Czech Republic: VAT not included, transfer tax | KPMG | GLOBAL

Czech Republic: VAT not included, transfer tax on real property

Czech Republic: VAT not included, transfer tax

Recent court decisions in the Czech Republic address value added tax (VAT), specifically on acquisition of “immovable property” and the concurrence of liability.

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Tax on acquisition of immovable property

The Supreme Administrative Court concluded that the amount of VAT is not included in the tax base for purposes of determining the valuation subject to the tax imposed on acquisitions of immovable property. 

The high court noted the purpose of the tax on acquisition of immovable property is to subject to tax the amount of financial revenue that is acquired as a result of a sale of a real property, and VAT cannot be deemed to be a part of such revenue. Moreover, including VAT in the real property transfer tax base would mean imposing a tax on amounts that are already being collected for the state. 

The judgment provides an opportunity for refunds of tax with respect to the amount of VAT previously included in the tax base. Read an August 2017 report prepared by the KPMG member firm in the Czech Republic

Concurrence liability for VAT

The tax administration has numerous tools to address VAT fraud and evasion, including denying the entitlement to VAT deduction or making customers liable for VAT not paid by their suppliers. The tax administrators do not hesitate to use these tools concurrently—in effect, collecting tax twice on the same transaction. Czech courts are now dealing with the admissibility of such practice. 

A regional court in Ostrava held that it was not acceptable for one entity to pay VAT twice on an identical business transaction. The case is expected to be appealed to the Supreme Administrative Court. Read an August 2017 report prepared by the KPMG member firm in the Czech Republic

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