VAT Act amendment lets tax administrators cancel VAT group registrations earlier

The amendment to the VAT Act continues to prescribe two methods of cancelling VAT group registrations: either upon the VAT group’s request, or ex officio. Nothing changes where a VAT group itself files a request to cancel its registration before 31 October of a calendar year. In this case, the tax administrator cancels the group’s registration on the last day of the respective calendar year while members of the cancelled VAT group become separate VAT payers from 
1 January of the following year.

The amendment provides a new regulation of the cancellation of VAT group registrations by virtue of office. Where a VAT group no longer meets the requirements set for VAT groups by the VAT Act or where the tax administrator learns that none of the VAT group members meet the VAT group membership criteria, the VAT group ceases to be a VAT payer on the date the decision to cancel the group registration enters into legal force, i.e. the tax administrator may cancel the group registration earlier than on the last day of the respective calendar year.

The amendment also directly defines the reporting duty of a member representing the VAT group. Once this group member determines that the group no longer meets the criteria prescribed by the VAT Act, the member must immediately report this fact to the tax administrator. The tax administrator then issues an ex officio decision to cancel the group’s registration. The explanatory memorandum on the amendment provides that immediately means within 15 days of the date the relevant fact occurred. A member representing the VAT group not fulfilling this reporting duty may be subject to a penalty of up to CZK 500 thousand. 

This means that under the new amendment, all changes relating to group registration conditions must always be immediately reported to the tax authority, even those that may subsequently not result in the tax authority’s cancellation of VAT group registration.