Rounding after amendment to VAT Act

The financial administration published information intended to solve the long-standing uncertainty regarding the correct calculation and subsequent rounding of VAT. The new rounding rules have been approved via the last amendment to the VAT Act, in effect from 1 April 2019. The duty to proceed in accordance with the new rules arose on 1 October 2019.

The VAT Act was amended primarily to unify the amount  of tax calculated using both the top-down and the bottom-up calculation approach, as well as eliminate the double rounding of cash payments when the first rounding concerns the calculated tax and the second one the total payment. Yet, uncertainty remained regarding the rounding of a total payment made by a credit transfer, which is not explicitly provided for in the VAT Act.

This change entered into effect on 1 April 2019 but, pursuant to the transitory provision, it was possible to proceed in compliance with the old rules until 30 September 2019 so as to have sufficient time for the necessary adjustments to accounting and billing systems.

Pursuant to the above amendment to the VAT Act, the amount arising as a result of the rounding of the total amount when paying in cash shall not be included in the VAT base. In other words, the amount of rounding to whole Czech crowns shall not be taken into account for VAT purposes.

According to the financial administration’s information, the rounding to whole Czech crowns upon credit transfers is not included in the VAT base, just as in the case of cash payments. In connection with this, we would like to draw your attention to the Act on the Czech National Bank, according to which amounts to be transferred can be rounded to two decimal places and, therefore, there is no reason to round the total payment made by credit transfer.