On 1 April 2019, Act No. 80/2018 Coll., The so-called Tax Package 2019, came into effect that amends, inter alia, the VAT Act. Selected changes in VAT Act are listed below.
Real estate changes
Changes in the VAT Act affects real estate in connection with easement. If the easement to the real estate shows signs of rent, the easement (establishment, duration and termination) of the property is considered as the rental of the property from the VAT point of view, i.e. the provision of the service.
Another change in relation to real estate affects in particular landlords who charge tenants for services directly related to the rent (e.g. reception, cleaning, security, etc.). Date of taxable supply of the services in question is the date on which the actual amount of the service was determined (previously, date of taxable supply of these services was date of service´s providing). For landlords, this means some simplification in the billing of services provided from a third party for a certain period.
The VAT amendment sets new obligation to return back a part of input VAT claimed (deducted) from “significant” repair of real estate in case of VAT exempt sale of the relevant real estate within 10 years from finished repair. The significant repair represents repair exceeding CZK 200 thousand excl. VAT.
Changes related to tax documents
VAT payers are newly obliged to send the issued tax document to its customer within the same deadline as deadline for issuing of a tax document, i.e. within 15 days from the date when the VAT or supply shall be declared in the VAT return. The deadline is met if the document is sent on the last day of the deadline (e.g. it is handed over for delivery to the postal service provider, sent by a data box, etc.). The VAT Act means by sending a tax document the effort that can be reasonably required on the payer to get the document to the recipient (customer) of the supply, respectively into its disposition. The condition "effort that can be reasonably demanded of the payer" is not met, for example, if the VAT payer knows that the customer is not contacted or unknown at the address to which the tax document is sent.
Corrective tax documents
A significant practical change comes in connection with corrective tax documents. If the corrective tax document decreased VAT base of original VAT supply (credit note) , e.g. due to the fact that the transaction (supply) has not carried out fully or partially, a discount has been provided to a customer, etc. - the supplier shall declare this credit note in the period in which the credit note was sent to the customer. Thus, it is not necessary to have a confirmation from the customer on delivering of the credit note. However, even in this case, the VAT Act means by delivery of corrective tax document “effort that can be reasonably required on the VAT payer”, therefore we recommend to VAT payers to send corrective tax documents to the address of the customers (postal, e-mail) to which the customer is contacted.
Please note that in case of a corrective tax document that decreases VAT of the original supply and are issued due to the incorrect VAT rate on the original tax document, the existing rule applies, i.e. the corrective tax document is declared in the tax return for the VAT period in which the customer received a corrective tax document.
In connection with the corrective tax document, we would like to point out that newly the VAT Act sets deadline for issuing of the corrective tax document. The deadline is set within 15 days from the date of taxable supply.
VAT deduction from bad debt
In case of bad debts, the VAT amendment extends the situation in which the VAT payers (suppliers) can claim back VAT paid from the taxable supply which were not paid by a customer. Before the VAT amendment, this procedure was only applicable for debts of debtors in bankruptcy proceedings. Newly, the procedure also applies to debts in insolvency proceedings, execution proceedings and inheritance proceedings. The amount of the tax base correction (and the amount of VAT that can be claimed back) is determined by status of relevant situations, namely beginning, outcome, or process of specific proceedings. Please note that the above-mentioned procedure applies in the case of bankruptcy proceedings for insolvency proceedings initiated after March 31, 2019.
Fine relating to VAT ledger statement
The VAT amendment also changes provision concerning the fine for breach of duty in connection with the VAT ledger statement. The fine expires if the payment order for paying of the fine is not assessed by the Czech tax authority within 6 months of the day on which the breach of the obligation occurred. This provision shall also apply to fines not yet paid.