2019 VAT Act amendment: Do you issue, distribute or accept vouchers? Will you know how to correctly calculate tax in 2019?
The final part of our VAT news tetralogy focuses on vouchers and related changes in tax calculation methods.
Vouchers from 2019
Do you issue, distribute or accept vouchers for your goods or services? As already mentioned in the February issue of Tax and Legal Update, the EU Vouchers Directive setting new rules for the application of vouchers in the European Union will become effective from January 2019. The Czech Republic is obliged to transpose the new regulation into its legislation and it will do so through the VAT Act. The new rules will not affect discount vouchers.
To determine the correct VAT regime, it is crucial to distinguish between single-purpose and multi-purpose vouchers. Simply speaking, it is necessary to ascertain whether the rate and place of supply associated with the relevant voucher is known at the moment the voucher is purchased. If so, we are talking about a single-purpose voucher; in the other case, it is a multi-purpose voucher. However, making this distinction in practice may not be so easy.
For single-purpose vouchers, the amendment stipulates that even a mere transfer of such a voucher is considered the delivery of goods or the provision of services for VAT purposes. The delivery is carried out by the business entity on whose behalf the transfer is performed. If the voucher has been issued on behalf of a person other than the supplier of goods or services, a special legal fiction applies for VAT purposes, according to which the transfer of goods or the provision of services in exchange for a voucher is regarded as the delivery of goods or services by the end supplier/provider to this other entity (i.e. the voucher’s issuer). However, the fiction only applies to part of the consideration covered by the appropriate voucher.
The amendment also stipulates a duty to refund a deduction already claimed in respect of a single-purpose voucher if the voucher is neither used nor transferred in a three-year period. Taxpayers must also take into account already deducted VAT on unused single-purpose vouchers when deregistering from VAT.
We therefore recommend reviewing in detail the existing structures in which various vouchers take place and making sure that their VAT regime complies with the new legislation.
End of differences in calculated tax amounts
The amendment also affects the tax calculation itself. Currently, there are two methods to calculate VAT: the top-down vs. the bottom-up calculation approach. Tax may differ slightly depending on the chosen calculation method. According to the explanatory report, the method of determining coefficient values has been amended so that both calculation approaches arrive at the same tax amount. Please note that this change may require adjustments to your cash and invoicing software.