Scope of the application for an individual interpretation
On July 13, 2023, an application for an individual interpretation was received regarding the lack of the right to deduct input tax in connection with the thermal modernization of two municipal buildings. The application states that the company administers the commune’s premises under an executive contract and is implementing an investment to modernize the buildings. The investment will be partly financed by a subsidy from the National Fund for Environmental Protection and Water Management.
The question raised in the application is whether it is possible to deduct VAT in this case, or if there is no possibility to deduct VAT, or if there is a limited right to deduct VAT. The company’s position is that all services purchased during the implementation of the investment are not subject to VAT deduction because they are not related to taxable sales.
The position presented in the application is correct. According to the Act of March 11, 2004 on tax on goods and services, a taxpayer has the right to reduce the amount of tax due by the amount of input tax if the goods and services are used to perform taxable activities. However, this right does not apply to goods and services that are not used for taxable activities, such as those used for activities exempt from VAT and not subject to VAT.
In this case, the conditions for deducting input tax are not met. The investment consists of deep thermal modernization of two municipal buildings that only have residential premises. There is no business activity conducted in these premises, and they are not related to taxable sales. Therefore, the company does not have the right to deduct input VAT in connection with the implemented investment.
The interpretation applies to the future event presented in the application and is based on the legal status in force on the date of the interpretation. It is important to note that the protective function of individual interpretations is determined by the provisions of the Tax Ordinance. The interpretation can play a protective role if the situation is consistent with the description of the facts and the taxpayer complies with the interpretation.
If the taxpayer disagrees with the interpretation, they have the right to challenge it to the Provincial Administrative Court. The rules for challenging individual interpretations are regulated by the Law on Proceedings before Administrative Courts. The complaint should be filed within thirty days from the date of delivery of the individual interpretation.
In conclusion, the company’s application for an individual interpretation regarding the deduction of input tax in connection with the thermal modernization of two municipal buildings has been addressed. The interpretation states that the company does not have the right to deduct input VAT in this case. The taxpayer has the right to challenge this interpretation to the Provincial Administrative Court if they disagree with it.