Changes in VAT Act expected in 2019
The Ministry of Finance has submitted a draft amendment to the VAT Act with planned effectiveness from January 2019 for external comments. The amendment aims to comply with the duty to transpose new EU regulations into our legislation and to harmonise other current regulations with EU legislation and the interpretations of the Court of Justice of the EU.
First, the proposed amendment will affect the application of VAT on vouchers. The new Czech rules will explicitly define single-purpose and multi-purpose vouchers, as prescribed by the amendment to the EU VAT Directive. The issue and transfer of single-purpose vouchers (i.e. this means vouchers for the supply of goods or services that are sufficiently known in advance) are subject to the same rules as the supply of goods or services or the acceptance of advance payment for such goods or services. The redemption of a single-purpose voucher is no longer treated as the delivery of goods or services. In contrast, for multi-purpose vouchers (i.e. vouchers for the supply of goods or services that are not sufficiently known in advance), the tax liability arises only when the voucher is redeemed.
Another novelty is the simplification of the taxation of electronically supplied cross-border services not exceeding a certain threshold value. This brings significant relief to small and medium-size businesses with registered offices in one member state. The amendment proposes an annual threshold of EUR 10 thousand. If this threshold is not exceeded, electronically supplied services will be taxed in the member state in which the supplier is established (instead of the member state in which the service recipient is established). The amendment also proposes certain simplifications for electronic service providers using a mini-one-stop-shop (MOSS). When issuing tax documents, the providers will only have to adhere to the rules of the state in which they have their MOSS registration (the member state of identification). They will no longer have to monitor the legislations of the individual member states in which the services are consumed.
In response to the Court of Justice of the EU’s decision in the Enzo Di Maura (C-246/16) case, the amendment proposes a significant change to the VAT Act regarding the failure to pay consideration for the supply of goods or services. The scope of instances in which a VAT receivable is regarded as unpaid once and for all is proposed to be extended, which allows the supplier to correct the tax base, i.e. correct the VAT amount that has been originally declared.
The amendment also proposes to cancel changes associated with radio and TV broadcasting carried out by statutory operators that have been in effect since 1 July 2017, reasoning that the changes are incompatible with EU law.
Another area that should change significantly is the application of an entitlement to VAT deduction when an entity registers for VAT. Fixed assets acquired in the period of up to 60 months before registration may lead to the right to claim an input VAT deduction when other criteria are met.