EU: CJEU Advocate general opinion on treatment of separate legal entities as single taxable person for VAT purposes (Czech Republic)
Determination of taxable person for VAT purposes must focus on whether entities acted on their own behalf and at their own risk.
The Court of Justice for the European Union (CJEU) published the nonbinding opinion of its Advocate General (AG) in case C-796/23 (Česká síť s.r.o.), stating that the Czech tax administrator could not treat a Czech company, along with the Czech branches of three U.S. companies, as a “society” under the Czech Civil Code, with the Czech company designated as the taxable person liable for value added tax (VAT) on behalf of all four separate legal entities due to their combined turnover exceeding the registration threshold.
Summary
The executive director of the Czech company was also the head of the three branches of the U.S. companies and was thus the sole person effectively managing all four entities operating in the Czech Republic. All of them provided internet connection services to end customers, each acting in its own name and with its own customer portfolio.
The AG rejected the tax administrator’s decision to treat the four separate legal entities as a “society” constituting a single, separate taxable person for VAT purposes. The AG emphasized that the determination of the taxable person under the EU VAT directive must focus on whether the entities acted on their own behalf and at their own risk, noting that if each entity operated independently and on its own behalf, each must be considered a separate taxable person for VAT purposes. The AG further stated that a society cannot be regarded as a taxable person unless someone acts externally on its behalf. However, the AG noted that if the arrangement was structured primarily to avoid VAT registration, it could be deemed abusive, potentially justifying additional VAT assessment.
Read an October 2025 report prepared by the KPMG member firm in the Czech Republic