The standpoint of Gestor to the problem of VAT
The standpoint of Gestor – The Association for the Protection of Authorship – to the problem of VAT deduction for the purposes of authors’ remuneration from a resale of an original work of art according to Article 24 of Law No.121/2000 Coll. – Czech Copyright Act).
In principle, we start from Article 24 of Law No. 121/2000 Coll. – Czech Copyright Act that claims: For the purposes of exercising the right and of the calculation of the pertinent price, the purchase price is understood as the price without the tax.
The price is understood as the amount of money the painting has been sold for and therefore VAT would have to be part of the painting price.
VAT can be deducted from the sale price only on the assumption that it is included in the price, here the sale is a taxable fulfillment. A sale can be a taxable fulfillment only on the assumption that the painting is being sold with VAT. This occurs only in one case, namely if the merchant, who is a payer of VAT, is selling a painting he himself keeps hold of.
In the given example, it is necessary to distinguish two kinds of fulfillment that can be viewed as a taxable fulfillment.
The first one is the fulfillment embodied in the sale of the painting as such. Such a fulfillment is a fulfillment of the owner towards the purchaser and it is subjected to VAT only on the assumption that the owner is a VAT payer. In this case, the owner has to pay VAT on the retail as the carried fulfillment. The purchase he carried out before was the received fulfillment out of which he could claim VAT refund.
The second fulfillment is the activity of a factor – the service he supplied the owner with and where he calculates VAT from the amount of factorage.
If the law considers leaving tax out of the sale price, it is necessary to regard VAT as being of the sale itself as the taxable fulfillment and on no account as the VAT of the factor service – of the merchant which is the relationship between the merchant and the person he implemented the service for.
Therefore merchants never deduct a tax on the painting retail but a tax on their service – on mediation or auction service.
The other way round VAT, would have to be deducted from all services connected with the painting sale, e.g. from an expert testimony, from transport to a sales room, etc.
Therefore it is evident this tax which is to be deducted from the sale price is only VAT on taxable sale and not on any service the sale is provided by.
In behalf of Gestor – The Association for the Protection of Authorship
JUDr. Antonín Janák