Indirect tax news in brief

Significant changes are being made to the application of the special scheme for travel agents. The amendments were introduced in Act No. 343/2020 from 22 July 2020, but the effect of the new rules for this special scheme was postponed until 1 January 2022.

It is now necessary to set a surcharge for each individual travel service separately. Furthermore, the obligation arises to recognise tax on advances already received for the provision of travel services subject to the special scheme. In this context, two possible methods of calculating the coefficient are introduced. Last but not least, the scope of the exemption for air transport carried out both in the European Union and in third countries has changed. Now only the part of the transport within the territory of the European Union will be exempted. 

The changes are described in the information of the GFD

VAT on electricity and gas in 2022

The Ministry of Finance did not extend the VAT exemption for the supply of electricity and gas. Thus, as of January 2022, VAT will be applied in the standard way to the supply of electricity and gas. 

End of the waiver of VAT for respirators and similar goods in connection to COVID-19

The Ministry of Finance has decided not to further extend the VAT exemption for filter half-masks and respirators with protection class FFP2 and higher, which thus ended on 31 December 2021. However, the exemption from customs duties and VAT on imports of medical devices by public institutions, which are subsequently directly used in the fight against pandemics, or distributed for the same purpose, continues to apply until 30 June 2022 (see the press release of the Customs Administration of the Czech Republic). 

Increase in excise duty rates for tobacco products from 1 January 2022

The rates of excise duty on tobacco products increased by about five percent, both for the fixed part of the rate on cigarettes and for the rate for other products. The percentage part of the rate for cigarettes is not changing.  The rate increase applies to cigarettes, cigars, cigarillos, smoking tobacco and heat-not-burn tobacco products. The rates of excise duty on tobacco products are increased in accordance with the schedule for the period of 2021 to 2023 ensuing from Act 609/2020 Coll. Rates will increase further from 1 January 2023.  

The moment of VAT deduction for services with deferred payments

In its recent decision C-324/20 X-Beteiligungsgesellschaft, the Court of Justice of the European Union (“CJEU”)  expressed its views on the moment of the obligation to pay VAT where the payment for a one-off service was spread over several instalments. The CJEU stated that it is not possible to postpone the payment of VAT for a one-off service, even if the remuneration for such services is spread over time, and the taxpayer is thus obliged to pay the tax on the outstanding remuneration. The CJEU thus confirms the established practice. At the same time, however, the decision also deals with the general rules for determining the date of performance of a long-term service, and introduces a new perspective on this issue for fixed-term services if there are payments for part of the agreed period. 

The Supreme Administrative Court has commented on the marketing services provided for the purpose of the settlement of profitability

The Supreme Administrative Court (“SAC”) assessed whether a marketing service invoiced by a Czech drug distributor to the parent company in Switzerland constitutes a separate transaction taxable in Switzerland or whether it is subject to Czech VAT, because it is a third-party payment for the price of medicines sold domestically. In its judgment, the SAC stated that the parent company could be interested in promoting its products in the Czech Republic and be the recipient of the marketing service provided by the Czech distributor, even if it is not the manufacturer of the medicinal product itself. Another conclusion of the SAC is that the provision of marketing services does not constitute ancillary service to the local sale of medicines. However, this conclusion should be interpreted in the light of the specific circumstances of the dispute and cannot be generalised. However, the decision may be another indication for the tax treatment of services provided within the group of related companies.