The Czech Supreme Administrative Court (SAC) has made several rulings concerning VAT deductions and potential abuse of rights.
In one case, the SAC upheld the refusal of a VAT deduction for a company involved in fraudulent copper and zinc trading. The court stressed the importance of due diligence and precautionary measures to prevent tax fraud, particularly in high-risk transactions. Robust control and compliance systems are crucial for mitigating financial losses associated with tax fraud.
In separate cases involving real estate lease chains, the SAC rejected claims of abuse of right, overturning decisions made by the Appeal Financial Directorate. The court found procedural errors and a lack of evidence to support the abuse of right claims. Although the specific lease and sublease models in these cases were not addressed directly, the court acknowledged that such business choices could be rational in certain situations.
Significant changes to the Czech VAT Act will come into effect on 1 January 2025, primarily impacting foreign entities registered for VAT in the Czech Republic. Although still pending final approval, the legislation is expected to pass without significant obstacles.
Starting in January 2025, non-EU businesses will be required to appoint a VAT agent in the Czech Republic. This agent will serve as the representative in communications with the Czech tax administration and must have a data mailbox. Businesses already registered for VAT as of 1 January 2025 without a data mailbox must appoint an agent by 28 February 2025. All VAT-registered businesses must notify the tax administrator of their email address by 28 February 2025 using a dedicated form. Failure to comply with these requirements could result in a fine of CZK 1,000 per day.
However, businesses with a data mailbox are exempt from appointing an agent. Voluntary VAT registration applications must include an appointed agent, or they will be refused.
From January 2025, VAT refunds for non-EU businesses will be subject to reciprocity conditions. A list of eligible countries with similar VAT refund systems for Czech businesses will be published in the Financial Bulletin by the Ministry of Finance.
Starting in January 2026, all VAT refund applications will be submitted electronically. This transition aims to streamline the process and improve efficiency. Additionally, the deadline for VAT refund applications will be extended to December of the year following the refund period. While businesses in eligible countries stand to benefit from this more efficient process, those in non-eligible countries may need to seek alternative solutions for claiming VAT refunds.
Czech police have participated in a major EU operation targeting a VAT fraud scheme linked to organized crime. The operation led to 32 arrests in the Baltic states and uncovered an estimated €297 million in losses from unpaid VAT on electronics sales. While Czech authorities conducted searches, no arrests were reported. This investigation is part of a larger operation targeting the biggest VAT fraud scheme ever discovered in the EU, with total estimated losses amounting to €2.9 billion (CZK 73.3 billion).
