Czech Republic: Unreliable payers on VAT Act

Alessandro PasutUnreliable payers: the General Financial Directorate modified the information on the application of the VAT Act relating to the legal concept of an unreliable payer.
The unreliable payer concept is generally applied when a VAT payer seriously violates his duties. Serious violations are understood to be situations where the public interest involving the proper collection of value added tax is in jeopardy.
According to the General Financial Directorate’s information, public interest is considered to be in jeopardy also when a taxpayer breaches his duties, his entitlement to a VAT deduction is not acknowledged and is decreased by at least CZK 500,000, and, simultaneously, the taxpayer does not pay an additional assessment within the respective due dates. In such cases, only proceedings started after 1 January 2013 and proceedings whose outcomes will affect decisions of the tax authorities after 1 January 2014 will be taken into account.
The new information substantially extends the number of entities that may be affected by the unreliable payer concept. Even though the tax authorities will also consider other circumstances when making a decision about the status of an unreliable payer, it is obvious that the new criteria might be met by relatively unproblematic entities.

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