Proč je třeba sledovat evropskou judikaturu k DPH

Why you need to follow the EU case law on value added tax

The Supreme Administrative Court ("SAC") recently issued an interesting judgment 8 Afs 84/2021-54, which is a deterrent for all taxpayers who underestimate the monitoring of the case law of the Court of Justice of the EU (“CJEU”) and rely only on the wording of the Czech VAT Act.

The company purchased goods from Poland under its Czech VAT number and transported them to its warehouse in Slovakia. Due to the use of the Czech VAT number, the place of supply was determined to be in the Czech Republic[1]. The Tax Authorities output VAT of assessed CZK 16mil for intra-EU acquisition. At the same time, however, they refused to grant the right to deduct this VAT because the goods physically ended up in Slovakia and the company did not prove that they were properly taxed there.

The basis for this decision was the judgment of the CJEU in Case C 536/08 Facet-Facet Trading from 2010. However, it should be emphasised that the case concerned supplies of goods from 2015, when the judgment of the Facet case was already known, but had not yet been implemented[2] in the Czech VAT Act.

The company argued that there was a legal "vacuum" in the relevant period. According to the company, its legitimate expectations had been violated. The Tax Authorities could not invoke the wording of the EU Directive (applying the interpretation of the CJEU in Facet) against an individual. Moreover, the company referred to the settled practice whereby the tax authorities allegedly did not question the right to deduct VAT in such situations before the law amendment.

The SAC upheld the tax administrator's allegations. The reasoning of the SAC and the company itself is difficult to grasp on many points and we leave it to the readers' self-study. However, several lessons can be drawn for practice:

(i) The use of a Czech VAT number when acquiring goods from another EU state if the goods end up in another member state was and is a problem that cannot be underestimated.
(ii) The case law of the CJEU interpreting the EU VAT Directive is directly binding and the ambiguity of the Czech VAT Act cannot be relied upon.
(iii) Settled administrative practice cannot be relied upon after the publication of the CJEU's judgment on the subject.

We will be happy to discuss specific situations in practice with you and help you with the correct tax treatment. If you are interested, please contact your client team.

Authors:

David Kužela

Jevgenija Bajzíková

References:

[1] According to § 11 (2) of the VAT Act

[2] Implemented in the VAT Act as of 1 July 2017 as the penultimate sentence in Section 11(2)