Value added tax in reorganisation

to the taxable amount with respect to claims partially cancelled due to the insolvency of the
customer resolved by reorganisation. The partial cancellation, according to the authors, serves
as grounds to adjust a taxable amount under the EU VAT Directive. The supplier is entitled to
issue a corrective invoice and claim a refund of a proportion of the VAT paid with respect to the
delivery of goods or services to an insolvent debtor. However, such practice is not yet followed by
the Czech tax authorities who do not allow for a reduction of a taxable amount in reorganisation
and only allow such reductions in the case of bankruptcy liquidation. The paper argues that this
approach is not compatible with European law. Moreover, such a different treatment of VAT payers
in bankruptcy liquidation (resulting in higher satisfaction of VAT taxpayers as creditors) puts
reorganisation at a considerable disadvantage and is contrary to the basic principles of insolvency
law. Finally, the paper argues that the corresponding claim of the tax authority resulting from the
VAT base adjustment constitutes a standard pre-insolvency claim and should not be preferred in
the insolvency proceedings under Czech law.