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Amendment to the VAT Act – current information

Learn how the upcoming amendments to the VAT Act will affect your business or company

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The amendment focuses primarily on changes to the tax base correction, rules for claiming VAT deductions, matters of unpaid liabilities, taxation of real estate transfers, and many other critical areas. The changes, which will be phased in from 2025 to 2028, require increased attention to ensure your business can respond appropriately. Below is a summary of the key information. 

Overview of the main changes that the amendment should bring:
 
  • Obligation to reimburse the VAT deduction if the liability is not paid within six months of the due date;
  • Extension of the period for correcting the VAT base to up to 7 years;
  • Reduction of the time limit for claiming VAT deductions;
  • Extension of the situations leading to VAT corrections for bad debts;
  • New concept of exemption for the supply of immovable property and completely different rules for determining a substantial change to a building;
  • Abolition of special procedures for self-created assets;
  • Introduction of new forms of VAT refunds, such as refunds to foreign persons when importing goods from third countries or when acquiring goods from another EU Member State;
  • Changes to the authorisation for delivery to foreign persons established outside the EU;
  • New approach to issuing tax documents by the customer (self-billing).
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What areas should you focus on as part of the VAT changes?

  • The amendment should completely revise the way turnover is calculated for VAT registration. Non-taxpayers will monitor turnover in a way that accounting software may not currently support.
  • A second limit (EUR 100,000) will be added to the existing limit (CZK 2 million), and any obligation to register as a VAT payer will be determined through a combination of these two limits. While this will may be a simple matter for your filing system, it is crucial to understand the substance of the changes.
  • The amendment also separately addresses how the statutory regime will transition between 2024 and 2025. To avoid unexpected impacts of the changes, ensure your internal procedures comply with the amendment’s requirements.
  • For persons who provide only exempt supplies, the amendment changes the criteria for mandatory registration and possible deregistration. You should be able to find out information from your ERP systems about the specific date that may mark a major turning point for your company. Not everyone will be prepared for such monitoring. But you will be!
  • And one more important detail: do you know which transactions are included in turnover? Consider how the amendment might affect this as well.
  • Fundamental changes will affect the taxation of real estate transfers. The amendment introduces a new concept of exemption for the supply of real estate, reducing the relevant period for taxation from five years to just two years. However, this is far from the only way in which the amendment will extend the scope of the exemption.
  • Do you plant to renovate the property before selling it or, conversely, acquiring it? It is very likely that you will also be affected by the amendment to the VAT Act, as it will fundamentally change the view on the so-called substantial alteration of a building.
  • The proposal to completely abolish the special procedures for self-created property has been long awaited. And it is finally here! However, due to the transitional provisions, the change will not be trivial and it is critical to understand the substance of the amendment.
  • Also new will be the allowance of a tax deduction for the inclusion of fixed assets after registration for tax. Could this potentially benefit you?
  • One of the most noticeable changes is the shortening of the time limit for claiming the tax deduction. What might this mean in relation to the circulation of tax documents in your company? At the very least, if you are considering a retrospective review to identify potential additional application of tax deductions, you should become thoroughly familiar with the amended VAT Act.
  • Do you know when a tax deduction is due? The amendment does not change this point in time for the time being, however, there are certain signals that some adjustments could be made.
  • An important change is undoubtedly the possibility of losing the VAT deduction if the supplier is not paid within a certain period of time. Does your company’s tax return process include this functionality?
  • The time limit for correcting the tax base will be extended to 7 years. Note that the change will also affect current running deadlines. The current practice of issuing corrective tax documents without VAT after three years from the date of the taxable supply will become history. Could this be a problem for your company or your customers?
  • The new tax base correction will have to be made even after the taxpayer’s registration has been cancelled. Yes, even in a non-taxpayer status, , it will be necessary to resolve the tax base correction for historical transactions up to seven years after deregistration.
  • The amendment will modify the list of countries with which the principle of reciprocal return is fulfilled. Make sure you can continue to recover VAT where your trading partners count on it.
  • Are you a foreign person established outside the EU without a data box? You will now be required to appoint a representative who has an accessible data box.
  • Relatively strict restrictions on who can serve as a representative will make it impossible for just anyone to act as one. It will certainly be too late to change your internal process settings in December, so focus on the new rules today.
  • The amendment should introduce a rule for determining the tax base at arm’s length when real estate is sold to employees or their family members. Invoicing a certain price but reporting and paying VAT on a different basis pose a challenge for your ERP systems.
  • Sales of goods to tourists from third countries in the VAT Refund system will be handled in a different way procedurally, with more involvement of electronic procedures. And there will no longer be an obligation to refund VAT to tourists. That sounds interesting, doesn’t it?

Why you should prepare for VAT changes with us? 

 

Expert team: 

With more than 40 experts, we track VAT changes for you, providing you with practical advice tailored to your specific industry. Stay one step ahead with us.

Years of experience:

Since 1993, when VAT was introduced in the Czech Republic, we have been providing expert advisory services. Our extensive experience in both local and international tax environments ensures that you receive the best guidance.

Comprehensive services:

We offer our clients a wide range of services, which we combine appropriately according to the needs of your business and in consultation with you - from providing technological tools from our tax and legal consulting workshop to optimising financial processes.

  • Technology, Robotics, ERP
  • Legal advisory
  • Accounting, tax and project management support

Innovative Tools: 

We utilise our technological tools, such as taxCube for preparing VAT reports, Maják, and other tools.

  • taxCube – A tool for easy preparation and submission of VAT and Intrastat Reports;
  • Maják – Protects you from unknowingly being involved in VAT fraud and the risk of losing your right to deduct VAT;
  • VAT analytics – A tool for bulk verification of the complete set of documents entering the VAT return; 
  • and many more.

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A team of experts to help you

Radka Mašková

Director
+ 420 603 177 719

Michaela Lounková

Director
+420 731 648 068

Marek Fořt

Director
+420 605 234 995

Jaroslav Beneš

Director & CTO
+420 603 177 906