Examples of Applying VAT Rates During a Rate Change
When VAT rates change, issues arise with applying VAT if advances (payments) were made at the original VAT rate and the taxable supply (billing) occurs after the new rate takes effect. In these cases, the procedure follows Section 37a of the VAT Act.
Based on the transitional provision, the same procedure applies to the supply of books, where taxable supplies from 2024 onwards will be exempt with the right to deduct tax.
Note:
The new method of deducting advance tax documents (ATD), in compliance with Section 37a of the VAT Act, can be adjusted in justified cases using advanced parameters:
odpocetZddZakazatZmenuTypuSazbyDisables the application of a deduction on an invoice line item with a different VAT rate type.
It is necessary to target the parameter at a specific document type. This can be done by adding the following element to the XML file: <typDokl>code:FAKTURA</typDokl>. Replace "FAKTURA" with the code of your required document type.
The parameter can be downloaded here.
odpocetZddZakazatZmenuProcSazbyDisables the application of a deduction on an invoice line item with a different numeric VAT rate value.
It is necessary to target the parameter at a specific document type. This can be done by adding the following element to the XML file: <typDokl>code:FAKTURA</typDokl>. Replace "FAKTURA" with the code of your required document type.
The parameter can be downloaded here.
Example 1 – Advance Tax Document and Balance Payment
Advance payment in 2023 in the amount of CZK 11,500.
Advance tax document (ATD) issued in 2023
Tax base: CZK 10,000
VAT (15% rate): CZK 1,500
Taxable supply in 2024
Total invoiced amount excluding VAT: CZK 30,000 (at 12% rate)
At final invoicing, only the difference between the tax bases is taxed:
Tax base: CZK 20,000
VAT (12% rate): CZK 2,400
Advance Tax Document (ATD), issued in 2023
Invoice with ATD Deduction, issued in 2024
Example 2 – Advance Tax Document and Overpayment
Advance payment in 2023 in the amount of CZK 11,500
Advance tax document (ATD) issued in 2023
Tax base: CZK 10,000
VAT (15% rate): CZK 1,500
Taxable supply in 2024
Total invoiced amount excluding VAT: CZK 7,000 (at 12% rate)
At final invoicing, only the difference between the tax bases is taxed. If the difference between the tax bases is negative, the original VAT rate applies.
Tax base: CZK -3,000
VAT (15% rate): CZK -450
Advance Tax Document (ATD), issued in 2023
Invoice with ATD Deduction, issued in 2024
In 2024, when deducting the advance tax document, the deduction line item will be split into two — this is a technical solution to ensure the correct calculation of the tax base and VAT.
Example 3 – Multiple Advance Tax Documents and Balance Payment
Advance payment of CZK 23,000 in 2023 (15% rate)
Tax base: CZK 20,000
VAT: CZK 3,000
Advance payment of CZK 11,200 in 2024 (12% rate)
Tax base: CZK 10,000
VAT: CZK 1,200
Taxable supply in 2024 (12% rate)
Balance payment: CZK 16,800
Tax base: CZK 15,000
VAT (12%): CZK 1,800.
Note:
Pursuant to Section 37a of the VAT Act, overpayments are processed starting from the most recent payments and working backwards.
Advance Tax Document (ATD), issued in 2023
Advance Tax Document (ATD), issued in 2024
Invoice with ATD Deductions, issued in 2024
Example 4 – Advance Tax Documents and Invoicing of Books at 0% VAT
Advance payment in 2023 in the amount of CZK 11,000 (10% rate)
Tax base: CZK 10,000
VAT (10% rate): CZK 1,000
Settlement of the advance in 2024 (0% rate) with a taxable supply date in 2024.
Advance Tax Document (ATD), issued in 2023
Invoice with ATD Deduction, issued in 2024
For correct reporting of books and similar supplies on VAT line 26, it is important to configure the price list correctly. For price list items, it is possible to set individual VAT rate types for specific periods and countries, along with their VAT fulfillment codes.
If you create a new VAT rate type, you gain the ability to set the newly added VAT fulfillment code — Supply of Books and Similar Services. This setting ensures the correct VAT line 26 is used for invoice line items.
If there are situations where you will be creating documents dated before 2023 with line items whose VAT rate classification has changed, we recommend creating an additional rate type of this kind.
