Planned amendments to the Value Added Tax Act

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• Further proposed changes to the 2022 VAT Act should take effect from 1 January 2023:

The main objective of this amendment to the Value Added Tax Act (the 2022 VAT Act) is to transpose the EU Council Directive introducing certain requirements for payment service providers in response to the rapid growth of cross-border e-commerce and with the aim of improving tax collection.

The proposed amendment to the Value Added Tax Act should introduce, from 1 January 2024, a special record-keeping and reporting obligation for payment service providers through which payments for goods and services are made. The obligation should arise once a specified number of cross-border payments to the same payee (25 payments) is exceeded in a calendar quarter. The payment service provider should fulfil this reporting obligation electronically towards the Financial Directorate by making its payment records available by the end of the calendar month following the end of the calendar quarter concerned.

At the same time, individual EU Member States are required to share information on such cross-border e-commerce payments in the central European payment system known as CESOP for cross-checking and evaluation.

Further proposed changes to the 2022 VAT Act should take effect from 1 January 2023:

A significant proposed change in the area of input VAT deduction would be the introduction of an obligation for the customer (taxpayer) to adjust deducted tax if it does not pay an invoice for which it deducted tax within 100 days after its due date. This measure should improve the business environment and payment discipline in supplier-customer relationships. To preserve proportionality and tax neutrality, the law should also provide the supplier with an analogous possibility to adjust the tax base by simplifying the conditions for a receivable to become irrecoverable. If a customer fails to pay fully or partly for supplied goods or services within 150 days of the receivable’s due date, the supplier should be able, after taking certain measures defined by law depending on the receivable amount, to adjust the tax base. For example, for a receivable of up to €1,000, it should be sufficient for the supplier to take and document any action aimed at collecting the receivable (such as an email payment request) in order to meet the statutory conditions for irrecoverability.

With the aim of reducing the administrative burden, the amendment proposes to waive the registration obligation for taxable persons providing exclusively insurance and financial services or exempt rentals of real estate. Taxable persons who were already registered could, under the Government’s proposal, request cancellation of their registration. If, however, they also achieve turnover from other activities, they would remain obliged to submit a registration application separately for those other activities, regardless of turnover, and would not be able to request cancellation.

The updated 2022 VAT Act should also bring the removal of certain problems arising from application practice. These include, for example, determining the amount of an input VAT adjustment in the event of theft of legally specified goods, for which the law presumes that the asset is depreciated evenly over four years. It is also proposed that late-payment interest on import VAT be assessed under the relevant customs rules, aligning the currently different treatment of late-payment interest on imported goods and customs debt. The proposal further clarifies, among other things, the provision concerning the filing of a VAT return by a taxable person who registered late, as well as the due date for tax payable by a person not registered for VAT when acquiring a new means of transport from another Member State.

We will keep you informed about the legislative process and the updated 2022 VAT Act.