The Financial Administration has started to issue information on the extensive amendment to VAT Act

The Financial Administration has prepared a basic overview that provides key information on all the main changes brought about by the amendment to the VAT Act. It will gradually prepare and publish more detailed information on the most important topics, including examples to help you better navigate the issue.

The introductory summary information covers the following areas in 15 pages:
 

• Cross-border regime for small businesses

Under certain conditions, the amendment introduces the possibility for persons from other EU Member States to apply this regime and not pay Czech VAT, i.e. to act as a non-taxpayer.
The tax administration will issue a separate information.

• Payer registration

There is a significant change at the time of the change of payer. Turnover is now calculated on a calendar year basis. If the turnover exceeds CZK 2,000,000, the taxpayer becomes taxable from 1 January of the following year, provided that the second limit of CZK 2,536,500 is not exceeded in that year. If this second limit is exceeded, the taxpayer shall become liable from the following day. The application for registration must be submitted by the 10th working day.
The tax administration will issue a separate information.

• Change of tax period

If the turnover does not exceed CZK 15 million, the company will not be able to sell the goods. This does not apply, of course, if the taxpayer became a taxpayer in 2024 or in specific cases (e.g. insolvency). It should be noted in this context that control statements often have to be submitted on a monthly basis, regardless of the tax period of the taxpayer.

• Identified persons

The non-payer may now become an identified person when receiving or making an advance payment, in particular in relation to cross-border services.

• Group for VAT purposes

The range of entities that can form a group for VAT purposes has been expanded, e.g. municipalities and their contributory organisations will now be able to form a group.

• Place of fulfilment for virtual/hybrid events

The Europe-wide change concerns events in the fields of culture, arts, sports, science, education and entertainment, which are partly held online. For example, virtual training will be invoiced to the foreign person without VAT.

• Place of supply for services to non-taxable persons in third countries

Consulting and similar activities invoiced to non-entrepreneurs will now be subject to Czech VAT if the actual use or consumption took place in the Czech Republic.

• Tax base in case of gratuitous supply of goods

Determination of the tax base, especially for non-monetary gifts and deposits, has now clear rules in line with the case law of the CJEU.

• Taxable amount of an exchange with additional payment

Once the surcharge is worth more than my estate, the tax basis of the surcharge will be determined. If the additional payment is less, the tax base will be determined on the value of my assets.

• Normal price for delivery of property to an employee

If the normal price is higher than the price of the property at which the employer sells it to his employee, the tax base will be based on the normal price.

• Adjustment of the tax base and tax deduction for so-called business reasons

The deadline for issuing a corrective tax document is extended until the end of the seventh year after the year in which the original transaction took place. The new provision applies to transactions carried out from 1 January 2025. It does not apply to outstanding advances, where the three-year period remains.

• Adjustment of the tax base for bad debts, including tax refunds on unpaid liabilities 6 months past due

VAT refunds on unpaid overdue liabilities will be practically dealt with for the first time in the July (Q3) 2025 return.
The new rules for correcting the tax base for bad debts can probably only be applied to debts arising from 1 January 2025.
The tax administration will issue separate information.

• Correction of the tax base and tax deduction for a person who has ceased to be a taxpayer or an identified person

Even a person who has ceased to be a taxpayer or an identified person may have obligations in relation to VAT, especially in relation to corrections to the tax base.
The tax administration will issue a separate information.

• Narrowing the exemption for financial services

In particular, from 1 January 2025, the management of a customer's property cannot be exempted on the basis of contracts with the customer if the asset includes an investment instrument.

• Extension of exemption for education

The amendment expands the persons who can exempt educational, training and leisure activities provided to children and youth. It also clarifies the exemption for language education, retraining and vocational training.

• Exemption for the delivery of leaflets

The delivery of the leaflet, as well as the brochure, is exempt from VAT. However, it should be noted that the condition stipulating that the advertising must not exceed 50% of the content also applies here.

• Entitlement to deductions and correction mechanisms

The time limit for claiming the deduction is reduced to the end of the second calendar year after the year in which the deduction was claimed.
The tax administration will issue a separate information.

• Exemption from the RRPD for forced sales

For supplies falling under the category of forced sales, the normal VAT regime will now apply.
The tax administration will issue a separate information.

• Agent for service of process (obligatory for foreign persons)

Foreigners, i.e. people from outside the EU, need to be aware of this new obligation. Non-UK persons who were already taxpayers in 2024 must appoint and notify a proxy by the end of February 2025. New payers notify proxies during early registration. A change in the agent will need to be notified within 30 days. The proxy must have an accessible (active) data mailbox. The penalty for non-compliance with this obligation is CZK 1,000 per day of delay. Of course, this obligation does not apply to foreign persons who have set up their own active data box.

• VAT on real estate

From 1 July 2025, changes to real estate will take effect. These include clarification of definitions, clarification of disputed cases and implementation of the new concept of exemption for the first delivery of completed immovable property or immovable property after a substantial change.
The tax administration will issue a separate information.

Our VAT experts will be happy to provide you with all the information you need on both the current changes and those coming into force during 2025.

Autor: Petr Linx