VAT News for Cars and Unpaid Invoices
VAT News for Cars and Unpaid Invoices
Under what conditions will it be possible to claim a full VAT deduction for the purchase of passenger cars without the current limit of CZK 420,000 from 2027
How the deadline for VAT refunds on unpaid invoices will be reduced from six to three months from 2027
How the limits for the correction of the tax base for bad debts will be increased and when the new rules can be used retroactively
Abolition of the restriction for passenger cars
When purchasing a car of category M1, the taxpayer can currently claim a VAT deduction of a maximum of CZK 420 thousand, even if the VAT is higher on the invoice received. Although the limitation of the maximum deduction of CZK 420 thousand is abolished only from 1 January 2027, the transitional provisions also regulate situations that have an impact on the current year 2026.If the taxpayer purchases a passenger car of category M1 at the end of 2026, but does not return it to a state of eligible use until after 1 January 2027, he will be able to claim the full deduction in the tax return for December 2026, which he will file in January 2027. The fact that the vehicle has not been put into operation will have to be proved by the taxpayer. In practice, this means of proof will probably be an entry in the vehicle register in the Czech Republic. The same possibility of claiming a full deduction will also apply to the advance payment provided.
Example: In December 2026, the taxpayer pays an advance payment of CZK 3,630,000 for the purchase of a passenger car of category M1. On 20 December, they will receive a receipt for the payment received. Since the vehicle will not be handed over and thus entered in the vehicle register until 2027, the payer will be able to claim the full right to deduct CZK 630,000 in the tax return for December 2026, i.e. not the limited amount of CZK 420,000.
If the taxpayer has paid an advance payment for the purchase of a car of category M1 earlier than December 2026 and has claimed a limited deduction according to the 2026 rule, he will be able to file an additional tax return and claim a deduction of the entire amount of VAT stated on the receipt for the payment received, provided that this vehicle will also be put into operation only in 2027. However, the deadline for filing an additional tax return here ends on 31 January 2027.
Changes to unpaid invoices
After two years from its introduction, there will be a change in the refund of VAT on unpaid invoices. Specifically, it is reduced from six to three months of the period from the due date, after which the claimed deduction must be refunded. There is no special transitional provision for this change, so the 3-month period should only apply to receivables that will have a date of realization after 1 January 2027.For a receivable with a realisation date of 31.12.2026 but due on 12 January 2026, the obligation to return the deduction will arise according to the rules as amended in 2026, which would be 31.7.2027.
For goods delivered on 3 January 2027 for which an invoice due on 15 January 2027 will be issued, a three-month period will already apply. This will end on the last day of the third calendar month immediately following the month in which the receivable became due. In this case, the deadline will expire on 30.4.2027.
The deadline will also be shortened from six to three months on the part of the creditor, although in his case only for the so-called small receivables. These are currently limited to CZK 10,000 including tax, from January 2027 there will be an increase to CZK 20,000, with the annual sum of these receivables up to CZK 20,000 against one debtor being up to CZK 100,000. Currently, it is only CZK 20,000.
A fivefold increase is accompanied by a transitional provision favourable to creditors. If, by 1 January 2027, the creditor has not applied a correction of the tax base for an irrecoverable receivable, the taxable performance of which took place from 1 January 2025, the creditor may proceed with the correction of the tax base of such a receivable in accordance with the rules effective from 1 January 2027.
This opens up the possibility for creditors to apply the correction of the tax base even to receivables that they could not claim in 2025 and 2026 because their value exceeded the limit amount of CZK 10,000 including tax at the time. Of course, the limit of CZK 100,000 against one debtor applies to all corrections made in a given calendar year, i.e. both for receivables arising in 2027 and for those that are from 2025 or 2026, but according to a transitional provision, it is possible to claim them after the amendment in 2027.
All changes will be discussed in more detail at seminars that we are organizing on tax changes in Prague, Brno, Pilsen, České Budějovice and Domažlice at the beginning of December, where it is possible to sign up now.