Czech Republic: VAT issues

VAT refund from other EU member states. A deadline for VAT payers to apply for a refund of VAT paid in another EU member state where they are not registered for VAT expires on 30 September 2011. In practice, this mostly involves VAT related to business trips (accommodation, training), purchase of goods that remain located in such a member state, purchase of goods with installation in the given state, and some services.

It is possible to apply for the refund through an electronic portal operated by the Czech Ministry of Finance. Taxpayers will be granted access to the portal by the relevant tax authority based on an electronic application filed with an electronic signature.

VAT treatment supplier/customer. The Supreme Administrative Court addressed in a ruling the issue of whether one and the same transaction must be treated identically in terms of VAT on the part of the supplier and on the part of the customer.

The case in question involved a supplier who cancelled invoices issued for domestic taxable supplies only because the tax office had denied the recipient of the supply the right to VAT deduction in a tax inspection on grounds of the recipient’s failure to prove that the taxable supply had taken place. Following the cancellation of the invoices, the supplier filed an additional VAT return, reporting a reduction in taxable supplies, which resulted in excessive deduction.

The Tax Authority, the City Court, and subsequently also the Supreme Administrative Court disagreed with the procedure pursued by the supplier, and did not accept the excessive deduction.

They justified their decision arguing that, as far as the same tax is concerned, the determination of the tax liability of one party does not directly determine the tax liability of the other party. Furthermore evidence provided by the supplier suggested that the taxable supply in question had indeed taken place, while the supplier had proven that the supply had not taken place by referring only to the result of the tax inspection. The fact that the customer failed to carry the burden of proof in providing evidence that the taxable supplies had taken place does not mean that the supplier’s duty to pay output VAT would cease to exist.

The recent Supreme Administrative Court ruling implies that, in respect of proving, the situation may be different for individual parties to the same transaction. The tax office then may judge the transaction differently on the part of the customer and on the part of the supplier.


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