A major amendment to the vat act is being prepared for 2025

The postponed major amendment to the VAT Act is taking shape. An external comment procedure is currently underway. It is expected that the government's proposal will reach the Chamber of Deputies as early as the middle of this year. Most of the provisions are scheduled to take effect on 1 January 2025.

As this major legislative change is at a very early stage, we provide below only a brief overview of selected planned changes. As soon as the amendment receives its House number, you can look forward to more detailed information so that you can prepare for the changes in time.
Shortening the time limit for claiming the deduction
It is proposed to reduce the time limit for claiming the deduction from 3 years to 2 years. The possibility of claiming the deduction from the notepaper should be reduced even to 12 months.

However, it will still be the case that in the case of receipt of a transaction for which the payer is obliged to declare the tax (reverse-charge), this time limit will not be relevant.
Outstanding commitments
There should be a new obligation for the customer to reimburse the tax deduction on unpaid liabilities after 6 months from the due date.
Bad debts
The amendment should expand the possibilities for suppliers to recover VAT on bad debts. In particular, it should concern smaller receivables and receivables against non-payers.
Correction of the tax base
The period for correcting the tax base should be extended from 3 to 7 years after the original transaction. However, the time limit should no longer be interrupted during the court proceedings.
Fulfillment for employees
In the area of VAT, we were used to VAT being levied on the price paid to the taxpayer by its employee, regardless of its economic reality. The amendment will apparently make it compulsory to pay VAT on the normal price.
Narrowing the scope of exempt financial activities
It is a harmonisation of the Czech VAT Act with the European Directive.
The exemption should no longer apply to the following transactions from 2025:
  • procurement of collections,
  • the collection of radio or television licence fees,
  • paying pension benefits or collecting recurrent payments from the public,
  • organising a regulated market in investment instruments,
  • the management of a customer's assets on the basis of a contract with the customer where the assets include an investment instrument, except for the management or custody of investment instruments,
  • keeping records of investment instruments,
  • settlement of transactions in investment instruments.
Changes in registrations
Also for the sake of harmonisation within the EU, a regime for small businesses is being introduced domestically.

A domestic taxable person or a person registered in the small business regime in the Czech Republic (i.e. a taxable person from another EU Member State) should become a taxable person as of 1 January of the year following the calendar year in which the turnover in the Czech Republic exceeded CZK 2,000,000.

However, the above persons will be able or even required to become taxpayers at an earlier date. The possibility will be introduced that, once the above turnover has been exceeded, the person may apply for early registration. Mandatory early registration will arise if the turnover of CZK 2 536 500 (equivalent to EUR 100 000) is still exceeded in that calendar year.

Of course, there will also be the possibility for domestic entities with activities in other EU Member States to register for the small business scheme.
Real Estate
The reduced rate for buildings for social housing will be governed solely by the registration in the Land Registry.
The limit for substantial alterations to a building will be reduced from 50% to 30%, which will mean that the time limit for claiming the exemption on delivery will start to be recalculated for more renovated properties.

The definition of a building plot will be modified. It should be newly defined in accordance with the planning documentation of the municipality.

The specific rules for self-created assets will be abolished.

The reverse charge will also apply to certain cleaning work.

In the case of rental property, it is proposed that the taxpayer may also choose to apply the tax to a tenant who is registered for VAT in another EU Member State.
Limitation of the right to deduct for passenger cars
In 2025, it is planned to abolish the limit for racing cars. From 2027, the restriction for all passenger cars should be completely abolished.