Forthcoming Amendment to VAT Act

We would like to inform you about a proposed amendment to the VAT Act, which should be effective from 1 January 2025. The main proposed changes are summarised below.

Adjustment to Time Limits

The time limit for claiming a tax deduction is to be shortened from the current three years to two. On the contrary, extending the time limit for applying a correction to the tax base from three years to seven is proposed.

Small Business Scheme and Changes to Registrations

If a taxable person from another Member State decides to use the small business scheme, he/she/it does not immediately become a taxable person when the taxable supplies are made and does not incur any additional duties such as registration and monthly reporting. This scheme should offer simplification in the form of registration in the state of establishment and quarterly reporting only.

The proposed change thus equalises the conditions for foreign entrepreneurs with domestic ones, since domestic entrepreneurs in most cases are only obliged to register after exceeding a turnover limit.

The amendment also includes changes to taxpayer registration. Thus, a taxable person with his/her/its registered office in the Czech Republic or a taxable person from another EU state registered in the small business scheme in the Czech Republic should become a taxpayer from the beginning of the calendar year after the year in which turnover exceeds CZK 2,000,000.

Abolition of Concept of Self-created Assets

The concept of self-created fixed assets is to be completely abolished. What was true for other self-generated fixed assets in terms of determining the amount of input tax for calculating an adjustment to the tax deduction should now apply to “any” fixed assets.

Uncollectible Accounts Receivable

The proposed amendment should expand the options for suppliers to recover VAT paid on uncollectible accounts receivable, especially for smaller receivables and receivables from non-payers.

Outstanding Liabilities

Payers should have a new duty to monitor the maturity of their liabilities. In the case of liabilities unpaid for more than six months, it will be necessary to return a tax deduction claimed.

Tax Base in Case of Performance for Employees

In contrast to the current legislation, where the tax base in the case of performance for employees was determined from the price paid by the employees, the draft amendment sets a duty to pay tax on the usual price. However, only in the case of the delivery of real estate.

Narrowing Scope of Exempt Financial Activities

In order to comply with the VAT Directive, the following activities, which are currently exempt from VAT, should be removed:

• procurement of collections;
• keeping records of investment instruments;
• collection of radio and television licence fees;
• paying pension insurance benefits or collecting recurrent payments from the public;
• management of a customer’s assets based on a contract with the customer where the assets include an investment instrument, except for the management or custody of investment instruments.

Certain changes can of course be expected during the legislative process and we will inform you in time.

If you are affected by the above stated changes, please do not hesitate to contact us.

Your WTS Alfery team