Tax 

VAT News [June 2020]

The legislative process concerning the amendment to the VAT Act continues. For selected types of goods, the opportunity to obtain an exemption from the duty to pay VAT is extended. The Court of Justice of the European Union has pronounced three interesting judgements that may also affect the Czech legal environment.

VAT Act Amendment

The amendment introducing new rules for intra-community trade in goods, which was supposed to be effective from 1 January 2020, was finally approved by the Chamber of Deputies and referred to the Senate for further consideration. There is also another amendment that should, after it is signed by the President, introduce a 10% VAT rate for the provision of selected cultural, sports or accommodation services.

VAT remission of selected gratuitously provided goods

By her decision published in Financial Bulletin No. 9/2020, the Minister of Finance remits the duty to pay VAT on selected gratuitously provided goods (donations of face masks, protective gloves, COVID-19 test kits, ventilators, thermometers, etc., including the donation of material needed for the production of the listed goods). In principle, the decision copies the older decision regarding the VAT remission, which was effective until 17 May 2020, thus extending the opportunity to obtain an exemption from the duty to pay VAT, for the period from 18 May 2020 to 31 July 2020.

CJEU judgements

 C-684/18 World Comm Trading

In this decision, the CJEU described the obligation to correct the right to claim the VAT deduction if the recipient of goods subsequently receives an additional bonus from their supplier. However, the court’s argument is also pertinent to the case of providing so-called indirect bonuses from foreign entities. In the current practice in the Czech Republic, such indirect bonuses are considered to be completely outside the VAT treatment, with no effects on the recipient’s right to claim the VAT deduction. As it turns out, the opposite is true, and the existing practices should be reviewed and reassessed if necessary.

C-43/19 Vodafone Portugal

The CJEU commented on the VAT treatment of payments, which had to be paid to the provider of telecommunications services in the event of an untimely termination of a contract concluded for a predetermined number of months/years. Since it is clear that the termination payments were solely intended to cover the costs of Vodafone Portugal, the company argued that it was a mere compensation outside the tax subject. However, the CJEU was of a different opinion. The CJEU’s judgement could also have more general implications for other types of performance provided on a long-term basis, such as those based on leases. As it turns out, it is often necessary to pay VAT on payments related to the termination of contracts.

C-756/19 Ramada Storax SA

In its resolution, the CJEU confirmed that a creditor’s entitlement to a VAT refund on uncollectible receivables cannot be limited by a tax administrator’s inability to recover the corresponding tax amount from a debtor, or by insolvency proceedings against the debtor that are subject to the law of another EU member state. This is another confirmation of the fact that the Czech VAT Act is not fully in line with the EU rules.

VAT Act Amendment CJEU Indirect Taxes dReport newsletter