In this article we would like to look at the changes concerning value added tax that have been introduced as part of the “tax package”.

First, we should recapitulate some basic facts about the date when the tax package is expected to take effect. This has evoked many discussions among experts.

The tax package, which includes several amendments for tax regulations including the amendment to Act on VAT, has recently been signed by the president of the Czech Republic which in other words means that for the legislative process to go through, only formal steps in the form of the prime minister’s signature and publishing in the Collection of Laws should suffice now.

There are two things that should be taken into consideration in connection to these steps:

1. The prime minister does not have the right to change or veto the law, he can only change the date of issue in the Collection. This date is determinative for the date the law takes effect (if not stated otherwise, a legal provision takes effect on the fifteenth day after its publication);

However,

2. The formal signature of the prime minister is a little problematic these days since the Czech prime minister announced that he had decided to resign.

Thus we are currently waiting for the prime minister and his signature so that the date the tax package takes effect can be decided. He was expected to sign on 17^th May 2017 (the tax package would take effect 1^st June 2017) or on 16^th June 2017 (the tax package would take effect 1^st July 2017). We would just like to add that the latter would be more favourable to quarterly taxpayers since it coincides with the beginning of the next tax period.

Overlooking the fact that we are currently unable to estimate the precise date the law will take effect, we will at least point out some of the most important changes in the area of value added tax which the tax package brings.

Cancellation of special application of VAT to companies without legal personality (formerly an Association)

• The amendment cancels all the specific provisions in the Act on VAT relating to these companies (formerly Associations). Thus, newly, every associate of a company without legal personality is considered separately and individually in compliance with the general principle of VAT.
• Based on the temporary provisions the lawmakers allowed taxpayers to act by the current provisions until 31^st December 2018.
• General Financial Directorate promised that they will soon provide guidelines for companies without legal personality (formerly Associations) stemming from the amended VAT Act.

New obligation to include considerations for vouchers in VAT return submissions

• VAT on vouchers designated for acquisition of a payment known in advance (single purchase vouchers) will be applied already at the moment of their sale to the customer or at any following sale or the like as European legislature states.
• This part of the amendment basically only generalizes conclusions from the current practice and available judicature.

New procedure in case of deficit (unless there is a proof of destruction, loss, or theft)

• Another new thing the amendment brings is application of VAT in the case of noted deficit in property.
• The current provision will be substituted by a new procedure which requires the taxpayer to compensate tax deduction in the tax period in which he or she learned about the destruction, loss, or theft, or could have learned about it, or when it actually happened.

The institute of the unreliable person

• Next to the already coined institute of the unreliable payer the amendment introduces the unreliable person as well. The explanatory memorandum states two main reasons for this:

1. Prevention of intentional cancelation of already registered payers and their subsequent registration,
2. Identification of unreliable entities not only among VAT payers.

Expansion of the transferring of tax duty regime

• The last novelty we will mention in this article is the expansions of the transferring of tax duty regime to other areas of enterprise.
• Newly this regime concerns for example:

1. Situations in which immovable propertyis sold by a judgment debtor in a compulsory sale procedure;
2. Supply of goods provided as security during realization of this security;

• Supply of construction or assembling workers.

Should you have any questions regarding the amendment to VAT Act or you need some expert advice when implementing individual changes in your business, do not hesitate to contact us.

Authors:

Zbyněk Švejcar

Martin Valášek