Legislative changes from January 1, 2023 – VAT Act

The amendment to VAT Act of December 6, 2022 introduces several changes intended to reduce the administrative burden as well as help the gastro sector and sports venues.

The individual changes adopted by the amendment are described in detail below:

• Entities that only provide VAT exempted services (e.g. § 37 - § 39 – insurance, financial services and delivery and rental of real estate) will no longer have to register for VAT purposes after exceeding EUR 49,790. This is to lower the  administrative burden for these entities as until now, they were obliged to register even if they only provided VAT exempted services.

• The amendment to the law introduces a reduced VAT rate for the gastro sector and sports venues. This is a reduction from 20% to 10%. However, the reduced VAT rate can only be applied to restaurant and catering services, as defined in Executive Order No. 282/2011, therefore catering services, to which additional services are also offered, such as the dining service, washable dishes and cutlery, toilets, etc. “Take away” and delivery services are not affected by this reduction. In these cases, it is a sale of goods, where a reduced 10% VAT may be applied to certain goods due to the inclusion of the goods in Annex no. 7 of the VAT Act.

• The new rules for outstanding liabilities and uncollectible receivables are intended to make life easier for entrepreneurs and increase the efficiency of mutual payments.

• Changes at the customer side

The VAT Act introduces the obligation to correct the deducted VAT from purchased goods and services from which the input VAT had been deducted, in the event that the customer does not pay in part or in full for more than 100 days after the due date. The regulation applies only to invoices where the person liable to pay the tax is the supplier (domestic invoices with the application of VAT), i.e. it does not apply to invoices where the transfer of tax liability is applied.

In case that full or partial amount of the obligation is paid in the future, the customer will be able to correct the amended VAT. Older obligations also fall under the mentioned provision, for which 100 days after maturity expire on January 1, 2023 or later. This adjustment does not apply in the case of old obligations, where 100 days after maturity will expire in 2022.

• Changes at the supplier side

There is also a possibility for the supplier to adjust the VAT deducted from the part of the invoice that the customer did not pay and which became unenforceable.
At the same time, the definition of an unenforceable debt is also changing, while it is now sufficient for it to be a debt that is overdue for more than 150 days and there has been an activity to obtain the payment:

• for a claim up to EUR 1,000 including VAT, it is sufficient if the payer proves that he has performed an activity aimed at obtaining payment

• in the case of a claim over EUR 1,000 including VAT, the recovery of the claim must be proven by a lawsuit in court or recovery in enforcement proceedings.

These changes apply to all receivables that are 150 days past due on January 1, 2023 and later.

• The amendment also introduces rules for correcting deducted VAT in case of theft. Until now, these rules have not yet been defined and the taxpayer was obliged to remit the VAT deducted from the stolen goods in full. Newly, in the case of theft of goods with a purchase price of less than EUR 1,700 with an expected usage for over one year - which is not a depreciable asset - the amount of VAT is calculated in the same way as for mandatorily depreciable assets. The amount of VAT will be reduced by the amount of VAT corresponding to the amount of depreciation for the property, which is depreciated evenly over a period of 4 years.

• Furthermore, the amendment to the VAT Act clarifies the concept of a small shipment of a non-commercial nature. The delivery of a small consignment of goods is still exempt, but it is necessary that the consignment meets the following criteria:

o    the shipment is sent from a 3rd country free of charge,
o    this is an occasional delivery,
o    these are goods that are exclusively for the personal consumption of the recipient or the household,
o    the value of the shipment does not exceed 45 euros.

In addition to the last amendment to the VAT Act, the amendment adopted on March 25, 2022 also enters into force on January 1, 2023. This amendment introduces a second reduced VAT rate of 5%, which will be applied to the supply of buildings, construction land, construction activities performed on construction sites, which meet the conditions for the construction of state-supported rental housing.

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