The time of summer holidays does not apply to the development of tax legislation. This well-known rule has recently been confirmed by our legislators again. This month, they have approved an inconspicuous, yet in many areas a very significant amendment of several acts, which are related to the so-called adaptation of the legal system of the Czech Republic to the customs code of the Union. The aim of this article is to familiarise readers mainly with the amendment in terms of act no. 235/2004 Sb., on value added tax (further only referred to as “the VAT act”), and to point out that, while this may not seem to be the case, this amendment actually relates not only to customs regulations, but contains a number of important changes, for example in the realm of the much-discussed control report. Let us start from the beginning, however. 

The government draft amendment of the VAT act has been presented in connection with a decree of the European Parliament and the EU Council, which lays down the new Community Customs Code. The amendment was signed by the president of the Czech Republic on July 27, 2016, and the amendment came into operation on July 29, 2016 (on the day of its formal proclamation in the Journal of Laws).

The aim of the amendment of the VAT act was chiefly to reflect changes of terminological nature and to ensure internal terminological unity and consistency of the local legal system with the Community Customs Code (for example the terms “free warehouse”, “customs-approved treatment”, “customs procedure with economic impact” and other terms will not be used anymore).

The amendment of the VAT act also includes some partial changes, nonetheless, which are more related to political promises regarding a “softening” of sanctions in case of late submission or late reaction to summons in connection with the control report, or the “fight” against carrousel fraud by means of further extension of the reverse charge mechanism.

Below, we mention a brief summary of the most important changes in the realm of value added tax.

• CONTROL REPORT – prolongation of the deadline for submission of an answer to summons from the current 5 calendar days to 5 workdays.
• CONTROL REPORT – an exclusion of the emergence of fine for not submitting a control report under certain circumstances (only for a fine of CZK 1,000).
• CONTROL REPORT – immunity from fine for not submitting a control report under certain circumstances (fines of CZK 10,000, CZK 30,000 and CZK 50,000).
• FREE WAREHOUSES – supply of goods in a free warehouse or supply of goods to a free warehouse will no longer be considered an exempt transaction.
• EXPORT – the tax invoice in case of export of goods will newly be a document based on the stipulation of article 28 and subsequent stipulations of the VAT act (formerly, this document was considered a decision of the customs office).
• EXTENSION OF THE REVERSE CHARGE MECHANISM – to supply of goods by a person not residing in the Czech Republic, which is not registered as a VAT payer in the Czech Republic, in the case, when the customer is a VAT payer.
• INSOLVENCY – correction of the tax for debtors, who find themselves in insolvency, is only possible for claims arising in the period of six and more months prior to the day that a decision about bankruptcy of the debtor was made (we write about this issue separately in the article entitled “Correction of the tax for debtors in an insolvency proceeding from the perspective of the expected amendment of the VAT act”). 

We believe that the above-mentioned summary of the most important changes regarding amendment of the VAT act will help you keep up with the continually changing tax legislation during the summer holidays.

If you are interested, we will be happy to provide you with more information. We wish you a pleasant summer.