The Amendments to the VAT Act

In late May, the Chamber of Deputies will discuss a series of partial amendments to the VAT Act. One of the most important amendments is the one establishing new rules for intra‑Community trade in goods (the so called Quick Fixes Amendment), which should have been effective already since 1 January 2020. Another key amendment is also the so-called E-commerce amendment that should be effective from January 2021. It should introduce to the VAT Act, among other things, modified procedures for mail order sale of goods and brand new rules for handling goods imported from outside the EU or goods which are traded in the EU by persons from third countries in case the trades are facilitated by electronic platforms. Interestingly, the effective date of the amendment could be postponed by at least another six months since a new initiative concerning an overall postponement of the effective date is now being created at the European Committee level. Another amendment worth mentioning is the proposal for reducing the VAT rate to 10% for supplies related to social housing.

Coordination Committees

There are currently two contributions submitted for the next meeting of the Coordination Committee between the General Financial Directorate and the Chamber of Tax Advisers of the Czech Republic. The first one concerns the assessment of the transfer of leased real estate as a taxable transaction. The second one concerns the application of VAT in case where otherwise non‑taxable persons (municipalities, natural persons) sell assets. Both of these topics are thus very ambiguous and controversial. The conclusions have not been discussed yet.

CJEU judgements

In case C‑446/18 Agrobet, the CJEU ruled on the question whether an excess deduction could be divided into a disputed and an undisputed part corresponding to the individual transactions that are not affected by the scope of the tax audit. In principle, the CJEU described the existing text of the Czech Tax Code as contradictory to EU law by stating that it must be possible to identify the undisputed part and that it must be quickly paid out. However, the amendment to the Tax Code that is currently being considered by the Chamber of Deputies of the Czech Republic brings the regulations in question in line with the CJEU’s opinions.

In case C-547/18 Dong Yang, the CJEU very briefly described that the payers could not be required to find out whether their customer residing in a third country owned a fixed establishment in the EU. This judgment is very favourable for VAT taxpayers, who should in this matter rely on the data provided either by their tax administrator or by the customer.

In case C‑401/18 Herst, the CJEU answered the questions regarding the assignment of transportation as part of a chain transaction and, in principle, also how to determine the substance of supplying goods by one person to another one in terms of the VAT. The CJEU’s answers are completely evasive and it is obvious that there are no clearly defined rules for this issue. More disputes in this area can therefore be expected in the future.