Pardoning of VAT for electricity and gas supplied in November and December 2021
In Finanční zpravodaj no. 34/2021 on 20th October, a ruling by the Minister of Finance (“Ruling”)  was made public, by which VAT is to be pardoned due to the sharp rise in gas and electricity prices. On the basis of this Ruling, VAT is pardoned on supply of electricity or gas (or when purchasing gas from another EU member state or when it is imported from a third country, e.g., in the case of cistern supplies). According to the Ruling, VAT is pardoned in transactions realized in the period of 1st November to 31st December (the day of realized taxable transaction will fall on a day in this defined period) and deposited payments which will be accepted in the period at issue.
In this regard, we would like to draw attention to the fact that pardoning is universal and not aimed only at a particular circle of persons. The Ruling at issue concerns not only suppliers of these energies as such, but also impacts subjects who “re-invoice” the pertinent energy in connection with real estate rentals or who trade with these energies.
In relation to the Ruling at issue, the General Financial Directorate has made public information regarding this VAT pardon (“ GFD Information”) , in which it attempts to summarize the practical application of the Ruling. According to the GFD Information, this would be based on applying a zero VAT rate for supply realized in the period of November to December 2021, which should likewise be stated in tax invoices. In the case of deposits for electricity and gas supplies accepted in these two months, the supplier is then not liable for VAT, according to the GFD Information, but is to include it at the amount, which it retains, in the tax base during the subsequent accounting, i.e., deduct it from the tax base (total price) of supplied electricity and gas in the accounted period.
It is clear that the above-mentioned VAT pardon and interpretation of its application is giving rise to considerable problems for the state administration, additional costs and is eliciting numerous questions on the sides of suppliers, landlords and businesspersons. It entails a different manner in drawing up tax invoices (whilst the approach to this obligation is not uniform, when, for instance, an already issued payment schedule need not be rectified, according to the GFD Information; only the approach to deposits paid in November to December 2021 changes, according to the above-mentioned), their accounting, accounting in tax returns or a control statement, for which the affected subjects do not have their accounting software set.
A separate question, then, is the very possibility to deal with the VAT pardon in this manner, its accord with European Union legal regulations, and in the GFD Information the above-mentioned rejection of the right to deduction on the customer’s side in the event that the supplier does not proceed according to the Ruling and its interpretation by the state administration.
In closing, let us state that the Government of the CR has passed the draft of the VAT Act, according to which electricity and gas supplies are to be exempt from VAT throughout 2022. The Ministry of Finance has likewise turned to the European Commission with the request that the Czech Republic be enabled this procedure.
We will inform you in the event of further development in the given issue.
Please contact Jana Jirmásková with questions on this issue, e-mail: email@example.com.