Hardships of companies with staff shortages

18.12.2017

The booming economy, coupled with the multi-year growth in household consumption , low unemployment and increasing production of goods and services, are all positive consequences of the generally good economic situation in the Czech Republic. At first glance, the environment is allowing for the creation of new business entities and for the current ones to grow in revenue and profit. However, the opposite can be true. Especially when companies with insufficient workforce capacity decide to use so called agency employees in order to satisfy the higher demand of its production. Under the normal state of affairs, we will accept these decisions as a completely legitimate and rational step.

The financial administration has published information about detecting fraudulent behaviour of employees in the sector of agency employment. This fraudulent behaviour applies to the providers of employees who do not return or reduce VAT. Every beneficiary of the agency´s employees is potentially suspected in participating in tax fraud. Every beneficiary becomes the interest of the tax administrator who, in turn, can stop on the VAT deduction and start to examine all of the fulfilments. The control activity means verifying if the fulfilment was actually realised. The tax subject has to prove, through accessible documents (contracts, completion protocols, written records, etc.), that the contracted work was really undertaken by the relevant employees and how it was contracted also. It could be complicated in many cases, especially with time.

Instead of enjoying a good mood on the markets, entrepreneurs can face the risk of a tax control, in a situation where they had no real choice other than to subcontract agency employees. In light of the above, a positive trend will be seen as a neutral one, or in some case, a negative one. On the other side, it is important to say that some quick and qualified help ensures that the VAT return to the entrepreneur as soon as possible. Or on the other side, the entrepreneur who connects with a qualified tax adviser in the first phase, increases the chance of the retained deduction being returned. At the same time, the same rule is valid: “he who is prepared cannot be caught”. It is doubly important in this case.




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