Changes to the VAT Act from 2021

Čo v článku nájdete:

• Correction of the tax base and tax where consideration for goods or services is not paid

Act No. 344/2020 Coll. approved an amendment to Act No. 222/2004 Coll. on Value Added Tax, effective from 1 January 2021 and 1 July 2021. The amendment introduces several changes, the most important being adjustments to the tax base and tax when a receivable becomes irrecoverable, the related adjustment of deducted tax, and new rules for distance sales.

Correction of the tax base and tax where consideration for goods or services is not paid

Businesses may newly correct the tax base and tax on supplies for which they were obliged to pay VAT under Section 69(1) of the VAT Act but did not receive all or part of the consideration after the tax liability arose. This is possible only for irrecoverable receivables meeting the conditions in new Section 25a of the VAT Act. A receivable may be irrecoverable, for example, if it is being enforced, the debtor is in bankruptcy or debt relief, or the customer ceased to exist without a legal successor.

A special case is a low-value irrecoverable receivable where the supplier proves that it took any action aimed at obtaining payment. If the receivable does not exceed €300 including tax, it is considered irrecoverable after 12 months from its due date.

In principle, a three-year limitation period applies to irrecoverable receivables. It begins on the last day of the deadline for filing the tax return for the tax period in which the goods or services were supplied. The Act sets out exceptions where the period is deemed interrupted, so each case should be assessed separately under the applicable legislation.

If a supplier chooses to correct the tax base for an irrecoverable receivable, the customer must correct the deducted tax on the basis of the document delivered for the correction. If the supplier receives payment after reducing the tax base, it must correct the reduced tax base by the amount corresponding to the payment received.

 

Distance sales of goods

From 1 July 2021, the term mail-order sale is replaced by distance sale of goods. Significant changes include new rules for distance sales, the abolition of the VAT exemption on imported consignments worth up to €22, and the introduction of the IOSS (Import One Stop Shop) scheme for distance sales of goods imported from third countries.

The new distance-sale rules set conditions for:

• supplies of goods within the European Union where goods are dispatched to a customer from a Member State other than the Member State of destination;
• supplies of goods imported from third countries to a customer.

For EU supplies, the place of supply will be where the goods are located when transport ends, except where the total value of goods supplied in a calendar year does not exceed €10,000 and other statutory conditions are met. For telecommunications, broadcasting and electronic services supplied to a non-taxable person, where the €10,000 threshold is not exceeded and other conditions are met, the place of supply will likewise be the supplier’s registered office, place of business or establishment.

For distance sales of goods imported from third countries, the place of supply will be where transport to the customer ends. In practice, the tax liability will arise where transport ends.

Abolishing the exemption for importing low-value consignments is intended to give suppliers equal market conditions and prevent suppliers from third countries being favoured over suppliers from the European Union.

Another change concerns supplies by a person not established in the EU through electronic platforms that facilitate the supply and act as intermediaries. If statutory conditions are met, the platform will be deemed to have received the goods from the supplier and supplied them to the customer itself. This makes it easier to settle VAT on goods purchased through electronic interfaces from persons not established in the EU.

New rules also apply to the special VAT schemes in Sections 68a to 68c. The scope of supplies eligible for these schemes will be expanded, for example to distance sales of goods imported from third countries and distance sales within the EU. These schemes reduce the administrative burden and make doing business within the EU easier.