Amendment to VAT on travel services
At the beginning of the new year we will see only one amendment in the field of VAT. As of 1 January 2022, the provisions of the Act relating to the special regime for travel services will be amended. Unfortunately, for an already hard-pressed sector, these changes will be rather negative.
The legislative regulation of the special regime for travel services (Section 89 of the VAT Act) concerns:
- Abolition of the determination of the tax base for travel services provided in aggregate for the taxable period. As a result, this means that it will no longer be possible to offset loss-making and profitable trips for the determination of the taxable amount of the surcharge within a single taxable period. Either a zero tax base or, more often, a positive tax base will be established for each individual tour.
- Introduction of the application of VAT on advances received for travel services. A taxable person providing travel services under the special scheme will now also have to pay VAT on the receipt of an advance payment on which tax is chargeable. The calculation of the tax base will be done by means of a coefficient for each trip separately. A similar approach will also be applied to so-called single-purpose vouchers.
- Adjustments to the tax exemption for air transport provided in the EU if it is also provided in a third country. A travel service provider will no longer be able to exempt the entire air transport from, for example, a Prague airport to outside the EU, but only a certain proportion related to the service consumed outside the EU.
At the beginning of December, the General Financial Directorate issued information on the application of VAT to tourism services, which aims to explain the whole issue and in particular to provide guidance for the new VAT application in the special regime for travel services. The sheer number of pages (16) shows that it is not certain whether this information will achieve its objective.
However, one thing is certain: for travel agents and agencies in particular, this means a change in the VAT reporting system, more work and more VAT payments.
Risk of adjusting deductions for rented flats and family houses
In January 2022, some landlords will for the first time be obliged to repay one tenth of the deduction claimed on the acquisition of the property and/or its technical improvement.
From 1 January 2021, there will be an obligation to exempt rentals of residential property, even if the tenant is a taxpayer who uses the premises for his economic activities.
If the landlord has taxed the rental until the end of 2020 and, for example, in 2019 carried out technical improvements for which he claimed deductions, he will have to repay one tenth of these deductions in his VAT return for the last tax period of 2021.
This inconvenience may last until the end of the deduction adjustment period, i.e. in our case up to and including 2028.
Finally, it should be noted that this obligation arises for all deduction claims made for acquired real estate and/or classified technical improvements from 2012 onwards!