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An external comment procedure has been initiated with regard to an extensive amendment to the VAT Act, which should come into force on 1 January 2025 (with certain exceptions). This amendment transposes European directives to a large extent and reflects the European decision-making practice.

The amendment alone contains about 400 items, i.e. it is rather comprehensive, and the below-mentioned points are intended to provide an interim simplified summary. We are monitoring the amendment and will keep you informed about any developments.

Please find below a summary of selected changes:

• Turnover for the VAT purposes: Changes will be made in calculating turnover and in the moment where the taxable person becomes the payer; implementation of the small enterprise mode (i.e. those that do not exceed the turnover’s threshold for the purposes of VAT registration);
• Internally developed assets: The whole concept of internally developed assets is abandoned;
• Correction of the tax base: Extended from three to seven years; however, it will not run over a judicial procedure’s period. Within the deadline, a correction is also made in the case that the payer ceased to be the payer;
• VAT’s return in a bad debt: The possibility to make a correction will be expanded (e.g. for receivables below CZK 10,000 if certain conditions are met);
• Reverse charging: Certain cleaning services will be subject to reverse charging;
• Building industry:
  • Residential structures: The reduced VAT rate will depend on the entry in the Real Estate Register;
  • Delivery of land: A building plot will be demarcated based on zoning documentation issued by a municipality;
  • Delivery of “new” selected immovable assets: Only the first delivery within two years from completion will be subject to taxation; and
  • Explicit regulation for a substantial change in a structure: Newly an increase in the value of an immovable asset by more than 30%;
• Tax deduction:
  • Limits on tax deduction for selected passenger vehicles will be cancelled as of 1 January 2027;
  • The period of time for application of a tax deduction is shortened from three to two years (only 12 months for tax deduction based on a debit note);
  • A duty to return a tax deduction from unpaid obligations after the expiry of six months is introduced; and
  • The possibility to apply a tax deduction in registering for VAT will be expanded to also include assets that are being acquired over a longer period of time and are only put into assets once the taxable person becomes a payer.

If you want to receive more information on this topic, please feel free to contact us.

Michaela Kozminská
kozminska@clarksonhyde.cz