Decision on VAT exemption for respirators

By a decision issued on 1 February 2021, the Minister of Finance exempts supplies of respirators (e.g. of the FFPII type) delivered in the period from 3 February 2021 to 3 April 2021 from VAT. A somewhat awkward fact about this exemption is that it is presented as mandatorily applicable and that no VAT deduction is possible for customers to whom their suppliers deliver respirators including VAT during the given period. Equally strange is the Minister’s idea that VAT on advance payments for respirator supplies paid before 3 February 2021 that were legitimately subject to VAT has to be corrected. These facts are almost alarming as the wording of the current decision corresponds to the wording of decisions previously issued by the Minister, where such principles were not applicable according to the publicly delivered opinion of the General Financial Directorate.

Judgments of the CJEU

• In case C‑288/19 Saarbrucken the Court of Justice of the EU interpreted the provision of a passenger car by an employer to an employee for private purposes as a lease of a tangible asset, if consideration was agreed for such supply. Conversely, if the car is provided free of charge, it is not considered a lease according to the CJEU. This conclusion could affect the place of performance in taxation of employee benefits.
• As part of the judgment in case C‑655/19 LN, the European Court of Justice introduced an entirely new concept of understanding the recovery of due amounts from the VAT perspective. The Court has concluded that the sale of assets acquired from a debtor in an auction is not subject to VAT in some cases because the creditor may only be attempting to recover their property and is thus acting as a non-taxable person. This judgment could have a major effect on the functioning of the leasing market.
• In the opinion on case C‑4/20 ALTI, the Advocate General considered whether a recipient of supply may be liable for VAT (and also for default interest payable by the provider), if the provider included the supply in the VAT return but did not pay the VAT. In the opinion of the Advocate General, there is a hypothetical liability but it must be distinguished whether the provider was evading tax or not and the mere failure to pay the declared tax is not considered evasion. The Advocate would not acknowledge the liability for default interest in the case of ALTI. Furthermore, the Advocate General assessed in an interesting manner whether the right to tax deduction may be lost in the case of tax evasion if VAT is the subject of liability. The Czech financial authorities clearly do not share the Advocate’s opinion.