VAT news

Turnover and VAT registration

One fundamental change will be a completely new approach to determining the turnover for mandatory registration as a VAT payer. In addition to the current single limit of CZK 2 million for the last 12 consecutive months, tax subjects will also face a second limit of CZK 2,536,500. The potential obligation to register as a VAT payer will have to be addressed by monitoring both of these thresholds. Furthermore, a completely new approach will also be taken to the determination of the period for monitoring the thresholds, and different dates will be set for when the relevant person will become a VAT payer after exceeding one of those thresholds. The changes will also affect persons who provide only exempt supplies.

Currently, the turnover is calculated over a period of 12 consecutive calendar months. It will now also be calculated on a calendar year basis. If turnover exceeds CZK 2 million, VAT liability will arise from 1 January of the following calendar year, but if the turnover exceeds CZK 2,536,500 (the standard EU amount of EUR 100,000), the entity will become VAT-liable immediately (on the following day).

Entitlement to tax deductions

The time limit for claiming a tax deduction will be shortened from the current three years from the date of the taxable supply received. It does not affect all input tax deductions - the amendment treats deductions differently depending on the period in which the right to claim them arose.
The key change is the obligation to repay a VAT deduction that has already been properly claimed once the customer in question fails to repay within a certain period of time his liability for the purchase of goods or receipt of services. The amendment provides for a basic period of six months of delay; however, this may be partially extended.

Adjustments to tax base

The extension of the time limit for adjusting the tax base to seven years is a slightly overlooked change, but one that has significant practical implications. It will difficult to deal with business cases more than three years old outside the VAT system anymore if there has been some price adjustment. The amendment even stipulates that each supplier of a supply is obliged to correct the taxable amount - even after its registration as a taxable person has been revoked. Hypothetically, up to seven years after deregistration, it will still be necessary to issue corrective tax documents under the VAT Act and to file VAT returns. However, the amendment introduces exceptions, and there will be cases where the current three-year period will be maintained.

Tax adjustment to irrecoverable debts

After the amendment, the VAT Act will contain additional options for recovering VAT from the tax office in the event that a receivable becomes irrecoverable. An interesting option will be the possibility to adjust so-called small receivables up to CZK 20,000 (of course, subject to certain conditions). Unfortunately, the current wording of the draft amendment extends the possibility of correcting VAT only in respect of receivables arising in 2025 at the earliest.

Abolition of the special procedure for taxation of "assets created by own activities"

The specific approach currently applied to assets created by the taxpayer through his own activities is abolished by the amendment and is replaced only partially by new procedures for the recalculation of input tax deductions. This issue could have a significant impact on companies that build assets with the intention of using them for purposes giving rise only to a reduced entitlement to deductions.