The Chamber of Deputies passed a technical amendment to the VAT Act in the third reading.
The amendment is anticipated to become effective on the first day of the month following the one in which the amendment was published in the Collection of Laws (with the exceptions listed below). The wording of the amendment will be subsequently considered by the Senate and signed by the President, with the key changes in the VAT Act being expected to affect the following areas (as opposed to the original intentions, the amendment will not modify the existing VAT treatment of the remuneration of statutory executives and members of statutory bodies):
Guidance on taxing vouchers (single-purpose and multi-purpose vouchers)
In the event of single-purpose vouchers, the tax rate (or the fact that the supply is exempt from tax) and the place of supply are known at the date of issue. The issuance and any subsequent transfer of a single-purpose voucher mean the supply of goods or provision of a service to which the voucher relates. Contrarily, the issuance and any subsequent transfer of a multi-purpose voucher (ie a voucher that does not meet the characteristics of single-purpose vouchers) are not considered the supply of goods or provision of a service. The actual delivery of goods or a service on the basis of a multi-purpose voucher is only considered the supply of goods or provision of a service.
Rules for delivering tax documents
Within the deadline for issuing a tax document, the payer is obliged to make an effort which may be reasonably required to deliver the document to the customer. For credit notes, such an effort is directly a prerequisite for the taxpayer to report a decrease in the tax base and VAT (on the other hand, it is no longer necessary to demonstrate to the tax administrator that the credit note has truly been delivered).
New provisions on the date of taxable supply (ancillary supplies to leases, long-term supplies)
Pursuant to the amendment, the date of taxable supply in the event of ancillary supplies to leases (cleaning, security, reception desk services) may refer to the day on which the lessor identified the actual amount to be charged for the service provided. To a certain extent, this is parallel to determining the date of taxable supply for the supplies of heat, cool, electricity, gas and/or water.
In the event of long-term supplies, the date of taxable supply is no later than on the last day of each calendar year following the one in which the provision of such supply commenced. The amendment additionally stipulates that this rule will not apply where a payment has been received in a 12-month period that gives rise to the payer’s duty to declare tax.
Finance lease definition (effective from 2020)
Agreements with the option (rather than the obligation) to purchase the subject of the lease should also meet the finance lease definition on condition that such option actually represents the only economically favourable choice for the lessee.
Lease of real estate and taxation option restriction (effective from 2021)
The existing legislation allows the payer to apply VAT rather than a VAT exemption as regards the lease of any immovable property with the intent of performing the payer’s economic activity. Nevertheless, after the amendment has taken effect, the tax will no longer be applicable to the lease of premises intended for permanent housing.
VAT deduction adjustment in respect of real estate repairs
If an immovable property on which a major repair has been completed is subject to a supply exempt from VAT within the deadline for VAT deduction adjustment (10 years), the payer will be required to adjust the VAT deduction which was originally claimed. A major repair is a repair for which the value of all received taxable supplies relating thereto net of tax exceeds CZK 200,000.
VAT deduction claim upon registration
The existing legislation enables a taxable person to utilise a VAT deduction claim in respect of taxable supplies acquired within 12 months prior to the VAT registration date. With respect to fixed assets, the amendment will also allow, inter alia, extending the period to up to five years before the VAT registration date.
Determination of the place of supply on electronically-provided services
Pursuant to the current legislation, the place of supply of services electronically provided to a non-taxable person means the place of establishment of the service recipient. The amendment stipulates that the above-specified rule shall not apply unless the value of such electronically-provided services exceeds EUR 10,000 in the relevant or immediately preceding calendar years. In such a case, the place of supply will be located in the state in which the service provider has its registered office or establishment.
Decrease in the VAT rate upon heat delivery (effective from 2020)
The VAT rate for heat supplies will decrease from 15% to 10%.
Ban on rounding VAT to fifty hellers (effective from the 6th month following the
amendment’s effective date)
Rounding the amount of VAT disclosed on a tax document to fifty hellers will not be allowed; instead, the amount will need to remain in hellers.
VAT adjustment in respect of bad receivables
The amendment should expand the opportunities of refunding VAT to creditors in the event of bad receivables. The amendment should predominantly remove the required 6-month-period that, according to the current wording, has to pass between the date on which the receivable originated and the date of the court decision on bankruptcy. Besides, it could also be helpful for creditors in practice that declaration of bankruptcy in respect of the debtor’s property will no longer be required. It will be sufficient for the receivable to be the subject of an enforcement procedure.
Changing the person declaring VAT with regard to the supplies of goods with assembly
In general, persons not established in the Czech Republic but registered for Czech VAT purposes will newly have to impose tax on the supplies of goods with assembly when it comes to sales to Czech VAT payers.
The article is part of dReport – January 2019, Tax news; Grants and investment Incentives.