Nejvyšší správní soud k okamžiku zániku stavby

The Supreme Administrative Court ruled on the moment of extinction of the building

The Supreme Administrative Court ("SAC") ruled on (7 Afs 132/2022-22) whether the costs incurred for construction works represented repairs or whether they were incurred for the acquisition of new tangible asset.

Within a tax audit, the tax authority found that the taxpayer had incurred costs to repair a hayloft that had been completely destroyed by fire. The tax authority concluded that it could not have been a repair of the building, as the original building had been destroyed by fire. Therefore, the incurred costs related to the construction of a completely new building.

The taxpayer disagreed with the legal extinction of the building. The evidence submitted included, inter alia, consent for the partial removal of the building and consent for the restoration of the building granted by the building authority.

Both the Regional Court and the SAC agreed with the tax authority's approach. The court assessed the conditions for the extinction of the building according to the existing case practice of the Supreme Court, according to which an above-ground building is created by the creation of the first-floor layout. If the associated walls are destroyed, the building logically ceases to exist in the legal sense. According to the existing files, the Court concluded that the fire caused serious damage leading to the building's extinction. The available consent for the restoration of the building did not have impact on the court’s conclusion. The consent could have been issued either in a case where the building had ceased to exist or in a situation where the original building had not ceased to exist.

For the sake of completeness, we would merely point out that the above brief commentary cannot replace a detailed tax assessment of the specific situation. We will be glad to help you with these and other tax aspects.

If you have any questions, please contact the authors of this article or the EY tax team with whom you regularly work.

Authors:

Ladislava Zamazalová

Ivan Zhurkin