In its recent judgement (No. 10 Afs 179/2020-56) the Supreme Administrative Court (SAC) concluded that a company that organised a promotional event was not entitled to the refund of input VAT on subcontracted supplies. According to the court, these involved the provision of travel services.
The promotion agency registered for VAT in Germany provided its customers with the complete organisation of events. Between March and July 2014, the agency organised a promotional event for a German customer in the Czech Republic. The organisation of the event involved the provision of complete services: i.e., transport, accommodation, catering, interpreter services, an experiential programme, etc. Some services were provided by the agency itself, others were purchased from Czech subcontractors. The agency then claimed a refund of the VAT paid in the Czech Republic on these subcontracted supplies. The tax administrator denied it on the grounds that the organisation of the promotional event should be regarded as a travel service, for which there is no right to VAT refund.
The Supreme Administrative Court agreed with this conclusion and unequivocally concluded that if the organiser of the promotional event provides tourism services such as transport, accommodation, or catering, which they have acquired from subcontractors, it is a provision of travel services. In such a case, according to the SAC, it is necessary to apply the special VAT treatment for travel services, and the organiser will not be entitled to a refund of VAT paid in another member state even though they are not a regular travel agency and do not have the necessary trade licenses. The actual nature of the services provided is crucial.
In its judgment, the SAC also commented on the principle of legitimate expectations, according to which identical or similar cases must be decided in such a way as not to create unjustified differences. In the SAC’s opinion, this obligation is not unlimited: a serious reason justifying the departure from this principle would be the previous administrative decision being contrary to law.
Following from this case law, we recommend that companies organising similar types of events (marketing, promotional, educational, etc.) pay increased attention to the issue to avoid the risk that the tax authorities will subsequently deny them the right to deduct VAT on subcontracted supplies and assess penalties.