Starting from the next year, changes in the VAT application in the provision of performance subject to a special scheme for travel agents will take effect. According to the Court of Justice of the European Union, the decision of the Member States on what performance will be subject to the reduced tax rate depends for example on an assessment of the perspective of an “average” consumer. Another statement by the CJEU related to a decrease in the tax base for a pharmaceutical manufacturer who made a subsequent bonus payment to a state health insurer based on a contract. We will provide more details in our October VAT News.
Guidance of the General Financial Directorate on New Rules for Travel Agents
Starting from 1 January 2022, changes in the VAT application in the provision of performance subject to the special scheme for travel agents will take effect. Vendors will be obliged, for example, to tax the received prepayments or impose value added tax on part of air travel to third parties. In this context, the General Financial Directorate has been preparing a methodological guidance and plans to publish it before the end of the year.
In its ruling in case C‑21/20 Balgarska nacionalna televizija, the Court of Justice of the European Union refers to the obligation of the Member States to define a method used to calculate the proportion for reduction in the entitlement to deduct tax in situations when the relevant input taxable supply is partially used for the purposes of an economic activity and partially for the purposes of a non-economic activity. However, such a calculation method is not covered by the Czech legislation.
The Court of Justice of the European Union repeatedly described in case C‑406/20 Phantasialand that the choice of the Members States as to what supplies will be subject to a reduced tax rate depends, among other things, on the point of view of an “average” consumer. It appears to be a pressing issue. It does not seem that the concept of an average consumer could be described in a way that can be translated into practice.
The Court of Justice issued an important ruling in case C-717/19 Boehringer regarding the reduction in the tax base for a pharmaceutical manufacturer who, based on a contract, made a subsequent bonus payment to a state health insurer. In the opinion of the Court of Justice of the European Union, the tax base may be reduced. It does not matter that the obligation to make a subsequent bonus payment arises voluntarily, on a contractual basis. This could change the practice in the Czech Republic.
In its ruling in case C‑299/20 Icade, the Court of Justice explained the definition of building land in a manner that repeatedly shows that the explanation provided by the Financial Administration of the Czech Republic in this issue (among other things, through its methodological guidance) is incorrect. The Court of Justice believes that it is essential for the definition of building land to take into account the broad meaning of the term “building” used in the EU VAT Directive, which is exactly what the Financial Administration of the Czech Republic disregards.
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