Czech Republic: Compensation paid to electricity and gas suppliers subject to VAT
Ministry of Finance clarified that compensation paid to suppliers for delivery of electricity and gas at fixed prices is subject to VAT
Compensation paid to electricity and gas suppliers
The Ministry of Finance clarified that compensation paid to suppliers for the delivery of electricity and gas at fixed prices is subject to value added tax (VAT).
The government earlier approved an amendment to the decree on such compensation that had put the issue in question. Read TaxNewsFlash
The Ministry of Finance specifically clarified that:
- If the customer of electricity or gas is the end consumer, meaning that the original supply was carried out in the standard VAT regime, the energy supplier is obliged to pay output VAT on the total amount of the compensation received. However, they do not have to issue corrective tax documents stating the increased tax base to individual customers. Compensation for the supply of electricity and gas at capped prices constitutes a consideration received from a third party, on which the electricity or gas suppliers must pay VAT.
- If the original energy supply was subject to the reverse charge regime, the energy supplier must quantify the specific part of the compensation relating to a specific customer and issue a corrective tax document to that customer under the reverse charge regime. However, if the energy supplier pays the output VAT on the full amount of the compensation received as if the original supply was in the standard VAT regime and does not issue a corrective tax document, the tax authority will not challenge such an approach.
Read an April 2023 report prepared by the KPMG member firm in the Czech Republic
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