Current VAT measures and relief
Exemption of Protective Equipment from Import Duties and VAT
The Czech Republic has asked the European Commission to grant an exemption for the duration of the state of emergency, based on which it would be possible to exempt the following from import duties and VAT:
- protective equipment (e.g. face coverings) distributed free of charge to victims of the pandemic, if imported by a state-owned entity, a charitable or benevolent organisation and
- protective equipment, instruments etc. used by medical staff participating in the fight against the pandemic, if imported by medical rescue units / medical facilities.
The exemption would apply exclusively to import from third countries, and it will only be possible to specify the type of goods the exemption would apply to after the decision of the European Commission. The finance ministry expects the request of the Czech Republic will be granted and the exemption will probably be applicable retrospectively as well.
VAT waiver for supply of protective equipment free of charge
In the area of VAT, within the so-called Liberation package II, there has been a general waiver of VAT on charge-free supplies of some protective equipment and other goods relating to the spreading of the SARS-CoV-2 virus and charge-free supplies of material used for their production, applying to goods supplied in this way in the period from 12 March 2020 until the end of the state of emergency. More specifically, the following types of goods are included, for example:
- face coverings and respirators, protective glasses, plastic face shields, protective gloves and other protective clothing,
- COVID-19 test kits, clinical thermometers, computer tomography scans (CT),
- extracorporeal membrane oxygenation (ECMO), medical ventilators and other machines for oxygen therapy including oxygen tents,
- electrical or electronic devices for disease monitoring and other medical equipment and material,
- disinfectant preparations and medical, surgical or laboratory sterilizers.
If the payer buys or produces some of the specified products or goods that are used for their production and applies entitlement to VAT deduction, he need not declare output tax upon its subsequent charge-free supply, although under article 13 paragraph 4 letter a) such supply is considered supply of goods against remuneration. In case of charge-free supply of goods used for production of disinfectant preparations and medical, surgical or laboratory sterilisers, VAT is waived only in case the goods are supplied free of charge to a payer, who is authorised to produce these products.
Waiver of sanctions and the option of deferral of instalments
As for the value added tax, there has been a general waiver of the fine for not submitting a control report according to article 101h paragraph 1 letter a) of the VAT act (fine for late submission without summons from the tax administrator), if the duty to pay it arose in the period between 1 March 2020 and 31 July 2020. This fine is waived automatically without request.
As to waiver of other fine according to the stipulation of article 101h paragraph 1 letter b) – d) of the VAT act (fines of CZK 10,000, CZK 30,000 and CZK 50,000), the still applicable directive GFŘ-D-29 is being followed. And in the same way, for waiver of late payment interest and interest on postponed sum, the current directive GFŘ-D-21 will be followed. Both of these directives have, nonetheless, been amended with a new justifiable reason for waiver, i.e. the fact that the taxpayer proves that the fine for non-submitting a control report/ late payment of tax arose as a result of the emergency measures. This reason will apply to fines, if the summons from the tax administrator and subsequent control filing related to the control report occurred between 1 March 2020 and 31 July 2020. According to the General Financial Directorate, any means can be used to substantiate this reason. It is possible according, for example, to substantiate the influence of a quarantine measure, illness, related care for a household member (relating to the taxpayer, his representative or persons crucial for the operation of the taxpayer). In case of interests, it is also further possible to consider for example a list of cancelled tours/plane tickets/admission tickets/events, comparing the occupancy or revenues to the previous period or substantiating an outage of production due to obstacle relating to emergency measures on the side of the supplier. These waivers need to be requested individually.
If, based on an individual request, the tax administrator at least party waives the mentioned fine for not submitting a control report according to the stipulation of article 101h paragraph 1 letter b) – d) of the VAT act, the fine for late submission of the VAT tax declaration for the taxable period that is completely or partly identical with the period, for which a delayed control report is submitted, is automatically waived, if the tax declaration was submitted on the day, when this delayed control report was submitted, at the latest.
If the tax administrator grants, at least partly, the request for waiver of late payment interests for reasons related to the spreading of the SARS-CoV-2 virus, a potential related fine for late submission of the declaration is automatically waived as well. This fine is automatically waived for taxpayers, whom the tax administrator permits, based on an individual request, to defer payment of the tax or to divide its payment into instalments, as well.
A request for deferring tax payment or its rescheduling into instalments may be another option for dealing with the effects of emergency measures on VAT payment. In this request, it is necessary to claim and substantiate the existence of at least one of the statutory reasons for deferral of tax payment or division of the payment into instalments (for example immediate payment would mean serious harm) and also from what sources the sum of the tax will be paid in the future.
Submitting the above-mentioned requests is not subject to administrative fee, on the condition that the request is submitted by 31 July 2020 at the latest.
For completion, we add that according to the applicable legislation, neither the deadline for submitting a VAT statement nor the deadline for submitting a (subsequent) control report can be prolonged.