GFD’s information on claiming VAT deductions

In the first section of its information, the GFD clarifies interpretation ambiguities concerning transactions carried out under the cross-border scheme for small businesses that are exempt from VAT without the right to deduct. The GFD confirms that where the payer is registered for this scheme in the EU and uses the received taxable supplies partly for these purposes, attention must be paid to the reduction of the right to deduct. At the same time, supplies made under this scheme are included in the calculation of the reduction coefficient.

The GFD’s information also deals with changes to the acquisition of selected passenger cars, the deadline for claiming VAT deductions, the right to a VAT deduction when registering as a VAT payer and, lastly, the requirement for more detailed information on fixed assets kept in the records for VAT purposes. The information briefly summarises these changes and, in some cases, illustrates them with examples.

However, the most significant changes concern claiming the right to a VAT deduction in a partial amount (i.e. when used for mixed purposes) when acquiring a fixed asset and any adjustments/settlements of the deduction in the year a particular asset is put into use (if put into use on 1 January 2025 or later). These changes are discussed in more detail below. The GFD’s information also provides several examples. For the sake of completeness, we point out that adjustments to the right to deduct in the years following the year in which an asset is put into use are subject to different rules and are not covered by this information (as there have been no substantive changes in this area under the amendment).
 

A. Right to a VAT deduction in a proportionate amount (i.e. use for both economic and non-economic activities)

The amendment differentiates the rules for adjusting the VAT deduction claimed using a qualified estimate, depending on whether the received supply becomes part of fixed assets. The adjustment is generally made in the VAT return for the last taxable period of the year of acquisition (putting the asset into use) based on the actual proportion of use (economic vs non-economic activities).

If the supply becomes part of fixed assets, the payer is always obliged to make an adjustment of the deduction in the year the asset is put into use regardless of whether it is a reduction or an increase in the right to deduct or how much the qualified estimate differs from the actual use. For fixed assets, the previously applied tolerance limit of ten percentage points in the year of acquisition of the asset has been abolished by the amendment.

For other supplies, the rules for adjusting the claimed deduction remain unchanged: no adjustment is made if the qualified estimate does not differ from the actual use by more than ten percentage points. Further, making an adjustment that increases the deduction is only the payer’s right, not an obligation.
 

B. Right to a VAT deduction in a reduced amount (i.e. use for VAT-exempt supplies without the right to VAT deduction in combination with supplies with the right to VAT deduction)

For the right to a VAT deduction in a reduced amount, in the VAT return for the last taxable period it is necessary to perform a settlement based on the settlement coefficient for the year in which the asset was put into use. As summarised briefly in the GFD's information, this settlement is still subject to the same rules: adjustments are mandatory for both increases and decreases in VAT deductions, with no tolerance limit.
 

C. Abolition of specific category of internally produced fixed assets

The amendment abolishes the concept of internally produced fixed assets (i.e., the initial claiming of the right to a full VAT deduction upon acquisition, followed by the fiction of self-delivery and the claiming of the right to a partial VAT deduction based on the manner in which the asset is used). The aim of this change is to unify the right to a VAT deduction for all received supplies that become part of a single fixed asset (or for consideration paid for them). This base level (i.e. the right to deduct ratio in the year of acquisition) is then used in subsequent years for the purposes of adjusting the claimed deduction.

Since the acquisition of internally produced assets often takes several years, the new regulation becomes gradually effective under the transitional provisions, and the method of applying VAT depends on the date the asset is put into use:

   a) The new rules will apply only to assets whose acquisition began on or after 1 January 2025.

   b) Where internally produced fixed assets began to be acquired earlier than 1 January 2025 and were put into use in the course of 2025, the regulation in effect until 31 December 2024 will apply (i.e. the right to full deduction, self-delivery, the right to partial deduction according to actual use).

   c) Where internally produced fixed assets began to be acquired earlier than 1 January 2025 and will be put into use in 2026 or later, payers may choose which legal regulation to apply, i.e. whether to proceed according to options a) or b).

As regards the new rules under option a), during the acquisition of internally produced fixed assets taxpayers shall claim the right to a partial deduction (i.e. a deduction in a reduced or proportionate amount or a combination of both) according to the standard rules. In the year in which the relevant asset is put into use, an adjustment or settlement of all deductions claimed in the past (whether full – claimed before 2025, or partial – claimed from 2025 onwards) needs to be made in the VAT return for the last taxable period. The claimed deduction will thus be “levelled” to the same adjustment or settlement coefficient (or a combination of both) in the year the asset is put into use.