Amendment to VAT Act to increase limit for compulsory VAT registration
The limit for compulsory VAT registration should increase from CZK 1 million to CZK 2 million from 1 January 2023. This should particularly help small businesses adversely affected by the COVID-19 pandemic. The draft amendment contains other changes, e.g., regarding deadlines and penalties.
The proposal to increase the registration limit also follows the amendment to the VAT Directive according to which the European Commission allows member states to increase the VAT registration limit to EUR 85,000 from 2025. The change should result in a reduction in the administrative burden on small businesses.
The amendment regulates the cancellation of registration on request and ex officio if the turnover does not reach CZK 2 million for the last consecutive twelve months. Transitional provisions address the situation where a taxable person who is not yet a VAT payer exceeds a turnover limit of CZK 1 million but not the new limit of CZK 2 million at the end of the year. Such a taxable person does not have to join the VAT system unless they voluntarily decide to do so. Another transitional provision addresses existing VAT payers failing to meet the new registration limit. In this situation, the VAT payer may withdraw from the VAT system within five days of the effective date of this amendment by applying for the cancellation of their registration.
The draft amendment also increases the turnover threshold from CZK 250,000 to CZK 500,000 where VAT payers have an option to apply for the cancellation of their registration 3 months after the date of becoming VAT payers due to the acquisition of assets on the basis of a decision on privatisation, acquisition of a business establishment or assets on the basis of a transformation of a corporation, or due to the continuation of trade after the VAT payer's death. The draft amendment also proposes to extend the deadline for responding to the tax administrator's call in case of doubt about the correctness or completeness of the data provided in a VAT ledger statement if the call is delivered by data message. The deadline shall extend to 17 days from the date the call is delivered to the data box. Therefore, the earlier the VAT payer opens the data box, the longer they will have to respond.
Another novelty is a reduction of penalties for breaches of obligations related to VAT ledger statements to half the amount, applying only to natural persons and limited liability companies that have only one natural person as a member.
We can only hope that the amendment to the VAT Act will make it through the entire legislative process by the end of the year.