Leaseback: change in VAT treatment
Within the Coordination Committee of the Czech Chamber of Tax Advisors and the General Financial Directorate, the financial administration confirmed that they will start applying the Court of Justice of the European Union’s interpretation to leaseback transactions, so that they now will be regarded as single transactions from a VAT perspective.
The Coordination Committee discussed the application of value added tax to selected finance lease arrangements, in particular sale-and-leaseback transactions.
Under a leaseback arrangement, the leasing company acquires an asset from the future lessee into its ownership while the asset becomes the subject-matter of a finance lease contract. The leasing company does not normally take physical possession of the leased item.
Historically, a leaseback arrangement has been treated as two separate transactions from a VAT perspective: the acquisition of the leased item by the leasing company from the future lessee, and the finance lease of that item to the same person. The submitters of the discussion paper to the Coordination Committee proposed to proceed in accordance with CJEU judgment C-201/18 Mydibel and treat the leaseback as a single transaction for VAT purposes.
The GFD confirmed the opinion of the paper submitters that from a VAT perspective, a leaseback is not a supply of goods by the (future) lessee to the leasing company and back but instead is the provision of a service to the lessee by the leasing company, usually a financial service.
As far as current practice is concerned, the conclusions of the Coordination Committee should be applied to contracts concluded after the paper’s date of publication on the GFD website.