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03.12.2018

Czech Republic: Draft amendment to the VAT Act as from 2019

Overview of some envisaged changes

Key Facts
  • The supplier shall be obliged to issue the invoice for supply of goods with assembly with Czech VAT. 
  • Small-scale cross-border electronic services should be taxed in the Member State in which the supplier is resident.
  • Providers of electronic services who use the Mini-OneStop-Shop (MOSS) will not have to follow the legislation of each member state where electronic services are received.
  • Both credit and debit notes must state the date of taxable supply which should be the date when the correction was performed.

An extensive amendment to the VAT Act is being prepared in the Czech Republic. This amendment should, with some exceptions, come into effect as from 2019. The Government presented the draft amendment to the Lower House (Chamber of Deputies) in June 2018. As the Chamber of Deputies only started discussing the draft amendment, it may go through significant changes. However, we would like to point to some envisaged changes.

Taxation of the supply of goods with assembly by a Czech tax non-resident

The amendment shall apply to situations where both the supplier and the customer are VAT payers, the supplier being, at the same time, a Czech tax non-resident. According to the current rules, the above-described supply of goods with assembly is subject to self-assessment by the customer. According to the draft amendment, the supplier shall be obliged to issue the invoice for such a supply with Czech VAT. 

Taxation of small-scale cross-border electronic services

The amendment should simplify the taxation of cross-border electronic services with an annual value not exceeding EUR 10,000. Such transactions should be taxed in the Member State in which the supplier is resident. Currently, these electronic services are taxed in the recipient’s Member State.

Issuing tax documents (invoices) for services in MOSS

This positive change will concern providers of electronic services who use the Mini-OneStop-Shop (MOSS). In issuing tax documents, these providers shall be governed only by the rules of the state in which they are registered for the MOSS scheme. Accordingly, they will not have to follow the legislation of each member state where electronic services are received.

Issuing credit and debit notes

In the future, both credit and debit notes must state the date of taxable supply which should be the date when the correction was performed. Currently, there are frequent discrepancies between how customers and suppliers show credit and debit notes in control statements.

Vouchers

In January 2019, Council Directive (EU) 2016/1065 shall become effective on the basis of which the EU Member States are obliged to unify the rules for issuing and using vouchers. Basically, single-purpose and multi-purpose vouchers will be distinguished. Single-purpose vouchers are vouchers for supplies that are sufficiently known in advance (tax rate and the place of delivery or performance). The other vouchers are the multi-purpose vouchers. The transfer of a single-purpose voucher shall be considered to be a supply of goods or services which is no longer subject to tax at the time the voucher is used. With multi-purpose vouchers, the opposite procedure shall apply.

Ban on the application of VAT to the lease of residential houses

Currently, VAT payers may decide whether or not they will tax the rent for real estate leased to another VAT payer. In the future, taxation of rents will only be possible in the case of non-residential buildings. However, this change should take effect as late as in 2021.

Claiming tax deduction before registration for VAT

According to the current legislation, persons and entities that have registered for VAT may claim VAT deductions for costs incurred within 12 months before the registration in their first tax return. According to the amendment, tax deductions may be claimed for the period of five years before the registration for VAT for long-term investments.

Article published in WTS Global VAT Newsletter Q4/2018
Recent or expected changes in VAT and GST regulations and compliance duties in various EU and third countries
View publication
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