The General Financial Directorate (GFD) has twice postponed the liability concept for outstanding VAT in respect of payments to an undisclosed account. Although the liability will be in place from 2014, it will take a different form.
Early in 2012, we were preparing intensely for making our accounting software ready for the amendment to the VAT Act. The amendment would impose liability for outstanding tax on the recipient of a taxable supply if the payment for the supply is not made to a bank account notified to the tax administration. In the end, application of this provision has been twice postponed, with the last postponement announced on 10 September 2013. In the waiver, the GFD decided not to call upon guarantors to pay tax underpayments by the end of 2013.
However, there will not be full applicability in the true sense of the word even at the beginning of 2014 due to the legislative measure adopted by the Senate. Liability for outstanding VAT will only apply to taxable supplies, as set out above, subject to two conditions: payment is made to an account not notified to the tax administration and, concurrently, exceeds double the amount permitted by the act regulating restrictions on cash payments, i.e. currently CZK 700,000. This limit was set as this provision was not targeted at ordinary business transactions but on tax evasion. According to the explanatory report on the legislative measure, liability will arise irrespective of whether the payment is made by direct credit as a whole, or partly in cash and partly by bank transfer. The focus will always be on the payment as a whole within the meaning of payment for a taxable supply defined in Section 36 (1) of the Value Added Tax.