The latest amendment to the VAT Act has brought crucial changes which have impact on all VAT payers. Read on to find out about the new terms of mandatory registration for VAT, the accelerated periods for claiming input tax deductions, and other changes.
An amendment to the VAT Act has come into force on 1 January 2025, delivering important changes that affect all VAT payers. However, some of the regulations, such as major changes in the real estate sector, have been postponed and will not come into force until 1 July 2025. We will look at these in the next issue of our journal.
What changes have there been since the beginning of the year?
Turnover and mandatory VAT registration
In connection with the introduction of the small business regulation, there is a change in the calculation of turnover. Until the end of 2024, turnover was calculated for the 12 previous calendar months. From 1 January 2025, turnover will be calculated per calendar year.
There are two new registration limits. The first limit remains at CZK 2 million. If this limit is exceeded, the person concerned does not become a VAT payer until January 1 of the following year. The second limit applies throughout the EU and is set at CZK 2,536,500 (EUR 100,000). In this case, the VAT liability arises on the day after the turnover is exceeded.
If a business owner exceeds a turnover of CZK 2 million, they may voluntarily become liable for tax from the following day. However, this requires that they submit an application for registration within 10 days of exceeding the turnover.
For more information, see:
https://financnisprava.gov.cz/cs/financni-sprava/novinky/novinky-2025/informace-ke-zmenam-v-platcovstvi-dph-2025
Deadline for adjusting the tax base (e.g. complete or partial cancellation or return of taxable services and supplies)
The period for correcting the tax base is now 7 years (from previously 3 years). This period was extended mainly so as to facilitate the recovery of claims and the provision of guarantees. For payments on account, the period for corrections remains three years.
Period for correcting input tax deductions
The deadline depends on the direction of the correction: if the input tax deduction is reduced, the deadline follows the above-mentioned seven-year period; if the input tax deduction is increased, the basic deadline for claiming the input tax deduction applies.
Reducing the deadline for claiming input tax deduction
The deadline for claiming input tax is reduced to two years. The deduction can no longer be claimed after the second calendar year following the calendar year in which the claim for deduction arose. The deadline is based on the date of the claim, i.e. the date of the taxable supply. Until now, the deadline for claiming the input tax deduction was three years.
This change only applies to services provided after 1 January 2025, i.e. for transactions with a service date in 2025. For example, the deadline for taxable goods with 1/1/2025 as the service date ends on 12/31/2027.
Adjustments to the tax base for irrecoverable receivables
The rules are being relaxed by the amendment, with the most important change being that the debtor no longer has to be a VAT payer (as long as they were registered for VAT at the time of the unpaid service or supply).
In addition, there is a new legal basis for automatic adjustment, namely the non-payment of so-called small claims. For the purposes of adjusting the tax base, small claims are defined as claims up to CZK 10,000 that have been outstanding for six months. After the debtor has been requested to pay twice in writing, the tax base on the creditor’s side can be reduced.
The customer must likewise monitor the maturity of the receivables, as the new wording of the law obliges the customer to adjust the claim to deduct input tax and to reduce the tax deduction if they failed to settle the receivable within six months of its maturity, up to the amount of the unpaid receivable.
The General Finance Directorate intends to explain the issue of corrections to tax deductions for irrecoverable or unpaid claims in a separate memorandum on irrecoverable receivables.
More detailed information on some of the other areas that have been amended will also be published by the General Finance Directorate at a later date.
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In addition, the amendment to the VAT Act also brings significant changes for real estate, which will only take effect in the second half of this year, i.e. from 01 July 2025. We will present these changes in the next issue of the bnt journal.
Source:
– VAT Act (Act No. 235/2004 Coll.)
– https://financnisprava.gov.cz