Amendment to the VAT Act

The draft amendment to the VAT Act, which should increase the VAT registration limit from the current CZK 1 million to CZK 2 million and reclassify some foodstuffs and beverages from the tax rate of 15% to 10% or 21% starting next year, has not yet been discussed in the Chamber of Deputies. We expect the amendment to be submitted to the Senate in November.

The Coordination Committee of the GFD and the Chamber of Tax Advisors of the Czech Republic

In May, the Coordination Committee concluded the discussion on the tax regime of goods import in relation to the humanitarian crisis in Ukraine. In the opinion of the GFD, the distribution of goods cannot be exempted if the donor transports the goods outside the EU. The GFD allows the exemption provided the goods are first donated to a humanitarian organisation that transports them outside the EU.

Judgements of the CJEU

• Securitisation of receivables

In Case C‑250/21 Fundusz, the Court of Justice of the EU (“CJEU”) described a situation where the creditor undertook to transfer all future income from a loan to a third party with the receivable remaining in the creditor’s assets. According to the CJEU, this represents an exempt funding service. This decision, in our opinion, may lead to a change in the approach to this type of receivable transaction.

• Fitness training rate

In September, the CJEU decided in Case C‑330/21 Escape Center concerning the VAT rate on the use of sports facilities for sports activities. In the Court’s opinion, individual instruction aimed at education or training of a certain sporting discipline cannot be subject to the reduced rate. It remains a question if such a rule is reflected in Czech practice.

• Tax deduction for purchase from a person overburdened with debts

The CJEU’s decision in Case C-227/21 HA.EN involves the matter of refusing a tax deduction entitlement in the case of a purchase from a person who is clearly in financial difficulties and has not fulfilled the obligation to pay VAT to the state. The Court has decided that it was not possible to limit the tax deduction entitlement for these reasons. It has not even found that failure to pay the VAT constituted tax fraud or abuse of the law. This may, in our view, help form the approach to the matter of tax deduction entitlement as well as the question of liability for VAT not paid by the supplier.

• Tax correction

The opinion of the Advocate General of the CJEU in Case C-378/21 P GmbH discusses in detail the possibility to correct an incorrect tax amount on an invoice. The Advocate General makes a clear distinction between the tax correction processes on a document issued in the B2C sector and in the B2B sector. The question is whether the Czech VAT Act can be interpreted accordingly.