Amendment to the VAT Act regarding the rules of e-commerce

 The amendment to the VAT Act, which should change the rules for mail orders of goods within the EU with effect from 1 July 2021, has not been passed on to the Senate for further negotiations so far. Several amendment proposals have been prepared regarding e.g. the change in the VAT rate for basic food items (meat, baked goods etc.) or the increase in the limit for VAT payment registration from CZK 1 million to CZK 2 million. Further negotiations regarding the amendment are expected towards the end of May.

Tax exemption of imported goods

The possibility to exempt from tax the imports of goods acquired for the purpose of fighting the coronavirus pandemic has been extended on the EU level until the end of 2021. The possible exemption also applies to import to the Czech Republic, as was confirmed by the General Financial Directorate on its website at the beginning of May.

Judgements of the CJEU

• The decision of the CJEU regarding C-935/19 Grupa Warzywna sp. z o.o. is concerned with a sanction of 20% of the amount of VAT deduction additionally assessed to the customer during a tax audit. In this situation, VAT was applied incorrectly by the supplier and paid to the tax administrator. Pursuant to the CJEU, it is an unauthorised sanction, which contradicts the proportionality rule. The decision above could thus significantly influence the administration practice in the Czech Republic.
• The CJEU issued a decision in respect of C-703/19 J. K. regarding how to distinguish between restaurant services and the supply of food as goods. The Court stated that restaurant services include such services where the sale of food is accompanied by a sufficient level of support services, allowing immediate consumption, and the services prevail over the act of food supply. We believe that the Court has thus avoided giving any practical answer. The only clear conclusion of the CJEU is that the sale of food “to go” is considered a supply of goods, which has never been subject to much doubt in practice.
• The decision of the CJEU regarding C‑844/19 technoRent emphasises the role of national courts with regard to the interest on excessive tax deduction that has been withheld by the tax administrator without justification. It is becoming apparent that the amount of interest cannot be determined on the basis of EU law, but only by applying internal regulations. If the interest cannot be determined at a sufficient level, tax entities may require the compensation of damage from the state.
• An opinion of the attorney general regarding C‑80/20 Wilo Salmson France SAS has been published, describing the possibility of VAT refund based on an invoice duly issued only several years after the performance was carried out. The attorney general came to a surprising conclusion that the tax document can only include information about the provider, performance recipient and the subject of the performance, and then only the price and a separately stated VAT. Such a conclusion, if approved by the Court of Justice of the EU, could affect the interpretation of the VAT Act in many ways.