Information on VAT Correction for Unpaid Liabilities after 1 January 2025

From 1 January 2025, a new provision (§ 74b of the VAT Act) comes into effect, regulating VAT deduction corrections for irrecoverable and overdue receivables. This change concerns the repayment of VAT deductions on unpaid liabilities. 

New Obligation

The new rule applies only to taxable supplies received from 1 January 2025 onwards, for which the recipient has claimed the right to a VAT deduction. The practical application begins in July 2025. The obligation to reduce the VAT deduction arises if a liability for a taxable supply is not fully settled by the debtor by the last day of the sixth calendar month following the month in which it became due. 

Correction Process

The correction of the VAT deduction is made for the tax period in which the last day of this obligation falls.

Example

A debtor (VAT payer) receives a taxable supply on 5 January 2025 and claims a VAT deduction (tax base = CZK 500,000, VAT = CZK 105,000). The liability is due on 20 January 2025, but the debtor has not paid it by 31 July 2025. In this case, the debtor must return the entire amount of VAT claimed for the July 2025 tax period or, where applicable, the third quarter of 2025. 

Accounting Procedure

The debtor accounts for the return of VAT deduction using an internal accounting document, most often posting the correction as an expense. If the debtor later settles the liability, he can reclaim the VAT deduction proportionate to the payment made. 

Example

The debtor partially settles the liability on 22 November 2025 (tax base = CZK 300,000, VAT = CZK 63,000). The debtor can correct the VAT deduction by CZK 63,000 for the tax period of November 2025 or, if applicable, the fourth quarter of 2025. 

VAT Return

The reduction in VAT deduction under § 74b(3) of the VAT Act is reported on line 40 or 41 of the VAT return (with a minus) and simultaneously on line 34 (with a plus). Any increase in deduction (when payment is made) per § 74b(4) is reported on line 40 or 41 (with a plus) and on line 34 (with a minus). 

VAT Control Statement 

In the VAT control statement, the correction is always reported in section B.2 regardless of the correction amount, with the indicator “P” in column 12, along with the creditor’s VAT number and document number. 

Atypical Cases

Non-standard cases may arise, such as claims under complaint procedures lasting over six months, when the deduction must still be corrected. For supplies with split due dates (e.g., retention amounts), each part is considered separately. 

Exceptions

Section 74b(3) does not apply to received taxable supplies for which the recipient was obliged to declare VAT (e.g., acquisition of goods from another EU Member State, receiving a service from abroad, or under the domestic reverse-charge mechanism). 


Further details can be found in the document “Information on Correction of VAT Deduction Claims on Overdue Receivables on the Part of the Debtor (§ 74b ZDPH) as of 1 January 2025”, dated 27 June 2025. 

If you have any questions or concerns, please contact us at any time. We will be happy to help you set up a system for monitoring and fulfilling this new obligation.