New VAT Obligation: Unpaid Invoices Require Deduction Adjustment in Czechia

Companies must reverse VAT deductions on unpaid invoices after six months, affecting cash flow and compliance. This rule applies to transactions from January 1, 2025, with exceptions for reverse charge supplies. Late payments allow VAT reclamation within two years. Accurate record-keeping is essential for partial payments and offsets, as they impact the adjustments.

Companies face a new VAT rule requiring them to reverse deductions on unpaid invoices, impacting cash flow for thousands and risking tax office issues if liability records are underestimated.

Main Rule: VAT payers must adjust (reverse) the deduction if payment isn't received within six months after the end of the invoice's due month.

• Example: Invoice with taxable date Jan. 31 and due date March 31 → deadline is 30. If unpaid, adjust in the September return (filed by Oct. 25).

Scope: Applies to transactions after Jan. 1, 2025; pre-2025 invoices unaffected. Covers all VAT payers claiming deductions on received taxable supplies (goods or services).

Exception: Excludes reverse charge supplies, where the recipient self-assesses tax (e.g., construction firms paying tax directly, without supplier-document deductions).

Late Payments: If paid after adjustment, reclaim the VAT portion in the tax period of payment, but within two years from the end of the calendar year when the initial adjustment was first due.

Pitfalls to Avoid: Accurately record partial payments, withholdings, or offsets, as they affect adjustments.

• Partial payments: Adjust only the unpaid portion.
• Offsets: Count as full payment equivalents.+