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Some legal and tax aspects of boiler operation

The production of heat and its subsequent delivery to another person is an activity regulated by the Energy Act (458/2000 Coll.). Unless the heat is supplied to more than one building, the operator does not need a licence under the Energy Act. However, if a boiler with a capacity of 50 KW or more is used, the producer must obtain a licence under the Trade Act. The heat producer is subject, inter alia, to price regulation of the heat supplied according to the price regulations of the Energy Regulatory Office.

Under the Energy Act, heat energy suppliers are obliged to provide their customers with a heat energy supply bill. This applies even if they do not hold any related licence. Typically, the obligation to issue a bill for the previous calendar year arises no later than 28 February of the following year.

As of January 2024, this obligation also affects the application of VAT. If the Energy Act provides for the obligation to prepare a bill, the application of VAT (tax point) will now be triggered by the preparation of the bill (or the expiry of the deadline for its preparation if the supplier is in default).

For the supply of other utilities (notably electricity and gas), the Energy Act generally imposes the obligation to issue bills only on the holders of the relevant licences (i.e. primarily producers, distributors and traders). For VAT payers who do not have the relevant licence, the date of actual consumption is considered to be the tax point. 

In practice, therefore, for landlords who operate their own boiler, the tax point will occur on a different day for electricity and gas and on a different day for heat - this may require reconfiguration of IT systems. 

We also occasionally see landlords incorrectly passing on the cost of a heating medium, such as gas, to tenants at the standard rate of VAT (21%) when they are effectively supplying them with heat that is subject to a reduced rate of tax (currently 12%). In such cases, the tenant faces the risk of being charged tax if they claim a deduction of incorrectly charged VAT.

If you have any questions, please contact the authors of this article or members of the EY team with whom you usually work.

Authors:

David Kužela

Antonín Panák

Stanislav Kryl