Main changes in the VAT Act – update
The new rate of 10%
- From January 2, 2015 a reduced tax rate of 10% has been introduced. It will apply to sale of infant formulae and follow-on formulae and food for young children. The deputies have also included products used in the preparation of food for people intolerant to gluten to the approved government proposal.
- In addition, the second reduced rate will also apply to vaccines and drugs classified under the appropriate code of the customs tariff. A third group to be taxed at 10% VAT includes books and picture books for children with a restrictive condition being that the advertising in these publications does not exceed 50% of the publication. A complete list of goods which are subject to the second reduced rate is listed in the new Annex No. 3a. Taxable transactions with the new rate will be reported for the first time for the reporting period January, 2015, in the tax return in the line for the reduced tax rate together with taxable transactions with the first reduced VAT rate of 15%.
Changes in real estate with deferred effect
- After the Senate rejected the amendment, the Chamber of Deputies postponed the ratification of the following changes until January 1, 2016:
- The Act reinstates the definition of building land. Compared to 2014, more land will be subject to VAT from sales from 2016 because the land, in whose vicinity construction work for the purpose of making future work – e. g. utility construction – are or were performed, will now be considered a building site.
- If the taxpayer decides to tax real estate that could be sold tax free, the buyer must agree with it. Sale with the tax is then included in the reverse charge procedure. In case of voluntary taxation of the rent of real estate, the agreement of the tenant is not longer required.
Extending the reverse charge
- The new Annex no. 6 lists products and services that follow a reverse charge procedure if the government deems it so. This regulation was published in the statute book on December 31, 2014, and includes cereal and industrial crops, as well as oilseeds and sugar beets which are not commonly used for final consumption in their unaltered state, including corn, soybean or rape seeds.
- Other goods include metals, such as iron, steel, copper, aluminium or lead and some precious metals. The reverse charge procedure would apply to the delivery of the above-mentioned goods from April 1, 2015, if the delivery exceeds the sum of 100 thousand CZK excluding VAT.
- In addition, the so-called quick reaction mechanism is being introduced, when the Government establishes, through its decree, the reverse charge on delivery of goods or services which are not listed in Annex 6 of the VAT Act. It is limited to a maximum duration of 9 months using this mode.
Mini One Stop Shop
- In effect from the 1st of January, 2015, telecommunication services, radio and television broadcasting and electronically supplied services will always be taxed at the place of the service recipient, so that the taxpayer, who will provide its service electronically (e.g. software, music, teaching materials, downloads), doesn’t have to register in every state where the recipient is a non-payer; he will register in one EU state to this regime and he will state the tax liability relating to this regime for all states in a special tax return.
- In the Czech Republic this mode is registered at the revenue office for the South Moravian Region. The tax is expressed in EUR in these special tax returns and the revenue office then redistributes it, according to the tax return, to the states in which the tax obligation arose.
In effect from the 1st of January, 2016, the obligation to submit inspection reports is being introduced which will apply, in particular, to adopted and implemented taxable transactions.
Author: Petr Vondraš