Czech Republic: Amendment to VAT treatment of compensation paid to electricity and gas suppliers

An amendment to decree on compensation paid to suppliers for delivery of electricity and gas

Amendment to decree on compensation paid to suppliers for delivery of electricity and gas

The government approved an amendment to the decree on compensation paid to suppliers for the delivery of electricity and gas at fixed prices that removes a provision specifying that such compensation is not subject to value added tax (VAT).

The removal of the provision thus technically leaves open the question of whether such compensation is subject to VAT. However, the prevailing view is that such compensation is a payment for the supply of electricity made by a third party to a final customer. Such an assessment then complicates the payment of VAT on the supply of electricity, when VAT should be paid not only on the amount paid by the customer (i.e., the maximum price) but also on the compensation received. At the same time, there may be situations when supplies of electricity by a trader will in some cases be in the standard VAT regime and in other cases in the reverse charge regime.

The amendment is currently awaiting publication in the Collection of Laws.

Read a March 2023 report prepared by the KPMG member firm in the Czech Republic


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