A change to the value added tax (VAT) law, signed by the president, introduces a change that will affect banks and other VAT payers that secure the future payment of loans and other receivables with movable and immovable property.
Under the amendment, expected to be effective from 1 July 2017, the realisation (sale) of security (property) will be subject to the reverse-charge mechanism. New rules thus govern the supply between the debtor and the creditor. The tax administration is expected to issue guidance for implementing this new rule.
The intention is to improve the collection of VAT. While insolvent debtors that fail to meet their secured obligations cannot be expected to have sufficient funds to pay any related VAT, the new rule will allow for the collection of VAT on the sale of the property securing the loan at the time of transfer of ownership or a pledge to a third person (a transfer to satisfy unpaid loans).
Read a May 2017 report prepared by the KPMG member firm in the Czech Republic: Tax and Legal Update
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.