Amendment to the VAT Act in 2025

The amendment to the VAT Act, which introduces changes in areas such as VAT deduction claims, corrections of tax on bad debts, taxation of real estate transfers, adjustments to the tax base, determining the tax base for the sale of selected goods to employees and changes in the area of financial services, has passed its second reading in the Chamber of Deputies. It will now proceed to the next stages of the legislative process. Contrary to expectations, virtually no amendments were proposed at the second reading.

Tax administration activities

The Coordination Committee of the General Financial Directorate and the Chamber of Tax Advisors of the Czech Republic will discuss the issue of tax liability in cases where goods are stolen, provided the perpetrator is identified and held responsible for reimbursing the value of the stolen goods. The authors of the proposal suggest that output VAT should not be deducted from the reimbursement. The proposed conclusion aligns with the current practice in the Czech Republic.

The General Financial Directorate is also preparing guidance on the application of VAT for fuel payments made through petrocard companies . Based on the first version of the draft information, it appears that the aim is to allow tax entities to fully maintain the current practice in this area.

Judgements of the CJEU

• In case C-87/23 Latvijas, the CJEU confirmed that even a sustained loss-making activity can be considered an economic activity. Engaging in economic activity should give rise to the right to tax deductions. According to the Court, price subsidies that offset losses on individual sales enter the tax base and are therefore subject to output VAT. In our opinion, this interpretation aligns with common practice in the Czech Republic.
• In case C-182/23 Makowit, the Court of Justice addressed the application of VAT to the expropriation of land by a public authority for compensation. The Court ruled that the supply of goods for consideration when used for economic activities is subject to VAT, regardless of whether the sale is voluntary or compulsory.
• In case C-83/23 H GmbH v Finanzamt, the Court of Justice clarified the procedures for recovering VAT incorrectly invoiced by tax authorities where the taxable person has failed to recover it from their supplier. This decision may significantly influence the formulation of the VAT refund rules which are expected to be introduced in the Czech VAT Act starting in 2026, according to the current plans of the Ministry of Finance of the Czech Republic.