Amendment to VAT Act in effect from new year
The amendment to the VAT Act introduces several key changes that will affect all VAT payers. Selected changes have a delayed effect - e.g., changes in immovable property will apply from 1 July 2025, while some changes in financial services will take effect from 1 January 2026. The General Financial Directorate has also issued summary information on selected changes applicable from 1 January 2025. More detailed updates on other areas should be published later.
The amendment introduces several substantive changes to tax base corrections that are mainly triggered by business reasons. These changes also affect VAT deduction corrections. Under the amendment, the rules for correcting the tax base and the tax deduction shall also apply to persons who are no longer VAT payers. The time limit for correcting the tax base on the supplier's part and the related correction of VAT deduction on the customer's part has been changed.
Time limit for correcting the tax base
The time limit for correcting the tax base has been extended to seven years. The main reason for extending this time limit is the provision of guarantees. However, in the case of advances, the time limit for correcting the tax base will remain three years.
Time limit for correcting the input VAT deduction
The time limit differs depending on the direction of the correction: if the deduction is decreased, the time limit is the seven years mentioned above; if the deduction is increased, the time limit is the basic time limit for claiming the deduction.
Time limit for claiming the VAT deduction
The time limit for claiming the deduction has been reduced to two years, i.e., the VAT deduction can be claimed by the end of the second year following the year in which the obligation to correct the deduction arose.
The GFD’s Information also draws attention to these changes being only effective for taxable supplies carried out after 1 January 2025, i.e., supplies with the date of taxable supply in 2025.
Corrections for irrecoverable debts
The rules for correcting the tax base for irrecoverable debts have also changed. The rules are being softened, with the most significant change being that the debtor no longer must be a VAT payer (provided that the debtor was a VAT payer at the time the unpaid supply was carried out). The amendment also provides for a new title to make automatic correction: the non-payment of ‘small’ debts. For the purposes of correcting the tax base, small debts are defined as debts up to CZK 10,000 that are six months overdue. After sending two written notices to the debtor to pay, creditors may reduce their tax base.
The amendment also imposes an obligation on customers to monitor the maturity of their debts and to correct their right to deduct and reduce their deduction up to the amount of the unpaid debt if the debt is not paid within six months after its due date.
The GFD intends to comment on the issue of VAT deduction corrections for irrecoverable or unpaid debts in a separate information paper.
Other related novelties
A new decree on submissions via prescribed forms introduces changes to VAT reports, specifically VAT ledger statements and VAT returns. These changes only involve the modification of the format of the prescribed forms and are intended to simplify and streamline the filing process. In addition to format changes, there are also new updated instructions for completing these forms.
The VAT return will also have two new lines to report that an obligation to make the correction arose within the time limit for correcting the tax base but that the supplier or the customer are no longer VAT payers.