New information from the General Financial Directorate regarding VAT issues

Recently, the General Financial Directorate has published two new documents with an interpretation of some VAT issues. The documents can be found on the tax administration's web pages. 

VAT on real estate

The first of the documents contains information on application of the VAT Act to real estate after 1 January 2016 and was created as a response to questions from the public (more information here). The questions regard namely the definition of building land, the first building inspection consent and the substantial change to real estate, a functional unit, etc. It is interesting that, according to the interpretation, even the transfer of land with buildings intended for demolition is considered to be a transfer of building land that is subject to VAT, because a new structure will be built there. The given interpretation is based on a certain verdict delivered by the Court of Justice of the European Union. However, in our view, the interpretation is not always in accordance with law or the respective case law.

The reverse charge mechanism for electronic communication services

The other document describes the reverse charge mechanism for electronic communication services which came into effect on 1 October 2016. It applies to taxable supplies provided among entities in the Czech Republic at the wholesale level (Information from GFŘ dated 29 September 2016, can be found here). The published information defines the concerned supplies and entities that are subject to the new obligation, including examples. It also specifies in detail the place of supply, the date of taxable supply, and the tax base unique for the given field of electronic services.