Czech Republic is preparing changes to VAT ‘Control Report’

The Czech Republic tax authorities are preparing to change data requirements in the ‘Control Report’ periodic VAT obligation.

What exactly are the changes?

The Czech parliament approved an adjustment to the VAT law which sets out the information that taxable persons must contain in their VAT ‘Control Report’. This adjustment states that in addition to the general data, the following information should be included:

• The customers and supplier’s identification data;
• Additional taxable person’s identification data, such as ID or his/her contact details;
• Any information about any deductions made to the input VAT;
• Any information that indicates that the transactions and payments need to be included in the control report.

If the adjustment is finally passed by the Czech parliament, these changes would be effective from 1st January, 2018.

This VAT ‘Control Report’ requires taxable persons to report details of each transactions performed on a periodic basis, permitting tax authorities to check if the information delivered reconciles with the amounts declared in the VAT Returns for the relevant taxable periods by suppliers and customers of the reporting entity.

A growing trend

These type of returns have become more popular in Europe in the last few years. Member States such as Spain, Italy, Hungary and Poland already are using this technology to cross-check transactions between taxpayers, hence increasing control and reducing tax fraud.

Usually, the problem for businesses is producing this information from their ERP system in a complete, accurate and system complete process.

General information about the Czech Republic Control Report below.

VAT Control Statement

(Information on key aspects of the VAT Control Statement. All documents concerning the VAT Control Statement are available only in Czech language – Source: website of the Financial Administration of the Czech Republic)

Selected entities (taxable persons registered for VAT) will be obliged to submit the so-called “VAT Control Statement” after 1st January, 2016 (according to Articles 101c – 101i of Act no.: 235/2004 Coll., on VAT as amended, hereinafter “the VAT Act”).

A new obligation to submit data, from particular tax documents which are already required to be recorded in the tax evidence by the VAT Act, arises. These data will be reported in the VAT Control Statement based on issued and received tax documents (including simplified tax invoices).

Only taxable persons registered for VAT in the Czech Republic (with assigned CZ VAT ID number) will have the obligation to submit the VAT Control Statement.

Transactions which shall be declared in the VAT Control Statement:

1. Domestic taxable supplies (CZ) or receipt of advance payment (lines 1, 2 or 25 of the CZ VAT return),
2. Domestic acquisition of goods/services or providing of advance payment (lines 40, 41 or 10 and 11) of the CZ VAT return,
3. Received transactions from which the acquirer is obliged to declare VAT according to article 108 section 1b), c) of the VAT Act (lines 3, 4, 5, 6, 9, 12 and 13 of the CZ VAT return),
4. Special scheme for investment gold:
   • Received Intermediary Service for which VAT is applied according to Article 92 section 5 of the VAT Act;
   • Supply of VAT exempt investment gold for which taxable person registered for VAT is entitled to deduct VAT pursuant to Article 92 section 6 b) and c), or;
   • Production of investment gold or transformation of gold into investment gold according to Article 92 section 7 of the VAT Act.

(Note: If none of the above mentioned transactions is carried out in the respective period, VAT Control Statement shall not be submitted. Nevertheless the obligation to submit a VAT return is not affected.).

VAT Control Statement is introduced as an effective tool to detect and prevent tax evasion and fraud. Its aim and purpose is to enable the tax authority to obtain information on selected transactions carried out by taxable persons registered for VAT and together with other available information to identify suspicious groups of taxable persons (chains, carousels), which are illegally withdrawing funds from the public budget.

VAT Control Statement is based on records for the purposes of VAT, which taxable persons registered for VAT, are already obliged to keep under Article 100 of the VAT Act.

VAT Control Statement does not substitute a VAT return or a Recapitulative Statement for Intra-community supplies. Nevertheless a special declaration of transactions in domestic reverse charge regime (Article 92a and coll. of the VAT Act) will be a part of the VAT Control Statement (a separate submission of domestic reverse charge statement will not be required as of 1st January, 2016).

Deadline for submission of the VAT Control Statement (CZ taxable persons registered for VAT):

• legal persons or group registration have to submit the VAT Control Statement no later than the 25th day after the end of each month,
• natural persons have to submit the VAT Control Statement on the same day as their VAT return (no later than the 25th day after the taxable period: month or quarter, or special taxable period e.g. in insolvency procedure etc.).

First taxable period for which the VAT Control Statement has to be submitted is January 2016 or 1st quarter 2016.

How to make changes to the VAT Control Statement submitted within the due date (regular):

• Changes within due date for VAT Control Statement submission: all data from previous submission including the corrections shall be declared.
• Changes after due date for VAT Control Statement submission: Corrective VAT Control Statement shall be submitted within 5 working days after detection of irregularities. All data from previous submission including the corrections shall be declared.

The VAT Control Statement has to be submitted electronically. The VAT Control Statement e-form will be available on the website of the Financial Administration of the Czech Republic: www.daneelektronicky.cz.

More information about this topic including the structure and planned xml format is available (in the Czech language) under the following links:

VAT Control Statement,
XML structure for submission of VAT Control Statement,
template of the proposed VAT Control Statement e-form (.pdf),
instructions to fill in particular sections of the VAT Control Statement and a general overview (.pdf).

Possible sanctions (applicable after 1st January, 2016):

If a taxable person registered for VAT does not submit a VAT Control Statement within the due date, the following sanctions will be applied:

1. a) 1,000.00 CZK, if the VAT Control Statement is submitted after the due date without summons from the Tax Administration,
2. b) 10,000.00 CZK, if the VAT Control Statement is submitted within the deadline given by the Tax Administration in issued and delivered summons,
3. c) 30,000.00 CZK, if the Corrective VAT Control Statement is not submitted although summons to submit a Corrective VAT Control Statement were issued and delivered by the Tax Administration,
4. d) 50,000.00 CZK, if the regular VAT Control Statement is not submitted nor is submitted after summons of the Tax Administration.

Nevertheless, if a taxable person registered for VAT seriously violates or obstructs the administration of VAT by not submitting the VAT Control Statement, the tax administrator can impose a sanction up to 500,000.00 CZK depending on individual conditions.

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