In the March VAT news, you will learn what rules for tax relief apply to the supply of goods in connection with the humanitarian crisis in Ukraine, what tax rates contact lenses are subject to according to the GFD, or what proposals to exempt gas, electricity or fuel supplies from VAT are currently being discussed in the Chamber of Deputies. We will also look at the case law of the CJEU.
VAT tax relief related to the situation in Ukraine
On their website, the General Financial Directorate (GFD) has summarised selected rules for the application of VAT in the case of the supply of goods in connection with the humanitarian crisis in Ukraine. According to GFD, it is possible to exempt from VAT the supply of goods to humanitarian organisations that export such goods outside the EU. At the same time, the GFD commented ambiguously on how the donor should prove that the conditions for the application of the relevant VAT exemption were met. Furthermore, in the opinion of the GFD, the VAT exemption cannot be applied in the provision of tangible gifts by the payer directly to persons in a third country, as it is not an export of goods as described in Section 66 of the VAT Act (this opinion can be agreed on). Last but not least, the GFD also listed the numbers of the tax return lines in which the relevant supplies of goods should be reported.
VAT rate on the delivery of contact lenses
The GFD informed that the contact lenses are classified in customs nomenclature code CN 90. In such a case, at least in the opinion of the GFD, their sale is subject to a 15% VAT rate if they are a medical device (which condition seems to be fulfilled unequivocally). Crucially, with this information, the GFD rejected the extensive interpretation of the amendment to the VAT Act effective from January 2022, according to which contact lenses could hypothetically fall into one of the reimbursement groups under the Act on the General Health Insurance Company.
Exemption of gas/electricity and fuel supply
A group of deputies submitted draft amendments to the VAT Act, on the basis of which an exemption from VAT could be introduced temporarily on the supply of gas or electricity (the proposed period for applying the exemption is 12 months) and permanently on the supply of fuel. It is questionable whether these amendments will actually be adopted in the legislative process.
Judgement of the CJEU
- Repair of goods under warranty
In case C-605/20 Suzlon Wind Energy Portugal, the Court of Justice of the EU has assessed the performance of the warranty repairs of goods directly by the customer, where the cost of repair is charged by the customer to the supplier of the goods without any margin. According to the CJEU, the customer provided a separate service to the supplier and was to pay output VAT. The decision could change the practice in the Czech Republic in situations where the customer repairs the defects of the goods and requires the supplier to compensate for the costs.