“Pre-Factor” in the Tax on Goods and Services

Abstract

Since 1 January 2016, there have been new provisions in force of the Act on Tax on Goods and Services, introducing the requirement to use the so-called “prefactor” of the input tax deduction by taxpayers. Already before the amendments, the VAT Act contained provisions on proportional deduction (Art. 90). However, the pre-factor was then applied at a different level. In this paper the essential issue is to establish the right of taxable persons (in particular a self-government unit) to a partial deduction of input tax with respect to mixed costs on the basis of the proportion of sales, referred to in Art 90/3 of the Act on Tax on Goods and Services, as well as to examine the merits of such solutions and to draw attention to possible elements of non-compliance with the rules of the tax while accounting for the CJEU case-law.