SDEU bude řešit odpočet DPH u režijních nákladů

The CJEU will decide on overheads VAT deduction

The Supreme Administrative Court (SAC) dealt[1] with the application of the deduction for costs required by law and, as it did not reach a clear conclusion, decided to refer the question to the CJEU.

What was the issue?
A hospital provided both exempt medical services and taxable supplies (clinical trials, internships, accommodation of patient escorts, extra services, etc.). The SAC reviewed the right to deduct input VAT for hospital equipment that is required by law for the hospital's operation - for example, the compulsory provision of defibrillators in certain wards.

The reasoning of the SAC
The SAC accepts that the link between the defibrillator and the taxable supply is not entirely clear. However, if the hospital did not have the defibrillator in question, it would not comply with the legal requirements. Thus, it could provide neither exempt nor taxable supplies. This reasoning supports the claim for VAT deduction (at a pro-rata rate).

As a counter-argument, the SAC stated that the mandatory equipment will (in most cases) primarily be used to provide exempt medical services. Therefore, the link to taxable supplies appears to be "rather remote".  

Practical implications
Although the final answer will be provided by the CJEU, the SAC has indicated its opinion. According to the SAC, the decisive factor should not only be whether the equipment is mandatory, but how it will be used (for which types of transactions). By this logic, the deduction would be applicable, for example, to a defibrillator placed in a ward where it can be expected to be used also for taxable medical services, or to a defibrillator acquired only to fulfil statutory obligations (without the intention of actually using it).

The above conclusions may be relevant not only for healthcare institutions but also for other taxpayers applying VAT deduction on overheads by a coefficient, including banks and other financial institutions or real estate companies.

If you have any questions, please contact the authors of the article or the EY team you are working with.

Authors:

David Kužela

Pavol Bezek

[1] Resolution of the Supreme Administrative Court 8 Afs 39/2023-90 of 15 July 2024