VAT news [November 2023]

Tax

The amendment to the VAT Act has been signed by the President. The meeting of the Coordination Committee of the General Financial Directorate and the Chamber of Tax Advisors will address a likely change in the Czech Financial Administration’s approach to the application of VAT on fuel card payments. The EU Court of Justice has addressed the difference in VAT rates between the sale of chocolate beverages and their serving in a café. For more information, read the latest VAT news.

The government’s consolidation package and VAT

The amendment to the VAT Act, which would introduce a single reduced tax rate of 12% and a limit for applying VAT deductions on the purchase of M1 category passenger cars, has been approved by the President of the Czech Republic. It will be valid as of 1. 1. 2024.

Developments in fuel card interpretations

In September, the European Commission’s VAT Expert Group issued information on the application of VAT on the use of fuel cards (e.g. CCS cards) when refuelling, which apparently contradicts the theoretical rules of the VAT system. Therefore, a submission has been prepared for the next meeting of the Coordination Committee of the General Financial Directorate and the Chamber of Tax Advisors of the Czech Republic, the aim of which is to determine the position of the Czech Financial Administration on this matter. It is likely that the current approach to the payment of fuel through fuel cards will have to be changed to some extent. However, it remains unclear which specific alterations to the contractual terms are required to satisfy the criteria of the European Commission’s VAT Expert Group.

CJEU/SAC case law

The CJEU’s judgment in Case C-146/22 YD concerns the possibility of applying a different VAT rate to (1) the sale of a chocolate beverage prepared from milk and a chocolate ingredient and (2) the serving of such a beverage when prepared and served as a hot beverage in a café. Although the amendment to the Czech VAT Act should largely eliminate such problems by unifying the rate for the sale and serving of beverages, some contentious issues remain as milk drinks and selected milk-based beverages will be subject to a reduced rate of 12%.
In Case 2 Afs 323/2021-56, the Supreme Administrative Court (SAC) of the Czech Republic addressed the VAT treatment of the transfer for consideration of a technically improved leasehold property upon termination of the lease. According to the Supreme Administrative Court, this is a taxable supply that cannot be subject to the reverse charge regime because it is a transfer of goods for use by another person, not construction work. The SAC bridged the ambiguous wording of the law with the euro-conforming interpretation and its judgment may thus appear surprising.