Vat News

• General Financial Directorate answers FAQs

Pursuant to the amendment to the VAT Act effective as of 1 January 2013, tax documents must be of a credible origin, their contents must be intact and they must be legible.

Since the terms above are fairly general, the General Financial Directorate is providing information and answers to the most FAQs in order to better educate the public and to ensure that VAT documents are handled correctly. The information and answers are available here (in Czech only).

We recommend that businesses review and adjust their internal rules on document circulation and safekeeping to meet the statutory requirements outlined above as this may play a major role in proving credibility and ensuring the documents are intact.

For assistance in creating or updating your internal rules, contact a KŠB tax advisor.

• As of 1 January 2013, Section 55 of the VAT Act – “Insurance Operations” – was amended.

The provisions of Section 55 of the VAT Act defines in greater detail which supplies will be considered insurance operations, which – as per the provisions of Section 51 of the VAT Act – are tax exempt without the right to a tax deduction.

The following activities will be considered insurance operations for VAT purposes:

  a) providing insurance;

  b) providing reinsurance; and

  c) services associated with insurance or reinsurance  provided by insurance or reinsurance agents.

The exemption is linked to particular services rather than to a specific provider.

As of 1 January 2013, the new definition will narrow the range of services that may enjoy the exemption under Section  55(c) of the VAT Act so that compliance with the VAT Directive and applicable ECJ case law can be achieved.

As such, the tax exemption will not apply to a number of services, including insurance-related educational operations, independent investigations of insurance events, operations of insurance mathematicians, risk assessment and calculation consulting services, market mapping consulting, and technical consulting.

• The General Financial Directorate has added a supplement to its information regarding corrections of VAT amounts relative to receivables due form debtors in insolvency proceedings to stay within the scope of current case law.

Based on the primary report of July 2011, the General Financial Directorate advocated the interpretation that a tax amount can be corrected even in respect of receivables due from debtors in insolvency proceedings if the taxable supplied was made before 1 April 2011 (the effective date of the relevant amendment to the VAT Act).

However, the General Financial Directorate recently stated that the tax amount can no longer be corrected for receivables established before 1 April 2011 or, if applicable, for receivables in respect of which the original taxable supplied was made before 1 April 2011.

Nevertheless, the General Financial Directorate noted that the tax authorities will not apply this approach before the information is officially amended, i.e. before 26 April 2013. Therefore, the tax authorities will not challenge creditors who made corrections in respect of receivables established before 1 April 2011 and whose tax has already been assessed.

The amendment to the information is available here (in Czech only).

• The Coordination Committee of the Chamber of Tax Advisors and the General Financial Directorate confirmed that only current data can be verified in the VAT taxpayers database, not data valid in the past.

Verification of whether a supplier is a reliable VAT payer is often made after the date of taxable supply, such as when the tax document is delivered.

However, a supplier’s reliability should be verified on a particular date, primarily the date of taxable supply. This can clearly complicate matters for taxpayers.

On the other hand, the General Financial Directorate confirmed that the date on which a payment order is filed shall be the decisive date for establishing guarantees in respect of payments made to an account not published in the tax authority’s official register. This means that if the conditions for guaranteeing unpaid tax as per Section 109(2)(c) of the VAT Act are not met for a particular payment wired to a published account and, in the meantime (until the funds are debited from the account), the supplier’s account number changes, the conditions for guaranteeing unpaid tax will not be met.