Prokazování režijních nákladů plátců s kráceným odpočtem DPH

Proving overheads of taxpayers with VAT pro-rata

The Supreme Administrative Court ("SAC") in its judgment 10 Afs 195/2021 dealt with a dispute between the Hospital of the Pardubice Region and the tax administrator. However, its conclusions may have a broader scope.

The hospital primarily provides medical services exempt from VAT without the right to deduct. However, it also performs a number of services that are taxable and give rise to VAT deductions (e.g. aesthetic procedures, clinical studies, sports examinations, internships, etc.).

The merits of the dispute were primarily about the extent to which a hospital is required to document a direct and immediate link to a specific taxable output for selected inputs - must it prove the use of needles, scalpels, instruments, drapes for specific taxable procedures?

The hospital argued that in its case, the costs are operational and technical, so-called overhead costs, which are related to the overall economic activity without the need to allocate a specific input to a specific output. The tax authority disagreed with this approach and requested examples of specific use for taxable activity (allocation of inputs to the cost centres was not sufficient). The SAC also sided with the tax authority, which unfortunately did not find it necessary to refer a preliminary question to the CJEU on the interpretation of the concept of "overheads".

This very long and detailed judgment, apart from partial guidance, unfortunately also raises many question marks for taxpayers with a shortening VAT coefficient. Neither the VAT Act nor the Directive provides for specific procedures, and there is a lack of interpretations by the tax administration on which these taxpayers could rely. Therefore, we recommend paying close attention to the correct allocation and preparation of the related documentation.

If you are interested in this topic, we will be happy to discuss it with you in more detail.

Authors:

David Kužela

Jevgenija Bajziková