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Czech Republic: Rate of interest payable to taxpayers on excess VAT

Czech Republic: Rate of interest payable on excess VAT

The Supreme Administrative Court issued a decision that addresses the rate of interest that is paid to taxpayers regarding retained excess value added tax (VAT).

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The high court held that the rate of interest payable to taxpayers on retained excess VAT is 14% plus the “repo rate.”

A legislative amendment (effective 1 January 2015) provided that interest on excess amounts was available at a rate of 1% plus the repo rate, from the fifth month after the commencement of a refund procedure. Previously, taxpayers were entitled to interest at a rate of 14% plus the repo rate from the beginning of the fourth month after the end of the relevant tax period for the period over which excess amounts were retained.

In the case before the court, the tax administration awarded interest at a rate of 1.05% on the excess VAT. The Municipal Court in Prague agreed with the tax administrator and confirmed the interest award. On appeal, the Supreme Administrative Court concluded the legislative provision at issue was in conflict with an EU directive and with an interpretation by the Court of Justice of the European Union (CJEU) that interest on retained excess amounts must correspond to a rate of interest that would have been paid on a loan made by a taxable person that is not a credit institution. As the Czech high court noted, a rate of interest of 1% plus the repo rate did not satisfy this requirement.

The Czech high court concluded that rules concerning interest on retained excess amounts as specified by the CJEU judgment continued to apply—that is, a rate of interest of 14% plus the repo rate from the fourth month after the end of the tax period.


Read an August 2020 report prepared by the KPMG member firm in the Czech Republic

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