Changes in the VAT Act from 1 January 2024

Jiří Šindelář

You have probably all already heard that the current government has prepared an amendment in the area of not only tax regulations, which is known as the so-called Consolidation Package. This package also includes upcoming changes in the area of value-added tax, which we will briefly summarize.

At the outset, we must inform you that the fate of the package is currently in the hands of senators and should be discussed at their November meeting. At work, I would take the liberty of summarizing the proposed changes under the terms rates, cars, and books.

Apparently, the key change will be the change consisting of the fact that we will have only two rates, i.e. the standard rate at the level of 21% and the reduced rate at the level of 12%. In practice, there will be a reclassification of goods and services that were previously subject to a rate of 10%. It is worth mentioning, for example, the delivery of food, which will now have a rate of 12%, as well as the delivery of soft drinks, which will now have a standard rate of 21% (with the exception of selected drinks), or the delivery of cut flowers at a rate of 21%. The standard rate will now also include the services of hairdressers, barbers and the services of authors and artists.

Another significant change will be the limitation of the maximum amount that the payer of value-added tax will be able to deduct in the case of the purchase of an M1 category passenger car. The amendment should introduce a limitation in the maximum amount at the level of CZK 420,000, which corresponds to the purchase price of CZK 2 million. The government is thus trying to fight against situations where entrepreneurs purchase luxury cars for their business, but ultimately use them for their own personal use.

The amendment should also introduce an exemption for the supply of books while maintaining the right to deduction (the definition of a book will be part of the VAT Act, where one of the conditions is that the book does not contain more than 50% advertising and at the same time does not consist exclusively of musical audio or audiovisual content).

Given that the changes will also have an impact on the settings of the economic software, we recommend that you check their settings so that the system is already adapted to the mentioned changes from the moment the amendment takes effect.

If you have any doubts in the area of value-added tax or would like to check the current settings of your system, do not hesitate to contact us.

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Jiri Sindelar
Jiří Šindelář
Tax Director

Tax advisory