The amendment to the VAT Act, which should, among other things, increase the limit for taxpayer registration, is still in the legislative process. The government has issued a regulation that changes the scope of goods for the supply of which the reverse charge regime applies. The Minister of Finance cancelled the VAT exemption on the supply of gas and electricity. These are just some of the topics covered by the VAT news.
Amendment to the VAT Act – increased limit for registration
The amendment to the VAT Act, which should increase the limit for registration as a taxpayer (from the current CZK 1 million to CZK 2 million for twelve consecutive months) as of 1 January 2023, is still going through the legislative process. On the closing date, the second reading in the Chamber of Deputies had not yet taken place. In addition to the actual limit increase, the amendment also contains rules for the transition between 2022 and 2023, and even allows some people who exceed the 1 million limit to avoid becoming a taxpayer.
Reverse charge regime
The scope of application of the reverse charge regime for the supply of selected commodities (mobile phones, video game consoles or metals) has been changed by the new Government Decree No. 228/2022 as of 10 August 2022. The situation has actually been aligned to the original state valid until the end of 2021, which was, however, unintentionally modified as of January 2022 due to the intervention of customs regulations. In a follow-up information, the General Financial Directorate stated that for supplies made in the period from 1 January 2022 until the date of the Government Decree, no procedure will be questioned for the supply of the commodities concerned (i.e. both the reverse charge regime and the standard VAT application regime will be accepted).
Cancellation of the VAT exemption on the supply of gas and electricity
The Minister of Finance has revoked the decision of the previous Minister of Finance to remove VAT on the supply of electricity and gas, which covered the supply of these commodities in November and December 2021. The decision is only effective for the future, i.e. it does not retroactively change the procedure for tax application. In practice, however, it is important for those who did not follow the decision and strictly adhered to the VAT Act.
Judgements of the CJEU
- C-56/21 Arvi (taxation option)
In its decision on C-56/21 Arvi, the Court addressed the question of the scope of voluntary taxation of transfers of immovable property. It gave the Member States a relatively wide scope to set their own conditions for the VAT application. It appears that the conditions of the Czech VAT Act for voluntary taxation of real estate transfers (or for voluntary taxation of real estate rentals) are in line with European law.
The Advocate General’s opinion in Case C-247/21 Luxury Trust concerns the application of the simplification rules for triangular trade. It appears that the intermediate undertaking must issue a tax document with unambiguous text referring to the application of the simplification mechanism. Otherwise, the transaction has a completely different tax regime. If the Court accepts the Advocate General’s opinion, this will have a profound impact on Czech practice.