AMENDMENT TO ACT ON VALUE ADDED TAX

(Act No. 144/2003 Coll., amending and supplementing the Act No. 289/1995 Coll. on Value Added Tax, as amended)

The amendment to the Act No. 289/1995 Coll. on Value Added Tax, as amended (the ``VAT Act'') solves deduction of VAT in connection with the purchase of tangible assets and removes the mistake, based on which the rape-seed oil as one of the essential raw materials was not listed in the List of Goods and Services falling under 14% tax rate, but it was subject to 20% tax rate.

According to the VAT Act valid till this amendment, the tax authority repaid the excessive tax deduction only to entrepreneurs who purchased tangible assets (machine, van, etc.) to improve their business activities in the value exceeding SKK 600,000, where the value of VAT exceeded SKK 100,000, and where this tax represented more than 50% of the total output tax for the particular taxation period. Such a legal regulation unreasonably handicapped entrepreneurs, who purchased e.g. two machines together for SKK 601,000 compared to entrepreneurs who purchased only one machine in the value of SKK 601,000.

Pursuant to the new legal regulation, a tax authority repays the excessive tax deduction, if a taxpayer deducts in the particular taxation period tax or sums of tax which totally exceed the value of SKK 100,000 and which relate to the purchase of tangible assets pursuant to Section 21a, para. 4 of the VAT Act or to technical improvement pursuant to Section 21a, para. 6 of the VAT Act and at the same time this deducted tax or sums of tax represent more than 50% of the total output tax for the particular taxation period.

Furthermore, the amendment introduced a new provision in Section 23, para. 1 of the VAT Act, based on which, if a taxpayer cannot deduct the excessive deduction from his own tax liability at the latest in the taxation period in which a six month period from the end of the taxation period, in which the excessive deduction was created, expires, a tax authority repays the uncounted deduction or its uncounted part by 30 days from filing the request for repayment of the excessive deduction. The request cannot be filed earlier than with the tax return for this taxation period.

According to the new wording of Section 23, para. 2 letter a) of the VAT Act, the right to the repayment of the excessive deduction in 30 days from filing the tax return for the particular taxation period shall be given not only to a taxpayer exporting goods, services and performing international transport, but also to a taxpayer performing manufacturing operations and deliveries of goods in the inward processing regime in the suspension system.

This amendment came into force on June 1, 2003, except for Article I, points 1 to 5 (containing the most important changes), which shall come into force on July 1, 2003.

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