Should the compensation of cost incurred in connection with wage deductions of employees under enforcement proceedings be subject to VAT? How should leasebacks be regarded from the VAT perspective? Should the services rendered by municipalities to providers of collective systems for waste collection subcontracts be taxed? The Coordination Committee of the Chamber of Tax Advisors of the Czech Republic and the General Financial Directorate has sought answers to these questions.
Enforcement of a Judgment and Wage Deductions
Since January 2022, the employers who, based on enforcement orders, deduct employee payments have been entitled to statutory cost compensation. The General Financial Directorate (GFD) within the Coordination Committee between the Chamber of Tax Advisors of the Czech Republic (CTA CR) and the GFD has issued a preliminary statement that the compensation is subject to value-added tax. In our opinion, there are arguments to the contrary. The case has not yet been finalised.
Leasebacks
A proposal to the Coordination Committee of the CTA CR and GFD regarding the assessment of leasebacks from the VAT perspective is currently being prepared for subsequent negotiation. The submitters propose that, under general conditions mentioned in the proposal, it should not be regarded as a supply of goods and rent-back to the supplier. In their opinion, it should be a service provision (it is understood that it may represent a certain form of financing). A common consensus of the parties concerned can be observed on the proposal.
Municipalities and Providers of Collective Waste Management Systems
A proposal on the taxability of services provided by municipalities to the operators of collective systems in connection with subcontracting of waste collection has been submitted to the Coordination Committee of CTA CR and GFD. The submitter suggests that the accepted payments should be taxed by the municipalities. Such a conclusion would have a material impact on the municipalities as they currently do not pay VAT on the payments in question.
Judgements of the CJEU
In Case C-513/20 Termas Sulfurosas de Alcafache, the Court of Justice considered the issue of which services may be so closely related to exempt medical care that they are also eligible for VAT exemption. The description of the rules is quite specific and could therefore bring further consistency of the approach in practice.
In its decision in Case C-90/20 Apcoa Parking Danmark, the CJEU definitely confirmed the VAT penalty regime for non-compliance by the customer. In general terms, it appears that the Court of Justice does not leave much space for invoiced contractual penalties or compensation to be outside the scope of tax.
In its decision in Case C-9/20 Grundstücksgemeinschaft Kollaustraße, the Court of Justice described how temporal connections between the payment of output VAT and the claim for its deduction should be treated. We do not assume that this decision will have any impact on current practice.
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