment to DCS does not represent a separate transaction. Additionally, the Court held that case-law concerning fuel supply paid for by fuel card companies does not apply to this model. This approach aligns fully with the current practice.