Proposed amendment to VAT Act targets three key areas
The proposed amendment to the VAT Act, introduced in connection with EET 2.0, focuses on three main areas: irrecoverable receivables on the creditor’s side, unpaid liabilities on the debtor’s side, and changes to the VAT rate applicable to non alcoholic beverages served as part of meal services.
For irrecoverable receivables, the Ministry of Finance proposes to expand the tax base adjustment scheme for 'minor bad debts'. Under the draft amendment, it would be possible to reduce the tax base for an unpaid debt if:
- the creditor has requested payment from the debtor in writing at least twice,
- the individual debt does not exceed CZK 20,000 including VAT (an increase from the current CZK 10,000), and
- the debt is currently at least three months past due (a reduction from the current six months).
The annual limit per debtor should remain in place, but the proposal increases the amount from the current CZK 20,000 to CZK 100,000 including VAT per calendar year. At the same time, just like the current wording of the VAT Act, it expressly provides that this rule should not apply if the claim already falls under another tax base adjustment scheme.
For liabilities, the proposal shortens the deadline for the mandatory adjustment of VAT deductions: if a customer had claimed a deduction and failed to settle the liability, the deduction must be reduced after just three months from the due date (instead of the current six months), in the taxable period in which this shortened deadline expires.
The third change standardises the taxation of non-alcoholic beverages served as part of meal services. The proposal provides that all non-alcoholic beverages served as part of a meal service should be taxed at a reduced rate of 12 per cent.