VAT news [June 2022]

The Coordination Committee of the GFD and the Chamber of Tax Advisors of the Czech Republic has adopted a decision on the tax treatment of prematurely terminated energy supplies in the event that one of the parties withdraws from the contract. On the other hand, the Committee has not yet agreed on the rules for applying VAT in the case of supplies of goods in relation to the humanitarian crisis in Ukraine. This is not the only issue you can read about in the latest VAT news.

Coordination Committees of the GFD and the Chamber of Tax Advisors of the Czech Republic

In May, the Coordination Committee concluded a discussion on the tax regime for early termination of energy supplies (e.g. electricity or gas), where one of the parties exercises its right to withdraw from the contract for the supply of the relevant energy at a pre-agreed fixed price and as compensation pays the other party an amount derived from the market price of the relevant energy. The participants concluded that the compensation granted was subject to VAT at the rate of 21% and that the normal tax regime, not the reverse charge regime, should be applied.

As regards the rules on the application of VAT in the case of supplies of goods in relation to the humanitarian crisis in Ukraine, the discussants have not yet found the necessary consensus within the Coordination Committee. For the time being, the General Financial Directorate rejects the benevolent approach to the taxation of humanitarian aid proposed by the drafters. In the view of the GFD, the distribution of goods cannot be exempt if they are transported outside the EU by the donor. However, if the goods were transported outside the EU by a humanitarian organisation, the GFD acknowledges the exemption, but at the same time places a number of practical restrictions.

Transfers under reverse charge

The Government of the Czech Republic has submitted a draft amendment to Regulation No. 361/2014, which sets out the scope of goods subject to the reverse charge regime. The existing wording of the Regulation ceased to refer to the relevant codes of the customs nomenclature as of 1 January 2022 (i.e. after the customs tariff has been amended) so the amendment of the Regulation is of the utmost necessity.

Judgement of the CJEU

  • C-1/21 Director (liability of a member of the statutory bodies)

In his opinion in Case C-1/21 Director, the Advocate General of the CJEU considered whether European VAT law gives Member States scope for VAT liability not paid by a company through its director who, despite the company’s poor financial situation, has repeatedly increased his or her remuneration and the manner in which the increased remuneration was paid did not comply with the legal requirements. The Advocate General concluded that European law does not regulate this issue. It is therefore a matter for the national law of each Member State to decide how to approach the issue.

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