A clarification was recently issued by the Czech Republic tax administration in relation to the implications of the Skandia America decision of the European Court of Justice (ECJ).
The ECJ decision concerned Skandia which was a US corporation with a branch in Sweden. The Swedish branch became a member of a Swedish VAT group and the tax authorities regarded the transactions between the branch and the US parent as taxable transactions for VAT purposes. The provision of information technology services was considered by the tax authority to be subject to VAT because the US parent company was outside the Swedish VAT group and the Swedish branch was within the VAT group. The decision of the ECJ confirmed that supplies were therefore made between two separate persons for VAT purposes. The Swedish VAT therefore had to be accounted for by the recipient of the services under the reverse charge mechanism.
The Czech tax administration has clarified that the Czech VAT provisions will be interpreted according to this decision, and that any prior guidance on the subject must be disregarded.
