With the beginning of the year, various news in tax area has traditionally comes up. The article below gives a brief overview of changes in the area of income tax and value added tax effective from 1 January 2020 or expected later in 2020.
In the area of value added tax, the rate applied for supply of heat and cold was reduced to 10 % as of 1 January 2020.
Further rate cuts are expected as of 1 May 2020, when the second reduced rate of 10 % will newly cover water supplies and sewage fees, catering services, sale of soft drinks and draft beer in the restaurants and pubs, indoor cleaning and window cleaning services in private homes, home care for children, elderly, sick and disabled citizens, minor repairs or alterations to footwear, clothing or bicycles as well as hairdressing and barber services. In addition, the rate in the amount of 10% will also be unified in case of books, e-books and audiobooks.
Last autumn we have also provided information about significant changes in the application of value added tax in case of supply of goods between EU Member States in connection with the so-called quick fixes. Unfortunately, lawmakers failed to approve the amendment to the relevant law by the end of the year. Although the financial administration keeps silent on this 'loophole' so far, we strongly recommend to adhere to the new conditions for tax exemption of supplies to other EU Member State, as these are governed by a directly effective EU regulation and thus, do not require implementation at national level.
In connection with the forthcoming amendment to the Value Added Tax Act, which should come into effect as of 1 May or at the latest as of 1 June 2020, the institute of advance on excessive VAT refund is proposed in relation to the Constitutional Court’s decision as of the end of February 2019 in the case “Metal Profiles”. Based on this, the tax authority shall be entitled to withhold only and exclusively that part of the excessive VAT refund where there are legitimate and expressed doubts. The tax administrator thus will refund to the taxpayers that part of the excessive VAT refund deduction which is not verified in the scope of the tax inspection or procedure to remove doubts, namely in the form of advance payment which – however – may be used by the tax payers without any restrictions. An advance payment will be paid provided that the amount of the VAT refund not subject to verification exceeds CZK 10,000.
Following this change, there will also be a change in the deadline for recovery of VAT refund. This will be newly - instead of the original 30 days - 45 days as of the day of tax assessment while it will start as of the 15the day after the submission of the relevant VAT return.
In the area of income taxes, changes as of the beginning of the year reflected so called tax package 2019 which primarily brought implementation of the so-called ATAD directive in the area of eliminating tax avoidance.
Another changes in this area were brought by the so-called budget package, among others taxation of lottery and raffle prizes over CZK 1 million, abolition of previously valid rules on taxation of interest on 1 CZK bonds issued before 2013 or changes in tax deductibility of technical provisions in the filed of insurance.