“Holiday amendment” VAT – A whirlwind of changes in 2016
2016 is full of VAT changes, of which I choose the most important ones to discuss here. We are already getting used to the correct completion of the review statement from 1 January 2016 and the related (hyper)quick response to notices from tax administrators. VAT returns can only be submitted electronically from the beginning of the year, the exception for a certain group of natural persons having been cancelled. Electronic filing has also been tightened. Since
1 May 2016, a VAT filing that does not meet the prescribed format (XML) and structure is considered ineffective, i.e. as if it had never been done.
The professional public is still failing to align with the state administration’s opinions on the amended provision concerning the (non)exemption of supplies of immovable property. It is also worth noting that the government likes the institute of domestic reverse charge from a supplier to a customer (Reverse-Charge). Several other benefits were added to the ten transactions during 2016: the delivery of an immovable asset that would be exempted, but that the supplier taxes (1 January 2016); the supply of electricity or gas through systems or networks to the trader and the supply of electricity certificates (1 January 2016); and from 1 September 2016, a further extension to the provision of electronic communications services between payers who are authorised to provide these services is planned. A pleasant change that will be effective as of the start date of EET reporting (currently 1 December 2016) is a 15% reduction in the VAT rate for most catering services and soft drinks.
While the 2016 VAT changes could fill an entire book, this contribution will focus only on the so-called “holiday amendment” to Act No. 235/2004 Coll., on VAT (the “VAT Act”), which was published in the Collection of Laws of the Czech Republic on 29 July 2016. The vast majority of the amended provisions are in effect on that date. In extreme cases, the performance affected by the amendment may have a different solution on 28 July 2016 and another a day later.
Import and export
The amendment primarily responds to the new European Union Customs Code, which has been in force since May 2016. The changes mainly concern imports and exports and are mostly terminological. In addition, there are changes concerning the modification of customs procedures. For example, the concepts of free warehouse or inward processing in the recovery system are no longer regulated. A significant change in this area is the end of favourable relief when trading goods in a free zone.
The tax document for export is no longer the decision of the customs office, but a classic tax document according to Section 28 (1) of the VAT Act. The decision of the customs office to export goods to a third country will be “newly” considered as a means of proving the (exempt) exit of goods from the territory of the European Union in Section 66 (3) of the VAT Act.
Change of the place of performance for delivery of goods by a person not established in the Czech Republic
If a person not established in the Czech Republic delivers goods to a payer with a place of performance in the Czech Republic, the tax liability is transferred to the customer, but only if the supplier (a person not established in the Czech Republic) is not registered as a taxpayer.
In this case, the payer to whom the goods are delivered is obliged to declare the tax on the date of the chargeable event or on the date of the payment if the payment was made before the date of performance (i.e. advance payment).
If a deposit is received prior to the effective date of this amendment and the goods are delivered according to the new wording, the new regime will apply only to the supplement.
The tax administrator cancels the registration of a taxable person who is not domiciled if the taxpayer requests the cancellation of the taxpayer registration within six months of the effective date of this amendment and only supplies the goods to the payer with the place of performance in the Czech Republic. These payers have until 29 January 2017 to ask the tax administrator to cancel the registration.
Correction of tax amount for receivables from debtors in insolvency proceedings
A slight change in the wording, when the unfortunate term “at the latest” is replaced by “in the period ending” six months before the court’s decision, should only clarify the existing provisions of the VAT Act. Its aim is not any substantive shift of this issue.
For example, the Supreme Administrative Court, in its judgment in Afs 170 / 2014-42, expressed its opposition to the previous amendment thereby creating a space for the payer to choose between administrative practice and case law. By this change, the tax administrator indicates that it does not intend to return VAT on documents with a date of taxable supply within six months of the court’s decision on bankruptcy.
The next chapter opens with a welcome change to respond to the tax administrator’s call for the submission or correction of an review statement from five calendar days to five business days.
Another source of intense pressure was the adjustment of the imposition and waiving of “fixed” fines for breach of obligations in relation to review statements. The amounts of the fines remained the same:
- Failure to file and subsequent voluntary redress – CZK 1,000
- Failure to file and subsequent rectification after the call – CZK 10,000
- Failure to respond to call for removal of doubts – CZK 30,000
- Failure to submit even upon notification – CZK 50,000
The obligation to pay the fine pursuant to point 1) does not arise if, in the given calendar year, the payer was not otherwise in delay submitting the review statement. The good news is that if the payer filed an ordinary or subsequent review statement late before this amendment comes into effect, this will have no effect on the condition, i.e. the 2016 calendar year for this provision starts on 29 July 2016.
The fine under point 1), which arose before 29 July 2016 and which was not decided by a payment notice before the effective date of this amendment, expires.
In other cases, points 2) – 4), the payer is entitled to ask the tax administrator to waive the fine. The tax administrator may waive all or part of the fine if the failure to submit a report is due to a reason that can be justified in light of the circumstances of the case. The administrator is not bound by the payer’s proposal. An application for remission of a fine may be filed no later than three months after the date of the legal notice of payment, which has decided on the obligation to pay this fine. The filing of an application for remission of a fine has a suspensory effect on the enforceability of the payment assessment, by which the obligation to pay the fine was decided.
The possibility to submit an application is also set for the fines under points 2) – 4) incurred before 29 July 2016. If the period for filing an application for remission of a fine commenced before the effective date of this amendment, this period will not expire before three months from the effective date of this Act.
If you are considering submitting a request for remission of a penalty under the previous paragraph, we will be happy to assist you. The tax administrator is bound by the Tax Code and the Guidelines of the General Financial Directorate in relation to the institute of waiver of tax accessories. In practice, this means that the payer’s request will be automatically rejected if the form and content of the request do not meet the predetermined criteria.
Change of tax administrator for persons not established in the Czech Republic
The tax administrator is changing for taxable persons registered for VAT in the Czech Republic who have no domicile or establishment in the Czech Republic. Instead of the Tax Office for the City of Prague, it is the Tax Office for the Moravian-Silesian Region. The tax administrator will issue a decision on the transfer of the file.
These persons will pay their tax liability to another bank account. We will inform clients about the change of account in due time.
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