Czech VAT Changes

Czech Republic: Amendments to the VAT Act effective from 1/1/2015

The following changes have been made to the VAT Act:

Tax Rates
A second reduced tax rate of 10% has been introduced. This cover essential goods such as books, pharmaceuticals and baby nutrition.

Local Reverse-Charge
The local reverse-charge mechanism has been extended to other types of goods and services (e.g. mobile phones, laptops, game consoles) if the tax base exceeds CZK 100 thousand per tax document and with no limit in case of certain cereals and industrial crops, raw or semi-processed metals, and allowances for greenhouse gas emissions etc. Local reverse charge mechanism should be applicable also in case of sale of immovable property when the VAT payer opts for taxation even if the sale could be VAT exempt.

Mini-one-stop-shop (MOSS)
This was introduced with the change of the place of supply with regards to electronically supplied services, which is now the customer’s state of consumption. As discussed in a previous blog, this MOSS eliminates the necessity to register in Continue Reading

Does patch 12726737 meet all the requirements?

patch 12726737

There is a patch ‘For automated tax date for AP and AR transactions – patch 12726737 – Used for ECE reports’ from Oracle that will apply a tax date to every transaction (subject to the country linked to the OU). What this means is that whilst an invoice, either in AP or in AR can have an invoice (or transaction) date, the tax date will default based on the GL date.

For AP this means that if an invoice was entered in March that has an invoice date of January, whilst the tax rate itself is determined based on the invoice date, the tax date will default to the GL date of March if no manual tax date is entered. This is how Oracle currently do things by using the GL date but this is in fact not correct and an SR will be raised. The issue is that if we close the period within 5 days after 31st Jan, we have not necessarily closed the tax period. With most countries, the tax return has to be done before the end of the next month. This means that most companies can still receive and enter invoices for January in the February GL period and include them on the January return. If we base this on the tax date and the tax date defaults from the GL date and the GL date is based on the system date then those January invoices entered in February only be reported in February. We will need to raise an SR on this.

Czech Vat rate

New Czech Vat rate

Under the new EU VAT directive, member states are permitted two reduced VAT rates. Following this, the Czech government has announced a second reduced VAT rate of 10% to be implemented by January 2015. The current reduced VAT rate is 15%. This new reduced VAT rate will apply to medicines, pharmaceuticals, e-books and baby food products. The standard rate of VAT rose by 1%, to 21% in 2013 as the country tried to control its government deficit.
This third 10% rate of VAT, has been estimated to cost the government nearly 3 billion Czech Krones. (Around £85.6k)
Originally there were also proposals for a 5% reduced rate and a Czech VAT rate simplification proposal (combining the standard rate of 21% with the 15% reduced rate to create a 17.5% VAT rate). However these proposals were dropped due to complications of managing government and company accounting systems.

Oracle R12 and Fusion Tax, CZ VAT to introduce 10% reduced rate

May 2014, The Czech government anounced the likely creation of a 10% reduced rate VAT that could be in place in 2015.