Amendment to the VAT Act

In connection with the amendment to the VAT Act effective from 1 January 2025, the General Financial Directorate (GFD) has published information describing some of the most significant changes. The document summarises in detail the text of the Act and the related explanatory memorandums, providing illustrative examples for certain areas. Topics covered include changes in payer registration and turnover determination, corrections to the tax base, new procedures for claiming tax deductions, updates on determining the place of supply and determination of the tax base. Unfortunately, this information does not address all problematic areas. The GFD is preparing a whole series of additional methodologies that should deal with unclear topics in more detail. However, the date of their publication is yet to be announced.

Activities of the Tax Administration

The GFD has released the long-awaited information on applying VAT to fuel payments made through petrocard companies. A related contribution was concluded within the Coordination Committee of the GFD and the Chamber of Tax Advisors. The content of the information implies, among other things, that it is always necessary to examine whether the conditions for the supply of goods are met by each entity in the chain. Therefore, companies working with petrocard companies that do not have clearly defined contractual terms of cooperation should take note.

The discussion within the Coordination Committee regarding the VAT treatment of damages for stolen goods has been postponed again and is expected to resume in February. It would appear that it may be impossible to reach an agreement on all aspects of dealing with the theft of goods from a VAT perspective.

At the start of this year, the Ministry of Finance published a list of countries with which the Czech Republic has reciprocity with regard to VAT refunds. Bosnia and Herzegovina has recently been added to the list, while Macedonia has been removed.

Case Law of the Supreme Administrative Court

In the SAC‘s decision in case 1 Afs 35/2024-43, the court addressed the issue of the start of the six-month limitation period for terminating the obligation to pay a fine related to the VAT control statement. According to the SAC, the deadline period starts after the expiry of the deadline for filing the VAT control statement, i.e. from the 25th day following the end of the calendar month for which the VAT control statement is to be submitted. This interpretation is expected to significantly influence practical application.

Judgements of the CJEU

• In case C 622/23 rhtb: projekt gmbh, the Court of Justice of the EU ruled on the taxation of compensation for an unfinished construction project where the client bore full responsibility for its non-completion. The CJEU determined that the compensation is subject to VAT as it does not constitute lump-sum compensation for damages. Instead, the CJEU stated, the consideration for the amount to be paid by the recipient of services is the right arising from the terminated contract. The decision could have significant implications for Czech practice.
• The decision C-680/23 Modexel was issued concerning the issue of carry-over of excess deductions to the subsequent periods, specific to Portuguese legislation. Given the differences in the Czech VAT rules, this judgment is of limited relevance to the practice in the Czech Republic.
• On the other hand, we consider the CJEU‘s decision in case C-331/23 Dranken Van Eetvelde, concerning unconditional overall liability for unpaid tax by another link in the fraudulent chain, to be very important. According to the CJEU, an individual can only be held jointly and severally liable if they knew or ought to have known that they were participating in tax evasion. However, the CJEU’s commentary regarding the options of taxpayers when it comes to proving their non-involvement leaves taxpayers with limited means to avoid joint liability.
• In case C-527/23 Weatherford Atlas Gip SA, the CJEU commented on the issue of claiming a tax deduction. This judgment is valuable in that it summarises the rules for the application of a tax deduction, reaffirming established principles without introducing unexpected interpretations.
• In case C-794/23 P GmbH, the Advocate General of the CJEU examined the correction of erroneous tax amounts stated on a number of tax documents issued to customers. This involved more than 20,000 tax documents and an unspecified number of customers. In his analysis, the Advocate General of the Court of Justice concluded that tax proceedings should always be carried out in close cooperation between the tax administrator and the taxpayer and that the resulting amount of tax does not have to match the exact amount. This is a quite controversial opinion and it is questionable whether the Court of Justice will adopt this approach.