New Year 2016 has brought some significant tax changes for taxpayers. The Christmas gifts were not exactly lavish when it came to income tax but a bit more generous in the case of value added tax (“VAT”).
As for the latter, a control report must be filed along with a VAT return, for the first time for January 2016, i.e. by 25 February 2016. Another important change is the application of VAT to the sale of real estate and extension of the local reverse-charge mechanism (self-assessment). As for real estate acquisition tax, the taxpayer will be clearly defined directly by the law (and not in an agreement).
As we informed you, the control report does not replace the VAT return or the summary report. It replaces, however, the extract from VAT records (notification of domestic reverse-charge supplies). Control reports must be filed by VAT payers (Czech and foreign entities and the group defined in Section 5a of the VAT Act) if:
- They effect or receive a taxable supply with the place of supply in the Czech Republic, or receive or provide consideration before effecting the supply;
- They receive a taxable supply with the place of supply in the Czech Republic, or provide a consideration before effecting the supply; or
- They receive supplies which give rise to their obligation to declare VAT under Section 108 (1) (b) and (c) of the VAT Act (such as goods purchased from another EU Member State, a service provided and goods supplied including installation/assembly by an entity not established in the Czech Republic);
- Specific transactions are carried out under special arrangements for investment gold.
The control report form, including instructions, the XML file structure for e-filing and other relevant information, is available at the tax administration’s website.
VAT on real estate
On 1 January 2016 a new wording of Sections 56 and 56a of the VAT Act took effect (which originally were to become effective a year ago but postponed by the Senate). The main changes include the following:
- The definition of building plots (the sale of which is subject to VAT) is extended to include plots on which or in the vicinity of which construction work has been carried out to build a structure or in respect of which an administrative act has been made to build the structure;
- A material change to a structure is introduced as a fact leading to the extension of the minimum holding period for the tax-exemption of the structure sale;
- A possibility to choose the application of VAT to the supply (sale) of unbuilt-on and non-building plots.
Reverse-charge mechanism extended
With effect from 1 February 2016, the reverse-charge mechanism obligation is to be extended to the supply of gas and electricity through networks to a dealer.
Amendment regarding real estate acquisition tax
The amendment is expected to become effective on 1 April 2016, from which date the payer of real estate acquisition tax may not be determined by agreement. Under the law, the tax will be paid by the real estate acquirer.
Please do not hesitate to contact us if you have any questions.