Value Added Tax Act Amendments

The National Assembly adopted long-awaited amendments to the Value Added Tax Act. The amendments introduce requirements of European legal acts and bring the national legislation into line with the case-law of the Court of Justice of the European Union as well as solve some practical problems.

Below is a brief summary of the proposed changes:

• A right to adjust the tax base in case of total or partial non-payment of the supply (the so-called bad debt relief) is introduced. This will allow a supplier who has not received payment from his customer to refund the tax charged and paid into the budget for the supplied good or service. The new provisions regulate the rules for documenting the adjustment of the tax base, the conditions for such adjustment, exceptions, as well as the procedure for adjusting the tax credit deducted by the recipient, etc.
• A 9% VAT rate for books and other publications listed in the VAT Act, as well as for baby food and hygiene products is introduced as permanent.
• Supplies of tourist, restaurant and catering services, as well as those for the use of sports facilities, will continue to be subject to 9% VAT until 31 December 2023 (instead of 31 December 2022).
• Instead until 1 July 2023, the zero VAT rate for bread and flour will apply until 31 December 2023.
• Special rules are provided for the declaration of export of goods by a supplier not established in the EU.  Due to the inability to meet some technical requirements, such suppliers have risked the application of a zero VAT rate to the export of goods from the territory of the country. 
• The prerequisites for deduction of tax credit in case of correction of tax documents or in case of correction as a result of wrong tax treatment of the supply, established by an entered into force audit act, are specified.
• It is envisaged that an adjustment of the tax credit deducted will not be imposed upon expiration date of a product, which, in addition to being established by a normative act (as before), can also be provided in a company standard where no normative act is in force.
• Obligations are introduced for payment service providers in relation to cross border payments. These obligations will enter into force on January 1, 2024.
• Certain provisions relating to deregistration under the VAT Act, to application of the One Stop Shop regime and the exemption from VAT of supplies under international treaties are supplemented and specified.
• Some deadlines in relation to the provision of collaterals for supplies of liquid fuels are changed. It is also envisaged that taxpayers who meet certain conditions shall provide collateral in a reduced amount – 10% (instead of 20%) of the tax bases of the taxable supplies, acquisitions or the value of the received liquid fuels released for consumption for the previous tax period.