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SAC on the withholding of the undisputed portion of the excessive input VAT deduction

At the end of March this year, the Supreme Administrative Court issued a judgment 9 Afs 155/2022 - 33 in the matter of withholding of excessive input VAT deduction. In view of the Constitutional Court's ruling, the SAC declared the Specialized Tax Office's procedure unconstitutional. According to the SAC, the Tax Code does not allow the tax authorities to withhold, together with the disputed part of the excessive input VAT deduction, the undisputed part of the deduction which is not subject to examination. 

It ties this case to the old legislation. Under the current rules, a similar case would already be covered by the so-called advance payment of tax deduction. This was introduced into the legal system by amendments to the Tax Code (§ 174a) and the Value Added Tax Act (§105a), both effective from 1 January 2021.

According to this regulation, the VAT payer is entitled to an advance payment of the tax deduction in the amount of the tax deduction, which the tax administrator does not intend to examine in the context of a tax audit or a procedure to remove doubts. The institution of advance payment of tax deduction is therefore granted before the issue of a payment assessment. This is an advantage for the VAT payer, especially from a cash flow perspective. However, it is still only an advance payment. Therefore, a situation may arise where, as a result of the settlement, the taxpayer is obliged to repay the difference between the advance payment refunded (or used or transferred) and the amount of tax assessed and to pay interest on late payment.

Irrespective of the use of this institute, it is advisable to check whether the VAT payer is still entitled to interest on the tax deduction.

If this topic concerns you, we would be happy to discuss it with you in more detail. If you have any questions, please contact the author of this article or the EY tax team with whom you regularly work.

Authors:

Ivana Krylová

Filip Kučera