New rule for debtors: Adjustment of VAT deduction for overdue payables

The obligation to adjust the deduction arises when the liability remains unpaid for six months after the end of the month in which the invoice was due. In such cases, the taxable person is required to reduce the originally claimed VAT deduction. This obligation applies only to supplies made on or after 1 January 2025. Older liabilities are not affected by this rule.

Practical example

An invoice with a taxable supply date of 1 January 2025 is due on 15 January 2025. The six-month period is counted from the end of January and therefore ends on 31 July 2025. If payment is not made by that date, the deduction must be adjusted in the VAT return for July 2025, for which the deadline for submission is 25 August 2025.

Who is affected

This obligation applies to VAT payers who received a taxable supply with a place of supply in the Czech Republic, claimed a VAT deduction, and subsequently failed to pay for the supply. It does not matter whether the supply was goods or services – what matters is that the input VAT was claimed.

Possibility of reclaiming the deduction

If the debtor makes a partial or full payment after the deduction has been adjusted, they may reclaim the corresponding portion of the deduction. This can be done no earlier than in the tax period in which the payment was made. However, the general deadline for claiming the deduction must be observed – that is, no later than by the end of the second calendar year following the year in which the adjustment could have first been made.

Reverse-charge mechanism

The new obligation does not apply to recipients of supplies under the reverse charge mechanism. If you received a supply for which you were required to self-assess VAT (e.g. construction services between VAT payers) but did not pay the supplier, the deduction adjustment does not apply to you. This is because you did not claim input VAT based on an invoice with VAT charged, but you declared the VAT yourself.

What to watch out for in liability records

We recommend keeping detailed records of liabilities by due date. Pay special attention to the following situations:

1. Partial payments – the adjustment applies only to the unpaid portion of the liability.
2. Set-offs – if a set-off occurred, it is treated as a payment.
3. Retention payments – if part of the price is retained (e.g. 10% for 12 months), each part has its own due date and must be tracked separately.
4. Instalments – if payment is agreed in monthly instalments, the due date of each instalment must be monitored individually. The taxable person must be able to prove the due date of each one.

Different VAT rates and a combination of regimes

If an invoice includes items with different VAT rates, the adjustment must be made proportionally based on the original breakdown. For example, if an invoice includes items taxed at 21% and 12%, and 40% of the total value remains unpaid, the deduction must be reduced proportionally for both rates.

If a specific item was not paid, for example, due to a complaint or claim, the adjustment applies only to that item and its corresponding VAT rate. The same principle applies if the invoice includes taxable supplies and supplies in the reverse-charge regime – the adjustment is made only for the part where VAT was claimed based on an invoice with VAT charged.

These new rules represent a significant change in the area of VAT. We recommend implementing internal control mechanisms, regularly updating liability records, and promptly identifying cases that may trigger the obligation to adjust the VAT deduction. If you have any questions, please contact your tax advisor or reach out to our specialist below.