Dentons sets another legal precedent in Czech tax litigation

Dentons secured a victory for Veolia Energie ČR before the Czech Supreme Administrative Court, in a litigation regarding interest from illegal gift tax in energy context. The case concerned a gift tax imposed on all emission allowances allocated to power plants in breach of the EU law. After the ECJ declared this tax illegal in the Skoda Energo case, the Czech tax authorities correctly reduced the tax but refused to pay the interest accrued as a result of the illegally imposed tax.

In its decision, the Supreme Administrative Court confirmed that the tax authorities have to pay interest from the date when the tax payer paid the illegal tax under the original decision of the tax authority imposing the tax (in Czech: platební výměr) and not only from the later decision on the change of the tax (in Czech: dodatečný platební výměr). This refined the previous landmark decision of the same court from 2017 (see 5 As 27/2017 – 45), and confirmed Dentons’ position that the tax authorities need to pay the interest accrued from the illegally imposed tax with respect to the entire period.

Commenting on the case, Petr Zákoucký, Head of Dentons’ Energy and M&A practices in the Czech Republic, said: “This follow-up decision of the Supreme Administrative Court should make the Czech tax authorities think twice when interpreting the Czech tax legislation, in a way which potentially conflicts with EU law. This landmark decision gives Czech tax payers recourse against the tax authority with regard to this illegally imposed tax.”

“Dentons keeps delivering great results even in these novel cases. Their Energy team stands out on the Prague market, we are grateful for our collaboration,” said Ondřej Hořín, the Head of Legal of Veolia Energie ČR.

PUGNATORIUS Ltd. expresses concerns regarding TIWB

Thailand’s recent participation in the “Tax Inspectors Without Borders” assistance program endangers not so much legally but factually the long-term cherished cross-border tax structures among the land of smiles. It demands sooner or later increased requirements for local tax advice and international tax planning.

TIWB allows the OECD, which is behind this raid against international tax competition, to familiarise the Thai tax authorities with OECD tax policy and viewpoints by sending their expert auditors to a tax-legally underdeveloped country, as Thailand is considered not entirely unjustified.

In the past, Thailand has been deliberately reluctant to interpret and reclassify cross-border transactions and to reinterpret double taxation agreements and tax information exchange agreements. This was done with good reason, only ostensibly inefficient, and Thailand participated in this tax-friendly treatment in several ways and at several levels.

The formal reason for Thailand’s Revenue Department to sign up for the training course for a world of “taxation without borders” is the desire to tax cross-border e-commerce and streaming services. However, this is not a limitation but only a starting point for the new right way of taxation with the friendly and targeted support by the OECD.

To address the tax challenges of the digital economy is just the first step on the 15-points-action BEPS list of the OECD. The base erosion and profit shifting initiative is e.g. also directed towards the topics of CFC controlled foreign companies, transfer pricing, abuse of tax treaties, and aggressive tax planning arrangements.

The tax counsellor PUGNATORIUS Ltd. analyses and monitors further developments and will provide practicable solutions for the more stringent requirements of future Thai tax planning. The announcements of the Thai Revenue Department are from June 2020. The Bangkok law firm sees a pressing need for action in this area for a variety of Thai tax issues.