Czech Republic: VAT relating to transfers of property | KPMG | GLOBAL

Czech Republic: VAT relating to transfers of property securing loans

Czech Republic: VAT relating to transfers of property

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.

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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

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