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2019 amendment to VAT Act: other three important changes

A draft amendment to the VAT Act has been submitted to the Chamber of Deputies. Below we present three significant changes.

Issue of credit notes and debit notes
A change that may make the declaring of corrective tax documents in VAT ledger statements easier is the specification of the date of supply as another mandatory essential of corrective tax documents (i.e. credit notes and debit notes). Currently, some credit or debit note issuers and recipients have problems with what date they should state in the VAT ledger statements as the date on which they must declare tax. It often happens that the dates in the issuer’s and the recipient’s VAT ledger statements do not match, resulting in a call for explanation from the financial administration. The amendment should remove these ambiguities. Under the new amendment, the date of making a correction should be stated as the date of supply in a corrective tax document.  

For the sake of completeness, we draw attention to the fact that the new concept of having to make every effort to issue and deliver standard tax documents, discussed in the last issue of Tax and Legal Update, also refers to the area of tax base corrections. If the tax base is to be reduced, the taxpayer must disclose the appropriate correction in the taxable period in which every reasonable effort to deliver a document to the recipient was made.

Tax base correction as a result of doubtful receivables 
Unfortunately, the amendment does not significantly extend the variety of options to correct the tax base as a result of doubtful receivables. Apart from the death of a debtor and the existing insolvency options, the amendment only adds enforcement proceedings. It continues to be possible to correct the tax base only with respect to B2B transactions, i.e. receivables arising from transactions between businesses. 

The new draft amendment also allows for the correction of the tax base due to inappropriately long insolvency and enforcement proceedings where more than five years have elapsed from the date of supply.

In addition, the amendment also contains an option to correct the tax base as a result of reorganisation, following the case law of the Court of Justice of the European Union, on the condition that the receivables at issue are part of the approved reorganisation plan and had been included in the tax base.  

Restricted option to tax real estate leases
Another change likely to be in effect no earlier than in 2021 but nevertheless important enough to mention affects taxpayers who lease real property for its further economic use. Currently, such taxpayers may decide to tax these leases. But from 2021, this will in some cases no longer be possible. An explanatory report to the amendment states that this is to prevent any potential abuse or gaining significant cash flow savings and advantages. From 2021, the taxation of leases would only be allowed in respect of structures whose area of more than 60% is not intended for permanent residence. 

Other changes to VAT will be discussed in Tax and Legal Update’s next issue.