Czech Republic Introduces New VAT Rules for Unpaid Invoices in 2025

From 1 January 2025, new rules apply in the Czech Republic that will affect VAT payers with overdue payables. The change comes from amendments to the Czech VAT Act (§74b ZDPH) and has been clarified by guidance issued by the General Financial Directorate in July 2025.

These rules bring Czech law closer to EU case law and aim to prevent financial loss for the state when invoices remain unpaid.

Key Change: Deduction Reduction for Overdue Debts

If a VAT payer receives a taxable supply but fails to pay the supplier within six months after the due date, they must reduce their VAT deduction.

• The six-month period starts from the end of the month when the invoice became due.
• The rule applies to taxable supplies received on or after 1 January 2025.
• If only part of the invoice is unpaid, the deduction must be reduced in proportion to the unpaid amount.
• The due date is determined by contracts, terms, or legislation.

Learn more about tax point rules in Czech Republic.

Reclaiming VAT if the Debt Is Paid

If the overdue debt (or part of it) is later settled, the VAT payer regains the right to reclaim the deduction. This applies even if the receivable was assigned to another party.

• The adjustment must be made in the VAT period when the payment occurs.
• For bank transfers, the date of payment is the date when funds are debited from the debtor’s account.
• Corrections must be made no later than by the end of the second calendar year following the first possible adjustment period.

Exemptions and Special Cases

The obligation to reduce deductions does not apply in all cases:

• Quarterly VAT payers are exempt if the debt is settled by the end of the same quarter in which the six-month period expires.
• Reverse charge transactions and intra-Community acquisitions of goods/services are excluded.
• Mutual offsetting of receivables (set-off) is treated as payment to the extent that debts are extinguished.

For debts with split payment terms, each portion is assessed separately. Businesses must therefore maintain precise records of due dates for each payment.

Reporting Requirements Adjusting Unpaid Invoices

Adjustments to VAT deductions must be recorded and reported correctly:

• Deduction reductions are shown in lines 40/41 of the VAT return with a negative sign and in line 34 with a positive sign.
• Reclaimed deductions are shown in the same lines but with opposite signs.
• In the VAT control statement, adjustments must always be reported in section B.2, including the supplier’s VAT ID.

Marosa Expert Tips

These rules create a new compliance burden for Czech VAT payers, especially those with high volumes of supplier invoices. Companies must:

• Track overdue debts more carefully.
• Ensure accounting systems can handle automatic VAT deduction adjustments.
• Train staff to apply the six-month test consistently.

The change reflects a shift in VAT compliance across the EU: states are increasingly requiring businesses to share the risk of unpaid debts. Find the official guidance issued by the General Financial Directorate.

Discover the VAT deduction limits in Czech Republic.