SAC rules on right to deduct VAT on fixed service fee
According to the Supreme Administrative Court (SAC), it is possible to claim a VAT deduction also for received services that were invoiced at a fixed monthly fee. The fact that the fee was agreed in this manner is not a fundamental obstacle to proving the scope of the received services. However, it is necessary to provide a chain of related evidence.
OLMAN SERVICES received cleaning services from its suppliers, which it used as sub-supplies for its customers. These sub-supplies were only arranged when the company's own capacities were insufficient to meet customer requirements. As it was difficult to determine the subject matter of the contracts, the company agreed with the suppliers on a fixed fee corresponding to the average number of days of cleaning services per month.
However, the tax administrator rejected the right to deduct VAT on the grounds that the scope of the received services was not sufficiently defined and the invoiced fee was not clearly specified. They also pointed to several non-standard features of the suppliers (such as having a virtual registered office and later being designated as unreliable payers).
As part of providing evidence, the company submitted a chain of evidence together with an explanation. This included tax documents, attachments with a breakdown of individual cleaning jobs (detailing the number of cleaning days, cleaning locations, cleaned areas, and rates per square meter of cleaned area), contracts, bank account statements confirming payment, and witness statements from the company's customers and suppliers' representatives, including email correspondence.
The SAC concluded that it is not possible to deny the right for VAT deduction on the grounds that the fee had been set as a fixed monthly amount regardless of the actual number of days of service provision (moreover, the actual number of days was clear from the documents provided by the company). Such a fee arrangement is not prohibited by law, and its determination is therefore at the discretion of the contracting parties.
The SAC stated that if the presented evidence is objectively related and supported by the company's explanation and witness statements, the arrangement for services to be provided "when necessary" cannot be considered an insufficient definition of the scope of services.
The SAC therefore ruled in favour of the company and confirmed the right to deduct VAT.
Regarding the tax administrator's doubts about the non-standard nature of the business and the credibility of the suppliers, the SAC stated that in such a case, it would be necessary to initiate proceedings to prove the involvement in tax fraud, with the burden of proof on the tax administrator.