We bring you the latest information and changes in legislation and case law that occurred during December 2023.
You will find in it, among other things, the topic of the impossibility of recognizing the right to deduct VAT on the purchase of anti-radar and GPS logbook or the assessment of discrimination against a handicapped child by the school.
Personal data
🟣Usefulness of police CCTV footage in tax proceedings
On 14 December 2023, the Supreme Administrative Court (SAC) issued a judgment (no. 9 Afs 147/2020-87) which, following the decision of the Constitutional Court (CC), revised its original legal opinion on the applicability of recordings from police cameras in tax proceedings.
In this particular case, the issue was whether the police can provide the tax office, at its request, with information on the movement of the taxpayer's vehicle in order to verify the taxpayer's right to deduct VAT.
In the original proceedings, the tax administrator requested information from the police and, after comparing it with the logbook submitted by the taxpayer, disallowed the right to deduct VAT on the purchase and use of the vehicle for business purposes.
The Supreme Administrative Court has now said that although CCTV footage of a vehicle's movements may be a useful means of verifying the validity of a VAT claim, it may not always be a means that is necessary to use.
According to the SAC, it is important to pay attention to the aspect of wider proportionality. In that respect, it held that the provision of the vehicle movement records was not necessary. Furthermore, it was possible to challenge the logbook without confronting it with the police CCTV footage, for example because it was internally inconsistent or too general.
The SJC concluded that if the log book could be challenged by other, less invasive means that did not require the transmission of information, including personal data, the use of CCTV footage was not necessary, although its use would be appropriate.
The suitability of a particular measure and its necessity are, according to the Supreme Administrative Court (SAC), two different categories. For these reasons, the SAC annulled the tax administrator's decision and returned the case for further proceedings.
Taxes
🟣The transfer of technical improvement at the end of the lease is a service for VAT purposes
In its judgment of 13 November 2023, Case No. 2 Afs 323/2021-56, the Supreme Administrative Court (SAC) examined the question of whether the transfer of technical improvements consisting of the revitalization of leased non-residential premises at the tenant's own expense (which the tenant also depreciated for tax purposes) to the landlord after the lease ends, in exchange for compensation in the form of the tax residual value, constitutes a service for VAT purposes. Furthermore, whether the reverse charge mechanism applies in this case.
The Supreme Administrative Court (SAC) held that the transfer of technical improvement for consideration by the lessee to the lessor does not correspond to the usual meaning of the term “provision of construction and assembly work” classified under production codes CZ-CPA 41-43, but meets the general definition of provision of services under the VAT Act.
Following the case law of the Court of Justice of the EU (CJEU), the Supreme Administrative Court (SAC) ruled that, similarly to the early return of the subject of a lease for payment, the appreciation of real estate for a fee can be considered an economically measurable service.
Nach Ansicht des SAC handelt es sich bei der Vermietung und der damit einhergehenden Renovierung und Rückgabe der bewerteten Immobilie zum Restwert um drei wirtschaftlich und rechtlich getrennte Umsätze und Dienstleistungen im Sinne der MwSt-Richtlinie. Da das SAC den Fall als Dienstleistung im Sinne der allgemeinen Definition und nicht als Dienstleistung, die in der Erbringung von Bau- und Installationsarbeiten besteht, beurteilt hat, ist die Umkehrung der Steuerschuldnerschaft nicht automatisch anwendbar.
🟣Non-recognition of the right to deduct VAT on the purchase of anti-radar and GPS logbook
In its decision of 26 July 2023, No. 1 Afs 157/2022-50, the Supreme Administrative Court confirmed the legal opinion of the tax administrator that it is not possible to recognise the right to deduct VAT on the purchase of an anti-radar and GPS logbook.
In the case of the purchase of the anti-radar, the SAC justified the impossibility by the fact that the anti-radar cannot be used for the economic activity of the tax subject or protect its property in any way. On the contrary, it is a device used by the purchaser to avoid liability for possible violations of road traffic rules.
In the case of the GPS logbook, the Supreme Administrative Court admitted the possibility of recognising the right to deduct VAT, but not in the present case, because the taxpayer refused to submit the logbook to the tax administrator, citing the protection of personal data.
🟣The tax nature of a magazine subscription gift
The Court of Justice of the European Union (CJEU), in its judgment of 5 October 2023, Case No. C-505/22 (Deco Proteste – Editores Lda), ruled that gifts offered by a publisher as part of a magazine subscription constitute ancillary supplies to the main supply for VAT purposes. Therefore, the tax regime applicable to the subscription also applies to such gifts.
Private law
🟣Awarding the maximum amount of compensation to a sales representative
The Supreme Court (SC) in its judgment of 15 September 2023, Case No. 23 Cdo 1879/2023, states that it does not follow from the legislation or case law that it would be possible to award the maximum amount of compensation to a sales representative without further determination of the amount of compensation.
According to the SC, it is not possible to dispense with the determination of the basic amount of compensation, since the maximum amount of compensation is not the method of determining its amount, but only a limit which may not exceed that amount of compensation.
Although the decision of the Supreme Court still refers to the original regulation contained in the Commercial Code, it is applicable under the existing regulation contained in the Civil Code (CC), which is similar.
🟣Damage to the goods taken over during the execution of the work
In its judgment of 22 August 2023, Case No. 32 Cdo 1343/2022, the Supreme Court (SC) examined the legal assessment of liability for damage caused to a received item during the performance of work (in this case, damage to the customer's vehicle during a test drive conducted by the contractor to diagnose a defect).
According to the Supreme Court, the opinion of the Court of Appeal, which applied Section 2598(2) of the Civil Code to the case, according to which the contractor is liable for the item taken over from the client as a warehouseman (i.e. for damage incurred from the time of acceptance until delivery, only if it was caused by the owner of the item, a defect or the natural nature of the stored item, or if it proves that it could not have prevented it), was incorrect.
According to the Supreme Court, this applies only in those cases where the damage to the thing taken over was caused during its care and not during the actual performance of the work or service.
In such a case, according to the Supreme Court, the case is to be considered under Section 2944 of the Civil Code, according to which anyone who has taken over from another a thing which is to be the subject of his obligation shall compensate for its damage, loss or destruction, unless he proves that the damage would have occurred otherwise.
🟣Delivery to employees by post
In its judgment of 11 September 2023, Case No. 21 Cdo 2697/2023, the Supreme Court ruled that it is lawful for an employer to serve an employee with a document in its own hands that is not required by the Labour Code.
If, in such a case, the employer proceeds to deliver the document through a postal service provider, its delivery is subject to the provisions of Section 336 of the Labour Code, and not to the general rules of delivery of the expression of will under the Civil Code. In the decision, the Supreme Court also dealt with the interpretation of the concept of ‘documents relating to the creation, modification and termination of the employment relationship’. According to the Supreme Court, this category includes not only legal acts of the employer in written form (e.g. proposal to conclude an employment contract, notice of termination of employment, immediate termination of employment), but also other written acts which - although they are not expressions of will with which the legal regulations would link the creation, change or termination of rights and obligations of the parties to the employment relationship - concern the creation, change and termination of the employment relationship (e.g. a notice to commence employment).
Public law
🟣Long-term investment product
On 1 January 2024, Act No. 462/2023 Coll. came into effect, amending certain laws in connection with the development of the financial market and the promotion of old-age security.
An important innovation introduced by this law is the so-called Long-Term Investment Product (LIP), which serves as an alternative to the existing third pillar of pension savings and private life insurance.
It is a form of an investment pension account with a legally defined financial institution. Through this account, the taxpayer can purchase publicly traded instruments, government and covered bonds, collective investment securities, and bank accounts, as a long-term tax-supported form of saving for retirement.
The provider of the Long-Term Investment Product (LIP) must report the commencement or termination of its provision to the Czech National Bank (CNB) according to the law. The law abolishes the so-called portfolio approach, through which all income from the paid transfer of assets held within the LIP was to be exempt from tax.
By abolishing this additional tax advantage, the standard rules for taxing investments will be maintained, and it will additionally be possible to apply an exemption if the value or time test is met. However, the abolition of the portfolio approach could pose a problem in cases of active portfolio management by the provider or when there is a change in the investment strategy within the LIP.
🟣Victims of crime are to be advised of the possibility of making a claim for compensation under the State Liability for Damages Act
In the event that an official person causes damage by his or her improper official procedure or by issuing an unlawful decision and is prosecuted for a criminal offence, the assertion of a claim for compensation for the damage suffered by the victim in criminal proceedings does not trigger the ten-year limitation period from the date of delivery of the unlawful decision.
It may happen that in long-lasting criminal proceedings, the victim's claim for compensation is time-barred. However, the current legislation nowhere expressly provides that the injured party should be advised of this so that he or she may pursue his or her claim otherwise than by joining the criminal proceedings.
The Constitutional Court responded to this situation with a ruling dated 15 November 2023, Case No. I. ÚS 1534/23. According to the Constitutional Court, law enforcement authorities should actively inform victims about the possibility of asserting their claims under the State Liability Act for damages. They should receive this information as soon as facts emerge suggesting that the crime may have been committed by a public official.
🟣Assessing discrimination against a disabled child by a school
In its decision of 15 November 2023, Case No. III ÚS 1068/22, the Constitutional Court commented on the assessment of the efforts a school must make under the Anti-Discrimination Act to make reasonable adjustments to facilitate inclusion.
In this case, the pupil in question was a pupil suffering from autism and mild mental disability, for whom the school counselling centre recommended pedagogical assistance as a pupil with special educational needs.
The headmaster therefore asked the regional authority (KÚ) to establish a teaching assistant position and to provide funds for his salary. However, the CA only provided money for part-time work. The remaining funds were provided to the school by the Labour Office and the city as the founder of the school.
Over time, they stopped providing these funds to the school. The school therefore agreed with the boy's mother to co-fund the assistant's fee. This was merely a personal assistance service and not a teaching assistant. This was later found to be a breach of the right to equal treatment, as the school had failed to provide free education and had thereby denied the boy, as a disabled person, the reasonable adjustments to which he was entitled.
The school's duty to make reasonable adjustments in relation to a disabled person does not apply if the adjustment would place an unreasonable burden on the school.
The term “disproportionate burden” is a relatively vague legal concept. The Constitutional Court now says that one of the important factors in assessing whether a particular measure would impose a disproportionate burden on a school is the extent of financial support, as well as the possibility of funding the measure from other public funds (including the effort made to obtain those funds).
However, according to the Constitutional Court, free education does not mean that parents should automatically pay for the assistance necessary for their child's education. A child's parent should not be faced with the decision of whether to fund the child's education or to deny their child the necessary education.
According to the Constitutional Court, these aspects were not addressed by the general courts, which is why it annulled the contested decisions and why the courts will have to hear the case anew.
