The Ministry of Finance is taking steps to address the value added tax (VAT) rules and to respond to a judgment of the Court of Justice of the European Union (CJEU).
In the first case (8 Afs 252/2016), a taxpayer was dispatching goods outside the EU. Believing that the delivery was not subject to VAT (because the goods were exported), the taxpayer did not remit VAT on the transactions. This treatment was challenged by the tax authorities, asserting that one precondition for a VAT-exempt sale was not satisfied because the goods had not been released into a customs regime as stipulated by law. The Supreme Administrative Court referred the case to the CJEU and asked whether the Czech VAT rules were in accordance with EU law. According to the CJEU’s judgment, entitlement to a VAT exemption cannot be conditioned upon releasing the goods into a certain customs regime, but instead it is sufficient that the taxpayer proved that the goods were actually delivered to a third country.
In response to this CJEU judgment, an amendment to the VAT law is being prepared (with an effective date proposed for 1 January 2020) to remove the precondition that the goods are released into a customs regime, and to replace that requirement with a measure that would allow for the possibility to prove entitlement to a VAT exemption on export by evidence other than a customs declaration.
In the second case (10 Afs 71/2016), the CJEU judgment concluded that a VAT-payer may correct the tax base if the debtor fails to pay, in full or in part, a disputed amount, even though the debtor ceased to be a VAT-payer. As for the second case, it is not yet clear what approach the Czech tax administration would take to bring Czech law into line with the EU directive. Read TaxNewsFlash
Read a September 2019 report prepared by the KPMG member firm in the Czech Republic
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.