Authors: Josef Žaloudek, Kristýna Šlehoferová
The Court of Justice of the European Union delivers approximately 40 to 50 judgments a year on VAT and its rules. The interpretation given by the CJEU in these judgments is effectively binding on EU Member States and should be followed immediately by local tax administrations. This makes knowledge of the judgments one of the most essential elements for the correct application of VAT rules, making VAT effectively the most interpreted (and in some ways the most changed) tax. To illustrate the importance of these judgments, below are examples of three CJEU judgments for 2021 and their impact on the operation of VAT.
In this judgment, the CJEU addressed a situation in which a Belgian company applied for a VAT refund in Hungary. However, on the application, it understated the amount of VAT for a part of the supplies received. Although being aware of this fact, the Hungarian tax administration did not notify the company accordingly and refunded VAT only on the lower amount stated in the VAT refund application. The company did not accept this fact. In its judgment, the CJEU admitted that the company was right, stating that the tax administration should always notify the taxable person of this fact in order to give them an opportunity to amend the application if necessary.
In such a situation, the tax administrations of all EU Member States should always be obliged to notify taxable persons if they believe that the information has been misstated in error.
ALTI was considered a person liable for VAT not paid by its supplier FOTOMAG EOOD. In this respect, the tax administration requested not only VAT on the supply concerned but also default interest, which ALTI did not accept. However, the CJEU held that EU VAT legislation does not preclude such a procedure if the liability for default interest is sufficiently justified by the Member State concerned with regard to the principles of legal certainty and proportionality and is enshrined in its law.
As a result, EU VAT laws in general allow individual Member States to introduce liability for related default interest. In the Czech Republic, the current legislation on liability for tax and its interpretation is narrower and applies only to unpaid VAT on a given supply. However, it cannot be ruled out that in the future there will be a change in the interpretation or the law directly that will allow liability for default interest as well.
In this judgment, the CJEU ruled that swimming tuition cannot be considered educational services exempt from VAT. Although it is of great public importance, swimming tuition constitutes specialised lessons that do not in themselves constitute the transmission of knowledge and skills relating to a large and varied set of fields and the extending and development thereof.
Swimming tuition with characteristics such as those in this judgment should not fall under the scope of educational services exempt from VAT.
