Selected VAT changes effective from 2021
- Richard Knobloch
- Michal Kočan
VAT on rental of real estate from 1 January 2021
The current provision of Section 56a (3) of the VAT Act has so far allowed the payer (lessor) to decide to apply VAT on the rent of any real estate to other payers (lessees) for their economic activities, i.e. the rent could have been accounted including VAT. The main advantage of this voluntary payment of VAT on rent was that the payer was entitled to deduct input VAT (e.g. VAT paid on the purchase of real estate, repairs on real estate, services related to rent, etc.).
With effect from 1 January 2021, a modification has been passed according to which this option is limited in cases where the subject of the lease is immovable property intended for permanent housing. In the case of the lease of these immovable property newly listed in Section 56a (3) of VAT Act (this applies in particular to buildings, parts of buildings, units, building rights and land, which includes premises intended for permanent housing), the landlord must always exempt this rent from VAT. This means that the landlord will no longer be entitled to deduct input VAT. Therefore, if the landlord has in the past claimed the right to deduct input VAT paid on the purchase of real estate, or its technical improvement, and the ten-year period for adjusting the tax deduction under Section 78 of VAT Act has not expired, it is obliged to start to apply this adjustment from 2021. For the sake of completeness, we state that the given change will only affect the rental of real estate intended for housing and not their other use. Thus, for example, if a VAT payer has acquired an apartment for the purpose of providing it for short-term accommodation (AirBnB), which is considered a taxable supply of services, his deductions will be maintained.
Changes in VAT with deferred effect from 1 July 2021 (Amendment to e-commerce)
With effect from 1 July 2021, new rules will apply within the EU for e-commerce, i.e. for business activities carried out on the Internet and by electronic means. The changes will mainly affect traders selling goods to final consumers established in other Member States, so-called distance selling.
The scope of the special "single point of administration" regime for the collection of VAT on the distance selling of goods and the provision of cross-border services to final recipients (non-businesses) from the EU will be extended. For online traders, the simplification is that they do not have to register for VAT and comply with their obligations in each Member State where they sell goods, but can file returns and pay VAT on transactions in all EU Member States via their home online portal. Until now, this option only applied to telecommunications services, radio and television broadcasting services and electronically supplied services.
An exemption is newly introduced for small businesses established in only one EU Member State, which will not exceed the annual limit of EUR 10,000 for distance selling of goods and services to non-businesses throughout the EU. Up to the limit, the supplier can tax these services in the state where it is based, and thus always invoice with local tax, i.e. Czech traders will use all services with domestic VAT when using this option.
At the same time, the amendment will abolish the VAT exemption for small consignments of up to EUR 22 from third countries. The end of the VAT exemption means that all consignments will be covered by a customs declaration and will increase the price of imported goods for the final consumer. For consignments with a value of up to EUR 150, two optional simplified special arrangements will be introduced, namely a new import regime under the special one-stop-shop regime and a completely new special regime for low-value imports. The importer can be represented in the customs procedure (e.g. by the Czech Post).
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