Abuse of VAT Law: Artificial Division of Activities and Its Consequences Confirmed by Court

• The Supreme Administrative Court confirmed that artificial division of economic activities among related entities can be considered an abuse of law.
• A company divided its activities among several firms to avoid mandatory VAT registration and allocated most income to a company providing VAT-exempt passive property rental.
• The court ruled this structure as an abuse of law, as the company actually provided comprehensive services without economic justification for the division.
• The case shows that tax authorities and courts examine the economic substance of transactions and may invalidate structures aimed solely at tax advantages.
• Tax benefits can be denied retroactively if the main purpose of an arrangement is tax advantage without economic justification.
• Tax entities should be cautious when establishing new companies or structuring business activities to avoid suspicion of law abuse.

Source: accace.cz

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

---

---