Czech Republic: Beneficial ownership of royalties; VAT exemption for intra-community supply; proof of “essential costs”
Recent tax-related decisions of the Supreme Administrative Court (SAC)
March 11, 2024
The KPMG member firm in the Czech Republic has prepared reports on recent tax-related Supreme Administrative Court (SAC) decisions (read more at the hyperlinks provided below).
- The SAC held (4 Afs 63/2022) that a UK company was not the beneficial owner of royalties received from a Czech company because it was obliged to pay almost 95% of the funds received to other related parties and thus was not free to make decisions about the use of the funds. Read a March 2024 report
- The SAC denied the taxpayer’s claim for the value added tax (VAT) exemption for the supply of goods to another EU member state because the taxpayer failed to satisfy its burden of proving that the goods had been supplied to a person registered for tax in another member state. The SAC stated that the mere payment for goods does not prove that all conditions for VAT exemption have been met, especially if payment is made from a bank account of an entity other than the declared customer. The taxpayer also did not have any documents proving that the goods had been ordered or received by a particular person in another member state. Read a March 2024 report
- An extended chamber of the SAC held that a taxpayers must prove “essential costs” (i.e., costs that must have been necessarily incurred in order to generate undisputed taxable income, such as the purchase of a car as a precondition for generating income from its sale). It is not appropriate for the tax authority to resort to using aids to support a finding that a taxpayer may deduct essential costs. Read a March 2024 report