Value Added Tax
Following our previous article on the Recovery Tax Package addressing significant changes in VAT rates, we would like to delve further into the changes in utility VAT rates and the upcoming billing of utility advances.
The currently valid utility VAT rates are as follows:
- Drinking water, water treatment, and distribution through networks: 10 %
- Heat: 10 %
- Cooling: 10 %
- Gas: 21 %
- Electricity: 21 %
Starting from January 1, 2024, the first and second reduced VAT rates (15% and 10%) are set to be abolished. Instead, there will only be two rates – the standard, 21% rate and the reduced, 12% rate. The supply of heat, cooling, water, and wastewater will be subject to a unified reduced 12% VAT rate, instead of the second reduced 10% rate.
In general, this means that suppliers should state a 12% VAT rate in the receipts of tax-deductible expenditure for the supply of heat, cooling, and water with the date of taxable supply (datum uskutečnění zdanitelného plnění – DUZP) starting from January 1, 2024.
To correctly determine the VAT rate, it will be important to ascertain when the day of the taxable supply occurred for the respective supply. Generally, when utility billing, the VAT rate valid on the day of the taxable supply is used. For utility bills (for electricity, water, heat, cooling, gas), this is the day of the utility reading or the day when the actual consumption was determined. A specific procedure applies if advance payments were received before the DUZP (if payment is received before the DUZP, it is mandatory to declare the tax corresponding to the rate valid on the date of the receipt of this payment). The currently valid VAT rate is applied to any positive difference resulting from the utility settlement, and the VAT rate valid at the time advance payments were received is applied to any negative difference.
Download PDF: VAT Rate Changes and Billing of Utility Advance Payments
