Since 1 January 2025, an amendment to the Value Added Tax (VAT) Act has come into force, also introducing a new rule concerning VAT deduction on unpaid invoices.
Under the new rule, companies must now repay the VAT deduction previously claimed if the invoice in question remains unpaid for more than six months after its due date.
In practice, how does this work?
- If a receivable related to a taxable supply is not fully paid by the last day of the sixth month following its due date,
- The debtor (the buyer) must reduce their VAT deduction by the amount unpaid,
- And this, for the tax period corresponding to that last day.
This obligation applies only to VAT deductions arising from 1 January 2025, that is, supplies of goods or services performed after that date.
The due date of an invoice stems from the contract, general terms of sale, or any other agreement between the parties. The correction of the deduction applies only to the unpaid portion of the invoice. In the event of subsequent payment, the debtor may reinstate their VAT deduction.
Note: this rule does not apply to transactions under the reverse charge mechanism.
What is the implementation timeline?
Companies on a monthly regime:
- The first correction had to be made in July 2025.
- It concerns receivables due in January and still unpaid as of 31 July.
Companies on a quarterly regime:
- The first correction applies to the third quarter of 2025.
- It concerns receivables due for more than six months and unpaid as of 30 September.
The Tax Administration has published an official interpretation clarifying the application procedures for this new provision.
Source: Parliament of the Czech Republic (in Czech)
