Correction of the tax base and other changes in Czech Republic in the area of VAT from 2025

The changes are as following:

• Corrections to the Tax Base: The period for correcting the tax base will extend from 3 years to 7 years, starting from the end of the calendar year in which the original transaction occurred. This allows for corrections related to complaints and other issues. Corrections can now be made even if the taxpayer is no longer registered for VAT, enabling former taxpayers to adjust their tax base based on changes in transaction prices.
• Simplified Procedures for Bad Debts: For receivables up to CZK 10,000 that are overdue by 6 months, taxpayers can issue a rectification document after making at least two written payment requests. This process is limited to claims up to CZK 20,000 per borrower per year. For higher-value claims, adjustments will be allowed sooner—one year after the first enforcement order instead of two years—and for claims not registered in enforcement or insolvency proceedings if the debtor is unable to pay.
• VAT Registration Changes: From January 2025, VAT registration will be based on annual turnover monitored from January 1 to December 31, rather than over a rolling 12-month period. Two new turnover limits will be introduced: exceeding CZK 2 million but not more than CZK 2.536 million requires registration by January 1 of the following year; exceeding CZK 2.536 million mandates immediate registration.
• Real Estate Delivery Adjustments: The current five-year exemption period for VAT on real estate sales will be abolished. Only the first sale after significant changes or completion of a building within 23 months will incur VAT, though suppliers can opt for taxation if it benefits them.
• Changes in VAT Deduction Claims: The period for applying VAT deductions will extend to two years from the end of the calendar year when the claim arose (currently three years). However, this does not apply to advances and single-purpose vouchers. Taxpayers must correct or return their right to deduction if they do not pay their obligations within six months of the due date.

These changes aim to improve efficiency and compliance within the VAT system and will apply to transactions occurring after January 1, 2025.