Czech Republic: Waiver of VAT on certain electricity and gas supplies

The VAT waiver applies to all supplies with a date of taxable supply in November 2021 and December 2021.

Certain electricity and gas supplies

A decision of the Minister of Finance provides for a waiver of value added tax (VAT) on supplies of electricity and gas when acquired from another EU Member State.

The VAT waiver applies to all supplies with a date of taxable supply in November 2021 and December 2021, and to advance payments for supplies to be received during those months.

  • The waiver is not limited to certain persons—rather, VAT will be waived for supplies of electricity and gas by their distributors and also for supplies of these commodities when, for instance, supplied to tenants as a part of property rentals and for supplies between energy traders that are subject to the reverse-charge regime.
  • The waiver applies to all supplies—including supplies to households and “small entrepreneurs” and to those that are VAT-payers. Thus, entities that are VAT-payers but cannot claim a deduction will also be eligible for wavier.

In the context of gas and electricity supplies, a taxable supply is generally deemed to have taken place on the date of a meter reading. If the meter reading is taken during the months of November-December 2021, the tax will be waived for supplies that were physically delivered before these months but were not covered by advance payments.

Suppliers are not to indicate VAT in tax documents for the supplies provided or for advance payments received during this period. Customers are not to deduct VAT on the supplies even if the tax is indicated in the tax document. However, payment schedules previously issued (in a form of a tax document) will not need to be changed and would be viewed as a payment instruction.

KPMG observation

In practice, the procedure will be similar to applying an exemption with the right to deduct. The reduction in the advance payments due to the VAT waiver may only show up in the subsequent final account/settlement of advances against actual consumption, when the advance payments will be deducted in their full amount. This will also depend on the existing contractual arrangement between the supplier and the customer.

When issuing the final account of gas and electricity supplies, the existing provisions of the VAT law are to be followed.

Pending legislation

A draft amendment to the VAT law that would exempt electricity and gas supplies from VAT (with the right to deduct) is pending. If enacted, it would be effective from 1 January 2022 for a one-year period through 31 December 2022.

A request to allow this VAT exemption has been filed with the European Commission.

Read an October 2021 report prepared by the KPMG member firm in the Czech Republic


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