Application of the VAT on the rent of the immovable property
In CZ the rent of the immovable property is generally VAT exempt. If, however, the property is leased to another taxable person for their business, it is possible to apply VAT on the rent charges.
From 1 January it is not possible to apply VAT on the rent of the immovable property designated for inhabitation. Rent of family houses, flats, or buildings where more than 60% of the floor area is designated for a living must be mandatorily VAT exempt with no input VAT claim allowed. Owners, who purchased their property before 1 January 2021 and claimed input VAT will have to make the VAT claim adjustment for the period remaining from the 10 year period starting in the year when the input VAT was claimed.
Payment of the indisputable part of the VAT excessive deduction
In the Czech Republic, there had been a chronic problem for businesses with the VAT claims that in spite of the ECJ and local court decisions tax authorities did not refund until tax inspections were complete. This could take months, even years, and could cause serious cash flow problems for businesses. From 1 January 2021 VAT act and related tax administration act amendments bring a revolutionary change. If the tax authority concludes that part of the VAT claim is ok they will without tax payer’s request consider that part exceeding at least CZK 50.000 as the tax overpayment and after setting it off with potential tax arrears they will pay it in the form of installment within 15 days to the taxable person’s account.
In relation to this topic – the interest for the VAT claim held by the tax authority for longer than 4 months after the VAT return filing is increased from 2,25% to 4,125%. It does not relate to the part of the VAT claim paid as an installment to the taxable person.
Contribution by
Ondrej Stedry
Tax Adviser
Prague
Czech Republic
