GFD on VAT rates from May 2020
VAT rates applicable to selected products and services will change in connection with an amendment to the Act on the Electronic Reporting of Sales. Most changes, such as the inclusion of water and sewer services or hairdresser’s and barber’s services into a group of services subject to the second reduced rate (10%), are relatively clear. But how to correctly evaluate meal services? And what does drinking water really mean in this context? Answers to these questions and many other topics are discussed in the General Financial Directorate’s new information.
The major part of GFD’s information deals with the VAT rate on meal and beverage services under classification code CZ-CPA 56. These involve services that are defined in more detail by the case law of the Court of Justice of the EU, according to which meal services are involved if the consumption of food and drinks is complemented by other services that enhance the benefit of consumption. These include for instance serving at table, providing premises specifically intended for consumption, washable dishware and silverware, toilets and cloakrooms. It is not necessary that all these complementary services are provided simultaneously, but the extent to which they are provided must be considered.
Importantly, from a VAT viewpoint, the CZ-CPA 56 classification includes both the provision of meal and beverage services and the delivery of goods. When evaluating the nature of supplies, it is thus necessary to consider not only the classification under this code, but also the criteria specified in the description section of Appendix No. 2 to the VAT Act. If uncertain, the ERS website may provide clarification, as it shows selected model examples of how to distinguish between a meal service and a supply of goods. Please be aware that the CZ-NACE classification is used for ERS purposes, which may result in minor differences.
The GFD’s information also pays close attention to exceptions from meal, catering and beverage services. Here the widely-discussed reduced VAT rate on draft beer is also discussed. Draft beer is subject to a 10% VAT rate only if the serving of such beer meets the criteria for the provision of restaurant services.
The GFD also deals with a VAT rate on the supply of drinking water under Code 2201 of the customs tariff, which is understood to be water delivered via a pipeline. Drinking water delivered in another manner (i.e. in bottles) remains subject to a 15% rate. The second reduced rate (i.e. 10%) shall also apply to the supply of hot water produced from drinking water. Another novelty is the reduced VAT rate on electronically provided books, brochures, leaflets and other printed materials, intended both for downloading or on-line reading, but only if such printed matters are specified in the appendix to the VAT Act and if their content does not contain more than 50% advertising.