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Czech Republic: Burden of proof, VAT exemption on cross-border supplies

Czech Republic: VAT exemption on cross-border supplies

The Supreme Administrative Court addressed the burden of proof in a matter when the value added tax (VAT) exemption of a cross-border supply of goods was challenged by the tax administrator. The high court held that in this case, the supplier could not plead good faith when it was “passive” and did not make any efforts to verify information provided by the customer(s).


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The case concerns the challenge by the tax administrator of a claimed VAT exemption for a cross-border supply of mobile phones to Sweden, with invoicing taking place through entities established in Sweden and Lithuania. 

On audit, the tax administrator determined that the customers’ books did not reflect records of any business transactions with the supplier, and that one of the customers had gone bankrupt. The information did not confirm that there had been any sales of goods as purportedly claimed by the supplier. The tax administrator also ascertained that criminal proceedings were pending against the statutory representative in the EU for VAT fraud and smuggling.

The court decided that:

  • The supplier had failed to take adequate measures so that the transaction would not lead to an involvement in tax fraud. 
  • The supplier had been reckless to hand the goods over to the customer’s carrier without having checked the final destination of the goods or whether they actually had been delivered there. 
  • The supplier had been “entirely passive” and had made no efforts to verify the information provided by the customer and thus could not plead good faith.   


Read an August 2018 report prepared by the KPMG member firm in the Czech Republic

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