Dentons Wins Important Tax Case for Sev.en EC in Czech Supreme Administrative Court

Dentons Wins Important Tax Case for Sev.en EC in Czech Supreme Administrative Court

Czech Republic
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Dentons has successfully represented Sev.en EC, a.s., a member of the Czech Coal group, before the Supreme Administrative Court of the Czech Republic in what the firm calls "extraordinary litigation" related to the reimbursement of gift tax from the Czech state that was imposed on the free carbon dioxide emission allowances in 2011 and 2012 in breach of EU law.

The Czech Coal group includes Severni Energeticka, Elektrarna Chvaletice and other companies, and is one of the largest producers of coal and coal-based electricity in the Czech Republic.

According to Dentons, "the Supreme Administrative Court decided the case in favor of Sev.en EC, and ordered the tax authority to return the illegal tax and pay almost 15% in interest on the due amount. The ruling sets an important precedent, which will affect many operators throughout the Czech Republic. The case was strongly driven by EU law, as the illicit tax was a result of a wrongly transposed Directive. The Court ruled the that the tax authority is obliged to know all legal norms on which the tax is based, including EU law, and in case of discrepancies, it is obliged to disregard national tax regulation in favor of directly applicable EU law. Therefore the conduct of the tax authority was indeed illegal and it has to be remedied through the award of interest."

Dentons Partner Petr Zakoucky, Head of the the firm's Energy group in Prague, led the team handling the case, supported by Associates Barbora Obracajova and Michal Pelikan. According to Zakoucky, “the litigation included several unique aspects, never before litigated before the Czech courts. The Court’s ruling sets a significant precedent, which will hopefully influence the operations and conduct of Czech tax authority. This applies not only with respect to emission allowances, but also for the entire tax system in the Czech Republic.”