The waiver of VAT on the supply of electricity and gas from 1 November to 31 December 2021

In connection with the several-fold increase in gas and electricity prices in recent months, the Minister of Finance issued a decision on the waiver of VAT on the supply of electricity and gas from 1 November 2021 to 31 December 2021. VAT is waived in cases of the supply, acquisition from another Member State, and import of electricity and gas which are subject to the obligation to declare the tax on the date of the taxable supply or on any payment received before the date of the taxable supply.

The waiver applies to all electricity and gas supplies, regardless of the identity of the supplier and the recipient, and in reality will have a positive impact not only on households but also on other consumers who do not have a full right to deduct (non-profit entities, financial institutions, etc.). The waiver will be applied both to supplies made by the electricity trader itself and to subsequent supplies or re-invoicing (e.g. for rentals).

In practice, this means that VAT is waived:

• for billing with the date of the taxable performance (date of the reading of electricity and gas meters) falling into November and December 2021, but the waiver applying only to any additional payment resulting from the billing (information from the Financial Directorate also confirms that the waiver does not give rise to any requirement for a special meter reading on 1 November or 31 December)
• for advances received in November and December 2021.

Tax documents issued for the relevant period will not state the VAT rate and tax, or the rate will be stated at a rate of 0 % and the amount of tax at CZK 0. If the recipient of supply receives a tax document with calculated VAT, he is not entitled to claim a deduction (on the contrary, he should contact the supplier and request a corrective tax document). However, according to information from the Financial Directorate, it is not necessary to adjust any previously issued payment calendar – the amount stated on the document, including tax, and paid during November and December will be included in full by the supplier in its tax base and the recipient is not entitled to a deduction.

The supplier shall declare the supply to which the waiver applies on line 26 of the VAT Return, in the same way as the recipient of the supply when applying the tax liability transfer regime. Supply that includes waived VAT will not be stated in the control report. From the supplier’s point of view, the waiver does not affect his right to deduct input VAT.

At the same time, the government is preparing an amendment to the VAT Act, which would, with effect from 1 January 2022, allow for the entire 2022 calendar year to exempt the supply of electricity or gas from VAT with a right to deduct, which would in practice make minor adjustments and extend the current waiver. However, in addition to the standard legislative procedures, this approach is also subject to approval by the European Commission.

If you have any questions on this topic, please do not hesitate to contact us.