VAT news [January 2023]

The General Financial Directorate has published two key pieces of information relating to the current amendment to the VAT Act. The Ministry of Finance has published in its newsletter a new methodology for the remission of fines for failure to submit a control statement. The Court of Justice of the EU has issued important decisions that should be heeded in the Czech environment.

Information from the Tax Administration

The General Financial Directorate issued two key pieces of information in connection with the amendment to the VAT Act effective from 1 January 2023. The first one explained in detail the part of the amendment that brings a change in the limit for registration as a taxpayer (this limit has been increased by the amendment from CZK 1 million to CZK 2 million for twelve consecutive calendar months). The second piece of information described very precisely the issue of control statements, in particular the issue of calls for submission of a control statement or a subsequent control statement and the issue of the penalty system for failure to comply with the obligation to submit a control statement or subsequent control statement.

At the same time, the Ministry of Finance has updated the methodology for the remission of fines for failure to file a control statement. The new methodology was published in the Financial Bulletin No. 18/2022.

Judgements of the CJEU

  • Triangular trade scheme and invoice form

There is a very important CJEU decision in Case C-247/21 Luxury Trust, concerning the simplification regime for a triangular transaction. The CJEU commented on the form in which the intermediate trader must issue the invoice in order for this simplification to apply. According to the CJEU, the invoice must necessarily contain the statement “the tax is to be paid by the customer”. The absence of this text cannot be compensated for retrospectively. It is therefore necessary to adapt quickly to the procedure required by the new CJEU decision.

  • Correction of tax incorrectly stated on a document

Another surprising CJEU decision relates to the correction of the amount of VAT stated on documents at an incorrectly higher rate. In Case C-378/21 P GmbH, the CJEU held that the obligation to pay such tax does not arise at all in the case of a document issued to a non-taxable person. This implies that it is not even for the EU VAT Directive to lay down rules for the correction of an erroneous amount.

  • Distribution of vouchers to employees

Decision C-607/20 GE Aircraft Engine Services concerns the gratuitous distribution of vouchers to employees under an employee reward scheme. Although this is a case in which the CJEU commented on the now invalid rules on the treatment of vouchers from a VAT perspective, it also contains some timeless and therefore still applicable arguments for the possibility of claiming a deduction for the purchase of vouchers intended for employees.

  • Entitlement to a tax deduction – a fraudulent link in the chain of traders

In Case C-596/21 Finanzamt M, the CJEU addressed the question of entitlement to a tax deduction in the case of unintentional participation in fraud. It held that the purchaser is not entitled to a deduction at all if he could have known of the fraudulent conduct after the implementation and evaluation of effective preventive measures. That conclusion is not affected by the fact that the fraudulent link in the chain of traders declared (and paid) part of the tax and that the failure to grant the full deduction is therefore financially advantageous for the tax administrator.

  • Exemption for cross-border social services

The opinion of the Advocate General of the CJEU in Case C-620/21 MOMTRADE RUSE concerning the exemption for cross-border provision of social services has been issued. In her analysis, the Advocate General concluded that the application of the exemption for these services is determined by the legislation of the EU Member State where the services are consumed by the final customer.

GFD CJEU Indirect Taxes VAT dReport newsletter

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