Tax package 2019 – Senate propose changes

What is the stage of the 2019 tax package in the legislative process? Late in January, the Senate returned the bill to the Chamber of Deputies with amending proposals. Below, we summarise the most important ones.

Reducing VAT rates
As the separate amendment to the Act on Electronic Reporting of Sales (ERS) proposing reducing the VAT rate to 10% for selected goods and services has only been submitted to the chamber for the first reading, the senators proposed including the reduction in the VAT rate in the tax package bill to speed-up the effective date of the changes. These mainly involve reducing the VAT rate on drinking water, catering, serving non-alcoholic beverages and draught beer, clothes repairs, hairdressing services, and home care for children and specific groups of citizens. The Senate also wants to reduce the excise duty on beer, and set the effective date of reducing the VAT rate on heat already from July of this year, rather than from January 2020.
Extending the deadline for filing electronic tax returns

The senate further proposes changing the rules for filing tax returns; the same change was brought up already in the chamber, but did not pass in the third reading.  It involves extending the deadline for filing a tax return if filed electronically from three months after the end of the taxable period to four months (meaning that for a calendar year taxable period, the deadline for such filings would be 1 May of the following year).
The senate also proposes cancelling the duty to deliver a tax advisor’s power of attorney for preparing a tax return to the tax administrator by the end of the three month period for filing the tax return. This deadline should extend automatically if the tax return is prepared by a tax advisor and filed within six months after the end of the taxable period.

Amending proposal regarding the sale of “non-business” property not passed in senate
Some senators proposed increasing the taxpayers’ legal certainty regarding the sale of property that is not a business property; this proposal, however, was not adopted by the senate. The senators namely proposed including a provision in the VAT Act stating that the delivery or provision of property does not constitute a business activity if the property is not a business property. The sale of such property is not generally subject to VAT and not even included in the calculation of turnover for VAT purposes, as the seller is generally not a taxable person for VAT purposes in relation to the property.

The Court of Justice of the EU repeatedly adjudicated that only a sale of property included in business property is subject to VAT, and that it is up to the taxpayer to decide what property they include in business property. The purpose of the provision was thus “only” to bring more legal certainty to taxpayers, namely non-profit entities and municipalities. As stated in the explanatory report to the proposal, it is a rather significant issue causing problems in practice, e.g. to territorial self-governments.

Ministry of Finance’s standpoint
The ministry is opposed to the senate’s proposals. According to the ministry, reducing the VAT rate for selected sectors is an inseparable part of the amendment to the ERS Act and is meant to compensate entrepreneurs for having to introduce the ERS. The ministry also does not support the changes to the rules of postponing the deadlines for filing tax returns.

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