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New Obligation to Return VAT Deduction on Unpaid Liabilities

As of January 1, 2025, an amendment to the VAT Act has come into effect, introducing, among other things, the obligation to return the claimed VAT deduction on unpaid liabilities. This is accompanied by an additional obligation for taxpayers to record the due dates of their liabilities for VAT purposes within their record-keeping obligations.

The new regulation stipulates that if a liability from a taxable supply is not fully paid by the last day of the sixth month immediately following the month in which it became due, the debtor must reduce the claimed VAT deduction by the amount corresponding to the unpaid consideration. If the liability is subsequently paid, it is possible to reclaim the VAT deduction.

However, the law does not provide clear guidance on how to proceed in certain practical situations, such as a retroactively agreed extension of the due date or the possibility of using the time shift rule under § 104 of the VAT Act if the entity forgets to reduce the VAT deduction in time.

According to available information, it is expected that the General Financial Directorate will publish guidelines on this topic to clarify how to proceed in specific practical cases.

In response to the new obligations, we recommend appropriately adjusting the record-keeping obligation and implementing a control mechanism that will alert you about liabilities for which the above-mentioned six-month period is about to expire.

For any questions or comments, please contact your EY client team or the authors of the article.

Authors:

Martin Novák

Nikola Kratochvílová