15. 06. 2017

Amendment to the VAT Act

There are major changes in the case of value added tax; the amendment contains a total of 134 clauses of changes to the VAT Act and 7 clauses of transitional provisions. Most of these changes are a follow-up to the changes stemming from EU regulations and concern intra-community transactions, i.e. performance within other EU Member States. As a result, there are new reverse charge regimes as has been traditional in the past few years.

In the course of 2017, there have been some minor changes in the VAT Act. It is worth mentioning the reduction of the tax rate on the supply of newspapers and magazines, for which a second reduced rate of 10 % is applied with effect from 1 March 2017.

We can also mention the ruling of the Constitutional Court, which annulled two provisions regarding the control report. The provisions concerned Section 101d(1), i.e. the prescribed tax management data, and Section 101g(5) dealing with requests for control reports sent by e-mail.

The biggest change of this year, however, will be the aforementioned amendment, which is part of the tax package for 2017/2018. In addition to minor adjustments relating to the refinement of the word formulations used, there are many other significant changes.

With regard to value added tax, as mentioned by the Ministry of Finance of the Czech Republic, the institute of unreliable person and an extension of the reverse charge regime will be introduced to improve the fight against tax evasion.

Furthermore, it is worth mentioning the conceptual changes in the application of value added tax to companies (“associations”). Above all, the provision under which a taxable person becomes a payer at the time when that person becomes a member of the company (member of the association) is annulled.

Newly, trust funds and sub-funds will also be considered taxable persons. If the statutory conditions are met, these entities may also become taxpayers.

A one-off adjustment of the tax deduction for fixed assets will now be made in the taxable period in which the performance establishing the obligation to adjust the deduction occurs. The adjustment of the tax deduction will also be made in the event of an unsubstantiated destruction, loss or theft of commercial property.

The amendment also brings some completely new modifications, which include for example new rules on the taxation of advances received before the date of taxable supply.

Any changes in the area of VAT will start to apply along with the effectiveness of the tax package, i.e. already in 2017.

Author: Radek Bartů, Senior Consultant, e-mail: bartu@apogeo.cz, phone: +420 267 997 702

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