Amendment to the VAT Act: an overview of new developments from 2025

The Ministry of Finance has prepared an extensive amendment to the Value Added Tax Act. Take a look at the main innovations that the amendment brings from 1 January 2025. Others will follow until 2028. The current version of the VAT Act can be found under 235/2004 Coll.

Changes in the calculation of turnover

Until now, the calculation of turnover, which serves as the decisive amount for compulsory VAT registration, was based on your turnover for the last 12 consecutive months. However, turnover is now added up over the calendar year and two assessment bands are introduced:

• Your annual turnover is between CZK 2,000,000 and CZK 2,536,000 (this amount corresponds to a conversion of EUR 100,000) - you are obliged to register for VAT from 1 January of the following year;
• Your annual turnover exceeds CZK 2 536 000 - you are obliged to register immediately, i.e. with effect from the day after you exceed this threshold. You must submit your VAT registration within 10 working days from the date of exceeding your turnover.

Changes to the right to deduct

One of the most significant changes is the reduction of the time limit for claiming VAT deductions from 3 years to 2 years. You can only claim the deduction up to the end of the second year following the calendar year in which the deduction arises. The reduction in the time limit applies to documents with taxable supplies from 1 January 2025 onwards and does not apply to reverse charge supplies.

If you are planning a retrospective check to identify any additional deductions, you should familiarise yourself thoroughly with the new rules. For example, the time limit for charging tax to the supplier of the supply has remained unchanged - this may lead to VAT becoming an irrecoverable cost for some parties.

Another important change is the possibility of losing the right to deduct VAT if the debt to the supplier is not paid on time. This requires a review of the due date in contractual relationships and ensuring that the due date is properly taken into account when tax returns are prepared.

Outstanding liabilities

As a VAT payer, you must now keep a record of outstanding payables. If any remain unpaid for more than 6 months, the customer will have to repay the tax deducted on them.

Simplification of self-billing

If you, as a supplier, give your customer a power of attorney, he can issue tax documents on your behalf, receive them directly and keep better track of their due date. This option existed in the VAT Act before, but the amendment has simplified it considerably.

Self-created assets

If you have manufactured, built or otherwise created fixed assets as part of your business, this is a special category for which you are now only entitled to deduct VAT at a partial rate. The amendment abolishes the existing complicated rules and clarifies the scope of the deduction for assets acquired over several years.

Adjustments to the time limits

The period for correcting the tax base has been extended from the current 3 years to 7 years. Deductions on the basis of a notation can only be claimed within 12 months.

The tax base will now have to be corrected even after deregistration of the taxpayer, up to 7 years after deregistration. Therefore, even as a non-taxpayer, it will be necessary to be able to adjust the tax base for historical transactions.

Taxation of the transfer of a building

For new constructions, only the 1st transfer of a completed property will be taxable if it occurs within 2 years of its completion (this change is expected to take effect from 1 July 2025). The original period for taxation is thus reduced from 5 to 2 years. The aim is that the transfer of the property will be taxed only once (at the time of the 1st sale).

Substantial change to the building

Substantial changes to buildings still include, for example, the conversion of a family house into a guest house, the construction of a lift on the facade of a house or the addition of further floors to a building. The amendment to the Act provides a new definition of what constitutes substantial alterations.

New forms of tax refund

The amended law expands the cases in which it is possible to apply for a refund of tax - for example, in the case of tax paid without justification to a provider who refuses to refund it.

It also concerns tax refunds to foreign persons for whom the principle of reciprocity applies (the list of such countries will be published by the Ministry of Finance in the Financial Bulletin) or when goods are purchased from another EU Member State.