12 October 2016

Deputies discuss amendment to VAT Act

An amendment to the VAT Act, planned to be in effect from 1 January 2017, is now discussed in its first reading at the chamber of deputies. Its original wording has changed slightly during the external comment procedure.

Veronika Jašová
Klára Sauerová

The amendment repeals special rules on societies (formerly associations without legal personality). To fight fraud, it introduces a local reverse-charge mechanism to be applied to the provision of personnel for construction and assembly work and to various forms of forced delivery of property. The amendment also introduces a new type of taxable entity, the unreliable person, and expands the concept of liability for unpaid VAT so as to include instances in which consideration for taxable supplies is provided in a virtual currency. The new legislation also amends the definition of fixed assets and the same rules will now apply to both fixed assets acquired via finance leases and fixed assets acquired in a standard manner. The duty to settle a VAT deduction originally claimed on input has also been introduced with respect to unsupported shortages, destruction, loss or theft of asset items. Unit funds and investment fund sub-funds will be regarded entities liable to VAT. The greatest number of proposed changes relate to the definition of taxable supplies.

Duty to pay VAT on received advances
With reference to the Court of Justice of the European Union’s decisions, the amendment specifies what information about a taxable supply must be known as at the date an advance was received to give rise to the duty to declare VAT before the supply is effected. The supply will be sufficiently specified if (i) the goods or services constituting the supply, (ii) the applicable VAT rate, and (iii) the place of supply are known. The requirement to include information about a person effecting the supply has been omitted from the amendment’s original wording. This new taxable supply definition seems to comply with a new directive regulating vouchers, adopted by the European Council in June 2016. These changes should be integrated into the VAT Directive from 2019.

Re-invoicing of services
The original draft amendment relating to the re-invoicing of services specifies that the date of supply should correspond to the date on which a tax document is issued. This provision has been eliminated from the draft during the first reading at the chamber of deputies. Therefore, when re-invoicing services, taxpayers should continue to take into account the taxable supply date of the purchased services.  

Supplies provided on a long-term basis
According to the original draft amendment, taxable supplies provided over a period longer than twelve months during which no consideration liable to the duty to declare VAT has been received should be regarded as effected no later than on the last day of each calendar year. The current wording of the draft amendment, however, extends this period to the last day of a calendar year following the calendar year in which the provision of supplies commenced.

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