Adjustment of the VAT deduction in the case of deficits and damages
Damage, loss or misappropriation of assets which is not properly documented is a reason for the return of the originally enforced VAT return for the tax period in which the payer knew, or could have or should have known, about the damage, loss or misappropriation.
An instrument of the VAT law about the tax return is the settlement and adjustment of the deduction. We speak about the settlement in the case before the assets are used. Warehouse stocks of material, as well as material included in semi-finished or in the finished product, which was not used for economic activities are a typical representative of this group.
The deficit above the norm of a natural decrease is not subject to the settlement or adjustment of the deduction if:
- The payer prescribes the employee to pay for the damage to the assets in accordance with the labour code
- Damage is paid by the insurance company in total or the partial amount (from reason of the partnership)
- The payer does not prove that it was lost in any credible way,- the payer does not document the resolution of the postponement of the case issued by the Police of the Czech Republic or does not document the resolution of starting or closing a prosecution for a criminal offence.
In case of long-term assets (more than 40,000 CZK), the law does not refer to compensation but to the adjustment of the deduction. It will be made within 5 years, in the case of movable assets and 10 years in the case of real estate.
When determining the amount of compensation or the adjustment of the deduction, it is primarily based on the amount of the originally applied deduction. If it is not possible to find it out, the payer has to use the FIFO calculation method or the weighted arithmetic average for the settlement or adjustment of the deduction and has to settle which method will be used when accounting.
The settlement or adjustment of the deduction will be not stated into the control report. In the tax return, the settlement of the deduction is in line No. 45, and the adjustment is in line No. 60.
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