Customer’s liability for supplier’s unpaid VAT
The number of cases where the customer becomes liable for paying VAT due on purchased goods and services where the supplier has failed to pay VAT is now extended. Under anti-VAT fraud provisions previously in force, customer liability applied to several types of transactions, including when payment for a taxable supply is made to a foreign bank account, or when the price apparently differs from the usual market value.
As of 1 January 2013, these provisions were extended to the following:
- payment for the supply is made to a different bank account to the supplier’s bank account published by the tax authority
- the supplier is classified as a non-reliable VAT payer
- fuel is purchased from a non-registered distributor of fuel, which sells fuel outside of a petrol station.
Based on the new rules, customers risk being liable in all situations where the original receivable has been assigned.
The VAT Act provides customers with an option to avoid liability for paying the supplier’s VAT by applying a special procedure. This means the customer ceases to be liable if they pay VAT for a purchased taxable supply directly to the supplier’s account held by the tax administrator.
These provisions could significantly affect the position of Czech customers registered for VAT purposes. It might also have implications for suppliers or entities purchasing receivables.
Transfer of immovable property
The time limit after which the transfer of real estate is exempt is to be extended from three to five years from the first use or approval of use. The new rules shall apply to real estate acquired after 1 January 2013.
The amendment also introduces an option to tax based on which a VAT payer might decide that once the conditions for exemption are met, the transfer of real estate will be regarded as taxable.
The amendment aims to reduce the administrative burden connected with issuing electronic tax documents, where an electronic signature might no longer be required. However, customers will still have to agree on the electronic form of the invoice.
At the same time, ‘authenticity of origin, integrity of content and legibility’ are explicitly defined as essential requirements that tax documents (whether in paper or electronic form) have to meet at the time of issue and over their entire archiving period. The precise methods for fulfilling these criteria are still under discussion.
Effective 1 January 2013, businesses have the option to use either the foreign exchange rates issued by the European Central Bank or those published by the Czech National Bank to calculate the VAT base of the invoice issued in a foreign currency.
As of 1 January 2013, the taxation period should generally be a calendar month. A VAT payer can opt for a quarterly reporting period only if its annual turnover does not exceed 10,000,000 Czech koruna (CZK), subject to further conditions.