The Recovery Package in the context of tax changes
Following the Government announcement on the Recovery Package, the related amendment to the tax regulations was published. Below we summarise a selection of the most important changes in this area.
The Court of Justice of the European Union has ruled on the possibility or impossibility of correcting taxation on bad debts that have already been partially recovered. In another case, it dealt with disguised cooperation between persons in an association. And last but not least, it dealt with the concept of “acting in one’s own name but on behalf of the represented party”. Details of the individual case law can be found in the March VAT news.
In the judgement in Case C-482/21 Euler Hermes, the Court of Justice held that VAT cannot be adjusted on bad debts which have been partially recovered through the payment of an insurance claim and assigned to an insurance company. As it turns out, the approach of the Czech VAT Act is consistent with the Court’s view of the rules on the adjustment of tax on bad debts.
The Court of Justice in Case C-519/21 DGRFP Cluj partly described the scope of application of VAT in the case of an association of persons (a company without legal personality) in a situation where third parties (including the tax administrator) were not informed of the existence of the association. In such a case, the Court of Justice does not at all recognise the taxable status of some of the participants in the association. On the contrary, it grants the participants acting on their own behalf with customers the right to deduct tax on the inputs purchased even if the relevant tax documents are issued to another person in the association. Given the high specificity of the case, we believe that its practical application in the Czech Republic will be minimal.
In the Court’s decision in Case C-695/20 Fenix, it became clear that the concept of “acting in one’s own name but on behalf of the person represented” is to be interpreted very broadly in the VAT context in relation to the services of a social media platform (even an intermediary who discloses the identity of the represented party may still be acting in their own name for VAT purposes). As the Court’s statements are very general in principle, we believe that the case law is applicable by analogy to other cases of acting in one’s own name on behalf of the represented party.
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