VAT and rounding: Where is legal certainty to be found?


In the last issue we informed you about a change in the calculation and rounding of VAT. Over time the Financial Administration of the Czech Republic has changed how it approaches the law.

So where did the approach change? On 14 October 2019, the Financial Administration issued surprising information on the tax base for non-cash payments. More precisely, it stated that in determining the tax base for non-cash payments it is possible to proceed in the same way as for cash payments, i.e. the amount resulting from rounding is not included in the tax base and is therefore not subject to VAT.

Until the information was published, we did not consider this procedure, because the law implies that the tax base is everything that the taxpayer should receive as a tax-free remuneration, including rounding. The Act specifically regulates only the determination of the tax base for cash payments, which does not include the amount resulting from rounding.

It is striking that this information was issued by the Financial Administration six months after the amendment or 14 days after the end of the transition period, when many of you already followed the law and made changes to your accounting software. So where is legal certainty to be found when the Financial Administration’s position on the wording of the law is different over time? We can only believe that the approach to rounding and setting the tax base will no longer change.

So how to proceed when rounding amounts for cashless payments? You can choose to act according to the law and tax the amount, or use new information based on the principle of legitimate expectations and not tax the amount.

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