When is an additional VAT return really necessary?
Corrections to already filed VAT returns are not uncommon in practice. Often, we either do not have the tax documents in the period to which they relate or we simply forget to include them. Let's take a look at situations when we are obliged to file an additional VAT return and when we can resolve the corrections more elegantly by including them in the regular VAT return.
Section 104 of the VAT Act
Section 104 of the VAT Act deals with incorrect statements of tax for another taxable period. In principle, a VAT payer may declare taxable supplies in a tax return relating to an earlier or later period without having to file an additional VAT return for the period in which the taxable supply should have been included according to the date of supply.
The tax administrator is obliged to accept such a procedure, i.e., they should keep the given supply in the period in which it was reported by the taxpayer.
However, were the inclusion of a fact relevant for determining the tax in the tax return for an earlier taxable period to reduce the tax in that earlier period, the tax administrator shall charge default interest. The same applies to later periods: default interest would be charged if the resulting tax liability were reduced in the taxable period that is correct according to the date of taxable supply. Default interest is payable within 15 days from the date of payment assessment.
Default interest shall not be charged by the tax administrator if the VAT payer declares late supplies received under the reverse charge mechanism and is also fully entitled to the VAT deduction.
Section 104 therefore saves costs both for taxpayers who do not have to file additional tax returns, and for tax administrators who do not have to change previous (or future) tax liabilities by making additional assessments.
When Section 104 cannot be applied
However, it is not always possible to apply a simplified tax correction procedure. The VAT Act lists situations where taxpayers must file an additional tax return:
- where the procedure under this provision affects the pro rata or reduction coefficient for the VAT deduction. It is therefore necessary to verify the time shifts at the end of the calendar year.
- where the selected supply is carried out under the OSS scheme with the place of supply in the CR or under the Import OSS scheme.
Furthermore, it is not permissible to include in a tax return for another taxable period facts that relate to the taxable period subject to the procedure to remove doubt or tax inspection.
This basically means that if the taxpayer does not find out about the unreported transactions themselves, but is sent a notice to remove doubts or a tax inspection was initiated against them, the tax administrator will require the filing of an additional tax return.
Finally, please note that all of these procedures can also be used by persons identified for VAT.