Maintenance of photovoltaic power plants as a low value-added service

On 25 July 2024, the Supreme Administrative Court issued a judgment No. 6 Afs 255/2023-58 in a dispute concerning corporate income tax and the correct setting of prices between related parties.

In the judgment of the Supreme Administrative Court, a cassation complaint against the decision of the Regional Court in Hradec Králové was examined. The subject matter of the dispute was an additional payment order, which the tax office assessed against the taxpayer on the basis of the difference between the price of services provided by the parent company to the taxpayer and the price that would be normal between unrelated parties.

The applicant lodged a cassation complaint against the decision of the Regional Court in Hradec Králové on the basis of which it was assessed corporate income tax for the 2018 tax year. The tax authority assessed the tax on the grounds that the company was unable to provide satisfactory justification for the differences in the price of services, in particular for the servicing, monitoring and maintenance of the photovoltaic power plant.

The applicant argued that the tax authority should have chosen the comparable independent price (CUP) method to determine the reference price. However, the tax authority used the Cost+ method on the grounds that the maintenance of the photovoltaic power plant is a low value-added service within the meaning of the General Tax Directorate's Guideline D-10 on low value-added services provided between related parties. In the calculation of the price, they therefore added the maximum mark-up allowed under the guideline of 7 % to the wage costs of the workers involved in providing the service.

The Supreme Administrative Court dismissed the cassation complaint and thus upheld the decision of the Regional Court and the procedure of the tax administrator.

If you have any doubts about the correct pricing between related parties, do not hesitate to contact the tax team of PKF APOGEO Tax.

Author: Petr Knotek