2019 VAT amendment: Are limited liability company statutory representatives VAT payers? When not to worry about a time shift in declaring VAT?

In the third article on the most important changes in VAT effective from 2019, we provide answers to the above questions.

Are statutory representatives of limited liability companies subject to VAT?  
The VAT status of statutory representatives of limited liability companies was repeatedly addressed by the Court of Justice of the EU, and by the Czech courts (see, e.g. SAC: is a statutory representative of a limited liability company a taxable person?) The proposed amendment responds to the case law by modifying the definition of taxable persons, i.e. persons that are subject to the VAT system and may or must become VAT payers (Czech entities mainly by exceeding a turnover of CZK 1 million). The amendment proposes to explicitly exclude employees and other persons carrying our economic activity under an employment, civil service, or a similar relationship from the category of taxable persons.

The proposed amendment provides no further criteria to determine this ‘similar relationship’. The explanatory report only states that when assessing whether a relationship similar to employment or civil service exists, the circumstances shall be assessed on a case-by-case basis. For statutory representatives of liability limited companies it will be necessary to analyse in particular whether, and to what extent, elements of subordination are present in their exercising the offices or in their remuneration schemes. If the statutory representatives are determined to be taxable persons, it will be necessary to ensure that they are registered for VAT, and carefully regulate their activities and transactions from the VAT perspective.

Time shifts in VAT 
The developments concerning familiar Section 104 of the VAT Act, which makes it possible, under certain circumstances, to avoid the unnecessary administrative burden of preparing and filing an additional VAT return, are certainly worth paying attention to. Under this provision, it is possible to declare ‘late’ VAT in a regular tax return, as in cases resulting in a temporary curtailment of the state budget late payment interest will be charged, but no further penalty. Nonetheless, the present wording of the provision is not exact and brings many interpretation issues.

The amendment clarifies the section’s wording and explicitly states that it shall also apply to reverse charges. Late payment interest, if any, shall only be charged on the difference between output VAT and the related deduction of input VAT (relevant for a partial entitlement to VAT deduction).

As the proposed amendment in fact reflects the conclusions already approved by the Coordination Committee of June 2018, it is possible to follow the modified rules starting today.

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