VAT Newsletter – third quarter 2023

The VAT newsletter for the third quarter 2023 highlighting the latest developments in the field of VAT in Austria, Bulgaria, Croatia, Czech Republic, Germany, Hungary, Poland, Romania, Serbia, Slovakia and Slovenia.

Austria

CASE LAW

• VAT refund and VAT assessment procedure (Sec 21 Para 9 Austrian VAT Act)
  • In case a taxable person not established in Austria carries out domestic taxable supplies, the assessments of input VAT according to VAT refund procedure (Sec 21 Para 9 Austrian VAT Act) are unlawful.
  • However, if these assessments become legally binding and no reopening is permissible, they do not prevent the issuance of assessments for output VAT according to VAT assessment procedure (Sec 21 Para 4 Austrian VAT Act) (Supreme Administrative Court, 21.6.2023, Ra 2022/15/0087).
• No input VAT deduction for representation expenses (Sec 12 Para 2 no 2 lit a Austrian VAT Act)
  • If a taxable person organizes a company event for employees at which business issues are discussed in the afternoon, but also plenty of time for skiing, the expenses cannot be deducted as business expenses.
  • Consequently, the expenses incurred in connection with the event (skiing vacation) are to be regarded as non-deductible entertainment expenses for income tax purposes pursuant to Sec 20 of the Austrian Income Tax Act (EStG) and therefore no input VAT deduction is possible according to Sec 12 Para 2 no 2 lit a Austrian VAT Act (Federal Tax Court, 27.06.2023, RV/2100666/2013).

Bulgaria

TAX AUTHORITIES’ PRACTICE

• No application of the call-off stock regime and the triangulation simplification at the same time
  • It is not possible for a taxable person to apply both the call-off stock regime and the triangulation simplification at the same time, for the same supply (written statement of the Directorate of the Central Department of the National Revenue Agency Nr. М-24-39-57/30.6.2023, https://nraapp02.nra.bg/cms5/apps/wqreg/get/8cdf9e791afa0dfaadb1f4b2a33f2201).

Croatia

TAX AUTHORITIES’ PRACTICE

• VAT refund
  • Overview of valid reciprocity agreements concluded between countries for purposes of VAT refund to foreign taxable persons (Official statement of the Croatian Tax Authorities: https://www.porezna-uprava.hr/HR_publikacije/Lists/mislenje33/Display.aspx?id=19819).

Czech Republic

TAX AUTHORITIES’ PRACTICE

• Determination of tax base for the supply of goods free of charge
  • Introduction of guidelines concerning an explanation of the determination of the tax base in case of a free supply of goods (to food and other charity banks) where the input VAT deduction was claimed on the purchase (https://www.financnisprava.cz/assets/cs/prilohy/d-seznam-dani/Informace_GFR_uplatneni_DPH_pri_bezuplatnem_dodani_zbozi.pdf).

CASE LAW

• No input VAT deduction for anti-radar equipment
  • The Supreme Administrative Court (SAC) confirmed that for purchase of anti-radar devices no input VAT deduction exists, as the device is not related to the economic activity of the taxable person (Supreme Administrative Court 1 Afs 157/2022-45, https://vyhledavac.nssoud.cz/DokumentOriginal/Html/713073).

Germany

AMENDMENTS TO THE VAT ACT/FISCAL CODE

• As of 1 January 2025
  • Mandatory e-invoicing with transition period (2025 to 2027) for B2B-transactions, where both supplier and recipient are established in Germany (Sec 14 German Law on Turnover Tax (Draft) acc. to government draft of the Growth Opportunities Act (Wachstumschancengesetz)).

CASE LAW

• No input VAT deduction for a holding company for services acquired which
  • are not directly connected with taxable services provided by the holding company or its own turnover,
  • are not included in the price of the taxable sales made by the holding company to its subsidiaries,
  • do not form part of the general cost elements of the holding company’s own economic activity (BFH XI R 24/22 (XI R 22/18), XI R 24/22, XI R 22/18).
• The requirement to split services into a tax-exempt rental service for a building and a taxable rental service for operating equipment situated in that buildings is no longer upheld in the case of a single supply from an economic point of view. According to the current implementation of EU law the ancillary service shares the treatment of the principal service (overall tax-exempt or taxable service) (BFH V R 7/23 (V R 22/20), V R 7/23, V R 22/20).

Hungary

AMENDMENTS TO THE VAT ACT/FISCAL CODE

• As of January 2024
  • For products charged with a deposit fee for wrapping which will be refunded when products are returned, the deposit fee is considered as part of the tax base, which will be reduced once the fee is redeemed. In case of non-reusable products not returned, the fee is considered as taxable and therefore results in a tax liability (Act CXXVII of 2007 – on Value Added Tax 77. § (2), b, c).

TAX AUTHORIIES’S PRACTICE

• Legal harmonization amendment
  • For non-established taxable persons, a refund of the VAT charged in advance on the purchase of domestic real estate within the framework of the special VAT refund procedure becomes available.
    − The VAT Act also provides small and medium-sized enterprises with the option to fulfill their tax obligations for these transactions in the Member State in which they are established after transactions performed for customers in other Member States (Act CXXVII of 2007 – on Value Added Tax 253/J. § (8)).

Poland

AMENDMENTS TO THE VAT ACT/FISCAL CODE

• Slim VAT 3
  • When a correcting invoice is issued in foreign currency, a historic FX rate must be applied,
  • No annual adjustment of input VAT if the difference between the initially applied and final pro-rata rate is less than 2 % and the amount of non-deductible input VAT does not exceed PLN 10,000.00,
  • No need to print fiscal reports and other (non-fiscal) documents from online cash registers (Journal of Laws 2023, item 1059).

TAX AUTHORITIES’ PRACTICE

No taxable supply of services in case of charging contractors for the cost of returning ordered but not picked up goods (0113-KDIPT1-2.4012.422.2023.1.JS).

CASE LAW

• ECJ case C 108/22 Dyrektor Krajowej Informacji Skarbowej v. C. sp. z o.o.
  • The services provided by a taxable person, which consists in purchasing accommodation services from other taxable persons and reselling them to other economic operators, is covered by the special value added tax scheme applicable to travel agents, even though those services are not accompanied by ancillary services.

Romania

AMENDMENTS TO THE VAT ACT/FISCAL CODE

• As of July 2023
  • Introduction of clarifications and extensions for the reduced VAT rate of 5 % including photovoltaic panels, solar panels, heat pumps, their related installation kits and accessories other high-efficiency, low-emission heating systems, repair and installation services and their supply as a component part of a building as well as the delivery of sawdust, waste and agglomerated wood scraps in the form of wood pellets, wood briquettes or in similar forms, which fall under NC codes 4401 31 00 and 4401 32 00, the delivery for use as heating fuel of sawdust, waste and non-agglomerated wood scraps, which fall under CN codes 4401 41 00 and 4401 49 00 (Law 216/2023 Government Ordinance 653/2023).
• As of June 2023
  • Tax exemption with right to deduct input VAT for the supply of goods and services to the medical sector by non-profit organizations (Law 88/2023 Government Ordinance 653/2023).
  • Exemption with right to deduct input VAT for orthopedic items and prosthesis (Law 88/2023).
• As of May 2023
  • Implementation of criminal sanctions for cross-border VAT fraud (Law 125/2023).

TAX AUTHORITIES’ PRACTICE

• As of 1 January 2024
  • Mandatory e-invoicing for all B2B transactions, where both supplier and customer are established in Romania (EU Council Decision 1553/2023).
• As of June 2023
  • Clarifications for application of VAT rates for restaurants:
    • for supplies of eco, mountain or traditional products, the VAT rate of 5 % is applicable, if the products are supplied within a restaurant/catering service and fall under NC codes 2202 10 00 and 2202 99, the rate of 19 % is applicable.
    • the VAT rate of 19 % is also applied to a final prepared lemonade (Communication between ANAF and the Chamber of tax consultants).

CASE LAW

• Transfer pricing adjustments and related VAT
  • VAT generated due to voluntary adjustment of transfer pricing are deductible (ANAF).

Serbia

TAX AUTHORITIES’ PRACTICE

• Multi-purpose vouchers
  • The issue of multi-purpose vouchers via terminals at locations of the issuer’s business partners is not subject to VAT, provided that these partners collect and transfer all considerations to the issuer (Ministry of Finance: “Newsletter – Official Explanations and Official Opinions regarding application of financial regulations” issue 6/2023; Official Opinion No. 011-00-306/2023-04).

Slovakia

AMENDMENTS TO THE VAT ACT/FISCAL CODE

• Draft amendment of the VAT Act with the following changes:
  • Change in the VAT regime for financial leasing as supply of goods.
  • Implementation of a special regulation for SMEs, according to which foreign SMEs are also not subject to registration and do not have to charge VAT (the aim is to ensure equal treatment of domestic and foreign small entrepreneurs).
  • Modification of the current provision regarding reverse-charge for import of goods in the Slovak Republic.

Slovenia

TAX AUTHORITIES’ PRACTICE

• FAQ about tax content related to the occurred floods
  • Even if a taxable person proves that his documentation was destroyed, he must do everything to restore the data from the destroyed documentation (meaning to obtain copies of documentation from his suppliers, customers, etc.),
  • Regarding the donation of goods, it is clarified that VAT is charged on the free disposal of goods that are part of the taxpayer’s business assets, if input VAT has been fully/partially deducted from these goods. The donations of funds without consideration are not subject to VAT.
  • Destruction of goods caused by force majeure is not subject to VAT.
  • A taxable person who purchases goods for further donation does not have the right to deduct VAT, as the goods are not intended for use in transactions that give the right to deduct VAT.
  • The supply of services which a taxable person carries out free of charge in connection with the elimination of the consequences of floods (e.g. catering services, cleaning services, rock removal, etc.) for business purposes is not subject to VAT (https://shorturl.at/uJPZ3).