Připravovaná novela zákona o DPH

Forthcoming amendment to the VAT Act

The Ministry of Finance has submitted a very extensive amendment to the VAT Act (HERE) for external comment procedure which should (with minor exceptions) come into force on 1 January 2025.

Below is a summary of the key proposed changes which are likely to affect a large number of taxpayers and may require more extensive preparation:

• Employees - for supplies to employees (and their dependants) at a discount, the taxable amount will be the usual price; this may lead not only to higher VAT liability but also a significant increase in administrative complexity.
• Claiming tax deductions - the time limit will be shortened to 2 years; tax deductions based on debit notes can only be claimed within 12 months.
• Unpaid liabilities - new obligation for customers to repay the VAT deduction claimed on unpaid liabilities after 6 months of their maturity; taxpayers will have to keep records of when liabilities become due for VAT purposes.
• Bad debts - extension of the supplier's ability to recover VAT, in particular looser rules for small debts or debts from non-payers; on the other hand, in these cases, output tax reduction will become mandatory.
• Evidence of business assets - the data that the taxpayer is obliged to record are specified.

Other selected changes:

• Corrections of the tax base - the time limit for correction is extended to 7 years; however, the time limit will not be interrupted during the court proceedings; the obligation to make a correction even after the cancellation of the taxpayer's registration is introduced.
• Guaranty of the customer for the VAT unpaid by the supplier - instead of automatic liability in selected situations, the amendment introduces a legal fiction that can be rebutted by the payer.
• Actual use or enjoyment - taxation of certain B2C services (e. g. consultancy) provided to non-EU persons consumed domestically.
• Small businesses (not exceeding turnover) - major changes to timing of registration and calculation of turnover; extension of the scheme to non-EU persons; explicit exemption of supplies made by a small business from VAT without entitlement to input VAT deduction.
• VAT deduction on registration - extension for assets acquired over a longer period.
• Housing - the reduced VAT rate will be strictly based on the registration in the cadastral register; some buildings for social housing will be newly defined.
• Substantial alteration of a building - will be based on an increase in the value of the building of more than 30%.
• Building land - will be explicitly defined based on the zoning documentation issued by the municipality.
• Supply of a 'new' building - only the first transfer of completed selected immovable property will be exempt from VAT if it takes place within two years of its completion.
• Self-created property - specific rules abolished; however, the scope of the right to deduct VAT on property acquired over several years is clarified.
• Reverse charge - now also applicable to certain cleaning work.
• Rental of real estate - the taxpayer will be able to opt to apply VAT also to a tenant who is registered for VAT in another EU Member State.
• Financial services - tax exemptions that conflict with EU law will be abolished (management of individual portfolios, debt collection, payment of pensions, keeping records of investment instruments, etc.).
• Foreign group registration - explicit provision for "autonomy" for domestic parts of foreign VAT group members.
• Entitlement to attend events - redefines the place of performance for virtual attendance at a cultural, artistic, sporting, scientific, educational, entertainment or similar event.
• Blood pressure monitors and pulse oximeters which are medical devices - a reduced VAT rate is introduced.
• Refund of unjustified tax paid - new possibility for customers to ask the tax authorities for a refund if it is not possible to recover from the supplier the VAT charged by him incorrectly.
• Restriction on the right to deduct tax on expensive cars - abolition of the restriction on racing cars and complete abolition from 2027.
• Import of goods by a non-owner - the right to deduct import VAT is excluded.
• Export of goods by travellers from third countries in personal luggage - the taxpayer will be obliged to communicate information on the sale to the customs administration electronically via the public administration information system.
• Transfer of a business - now "totality of assets" - legal succession is explicitly introduced.
• Supplies supplied over more than 12 months - it is specified when VAT must be paid at the end of the year.
• Education and training - the scope of exemption is clarified.
• Refund of VAT to foreign persons – the Ministry of Finance will publish in the Financial Bulletin a list of countries with which the principle of reciprocity is fulfilled.
• Refund of VAT to foreign persons when importing or acquiring goods - VAT will now be refunded if the goods are used in the Czech Republic for performance under the reverse charge regime.
• Delivery by email - the fiction of delivery on the tenth day after the message is sent via a public data network is introduced.
• Travel services – passenger air transport from/to the EU will again be treated as a service supplied in a third country.
• Correspondence address representation - foreign persons are required to appoint an agent to receive correspondence from the tax authorities who has access to a data box.
• Bundle of supplies - the rules for applying VAT rates to a bundle of mutually equivalent and inseparable goods or services are clarified.
• Transactions with a place of supply outside the country - precise rules are introduced for their reporting in the VAT return.
• Forced sale of property - the obligations of the person responsible for such a sale are specified; the application of the reverse charge regime is excluded.
• Authorisation to issue a tax document - it will be possible to prove authorisation not only by written agreement.
• New VAT return - tax return for VAT refund is introduced (e. g. for diplomats or foreign persons)

The amendment contains about 400 points supplemented by a comprehensive explanatory memorandum. We are currently analysing the material and the above is only an initial simplified summary of selected areas.

If you have any questions, please contact the authors of the alert or members of the EY team with whom you usually work.

Authors:

David Kužela

Stanislav Kryl