The General Financial Directorate is preparing changes to the information on the application of VAT in the field of real estate. In addition, it intends to issue information on the determination of the tax base for donations of goods, for example, donations to food banks. The Ministry of Finance has commented on the issue of VAT on energy supplies at capped prices. And the Court of Justice of the European Union has ruled on the question of whether the supply of photovoltaic power plants and heat pumps by municipalities is subject to VAT.
Upcoming GFD information
The General Financial Directorate is preparing extensive changes to the information on the application of VAT in the real estate sector, which was published several years ago. According to preliminary statements of the responsible officials, the interpretation of the law should not change conceptually. However, in the course of the discussion, it became clear that the General Financial Directorate interprets some issues in a way that is not in line with the case law of the CJEU. It is, therefore, possible that the upcoming information could describe some concepts (e.g. ‘building plot’, ‘functional unit’ or ‘residential space’) in a new way.
The GFD is also preparing information on the determination of the tax base for donating goods to food banks or, more generally, for donating goods that are practically no longer sellable. It is likely that the GFD will allow the taxable amount of such donations to be set at the minimum taxable amount. If the donated goods do not meet the condition of being effectively unsellable, then the tax base should be their market price. The views of the GFD are at odds with how the European VAT rules view goods handed out for free.
Energy and VAT compensation
At the beginning of April, the Ministry of Finance of the Czech Republic sent out a letter briefly commenting on the issue of VAT on energy supplies at capped prices. The letter indicates that the Ministry will consider the compensation received as an adjustment to the tax base for supplies already made (i.e. not as an advance payment) and that it will tolerate it if no corrective tax document is issued. The Ministry will also not question if the recipient of the compensation does not differentiate between the original mode of supply (reverse charge vs normal taxation). Although the letter contains a number of conclusions which depart completely from the rules laid down in the VAT Act, it is likely that it will be followed in practice.
Judgement of the CJEU
- Sale of goods and provision of services by municipalities
In its judgment in Case C-612/21 Gmina O., the CJEU dealt with the issue of the supply (including installation) of photovoltaic power plants and heat pumps by municipalities for consideration, where such supply is carried out with a public-interest objective. On the basis of a number of criteria (unprofitability, uncertainty of obtaining revenue, one-off nature of the event), the Court concluded that the supply was not subject to value-added tax at all. This decision may be crucial for municipalities and may indirectly affect other non-profit entities.