NSS k mankům a jejich daňové uznatelnosti

NSS on shortages and their tax deductibility

Judgments on the tax deductibility of detected deficiencies are as numerous as saffron. Therefore, we have briefly summarized a recent judgment of the Supreme Administrative Court[1] dealing with this topic.

A shortage is generally defined as an inventory difference where the actual balance is lower than the book balance. Loss in retail can be claimed as a tax deductible cost, but only up to the standard. The taxpayer may set the standard itself but must be able to justify its economic rationality. The standard forloss should be set at the time when the shortages are identified and accounted for (no later than the end of the accounting period).

However, the tax authorities may examine whether the amount of the standard set is in line with the nature of the taxpayer's activity and the normal level of standards of other taxpayers engaged in similar activities (i.e., in simple terms, whether the amount of the standard is economically justified). If the tax authoritiesconclude that this is not the case, it will adjust the tax base by the difference found.

The crux of the dispute in the present case was precisely whether the sthortage was reported in accordance with the law and whether the amount of the standard of loss was set at an economically rational level. In the present case, the tax authority accepted a loss allowance of up to 0,15 % of turnover, but questioned the technique for calculating the inventory difference and the way in which it was accounted for.

The taxpayer considered that the loss allowance could be calculated as the difference between the shortage and the surplus. However, the tax authorities unsurprisingly argued that it was not possible to offset the individual shortages and surpluses found for the different types of assets and then to account only for the total. The Accounting Act does not permit the offsetting of shortages and surpluses, with exceptions[2]. The tax authorities concluded that in certain cases the inventory difference found exceeded the standard and excluded the related costs from the tax base.

The above conclusions of the tax authorities were not challenged by the Supreme Administrative Court.

In conclusion, we would like to emphasize that in connection with inventory differences it is necessary to remember about VAT. In a situation where a taxpayer has claimed a VAT deduction on the acquisition of goods and subsequently discovers a shortagel in such goods, he must generally proceed to adjust the VAT deduction.

We will be happy to assist you in determining the standard of loss or we can review the methodology of your inventory difference calculation. If you are interested in cooperation or have any questions on this issue, please contact the authors of the article or the EY tax team you are working with.

Authors:

Martin Novák

Karolína Moškořová

[1] Decision of the Supreme Administrative Court No. 1 Afs 31/2024-97

[2] § Section 58(1)(c) of Decree No 500/2002 Coll., implementing certain provisions of the Accountancy Act