Commentary on ECJ C‑154/20 (Kemwater ProChemie s. r. o.) – Effect on the VAT deduction in the Czech Republic

In April 2020 we informed you about the case Kemwater ProChemie s. r. o., in which the Czech Supreme Administrative Court referred for a preliminary ruling to the ECJ relating to the right to deduct the VAT on services supplied by the entity unknown.

In December 2021 the ECJ ruled that the right to deduction can be denied if the supply recipient cannot prove, that a supplier is a taxable person.

This, in practice, obviously can be difficult. This decision can uphold the practice of Czech tax authorities which deny the VAT claims if the taxable person cannot prove, that he received the supply from the entity stated on the invoice (a “declared supplier”).

Kemwater decision goes in our opinion against previous ECJ rulings (like Signum Alfa Sped and Maks Pen) which ruled that the VAT right to deduction shouldn’t be disputed just based on the fact that the issuer of the invoice is not the actual supply provider.

Ondřej Štědrý
Tax Adviser
Prague
Czech Republic

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