New VAT sanctions

As on 1^st January 2017  Art. 112b and 112c will be added to the VAT Act, which contain new provisions on additional tax obligation. This obligation will be determined by tax authorities in five cases (unless the circumstances excluding the application of the provisions of additional tax liability occur, for instance, if before the day the tax inspection is initiated by the Head of the Revenue Office or inspection by Revenue Control Office is started, the taxpayer made a relevant change in the Tax Return and paid to the Tax Office the amount, arising from the change of Tax Return together with interest for delay), i.e. in the case it is found out that:

1) in the tax return filed, the taxpayer indicated:

1. a) the amount of tax liability lower than the output tax
2. b) the amount of tax difference return or the return of the input tax higher than the output tax
3. c) the amount of tax difference to reduce the output tax for the subsequent period higher than the output tax,
4. d) the amount of tax difference return or the amount of input tax return or the amount or tax difference to reduce output tax for subsequent periods when the taxpayer should show the amount of tax obligation needed to be paid to the Revenue Office.

2) has not filed the Tax Return or has not paid the amount of tax liability.

The amount of additional liability shall be, on principle, 30% of the amount of under-rated tax liability or 30% of the amount of over-rated tax difference to be returned, the return of the input tax or the difference of tax to reduce output tax for the subsequent periods.  However,  in some cases  the additional tax liability shall be set out at 20% (if after the end of the tax inspection, the taxpayer filed a return correction, taking into account all irregularities found out and paid the amount of the tax liability or returned undue amount of return  or filed Tax Return and paid the amount of tax liability) and 100% ( for instance if the irregularities arise from the invoices issued by inexistent entity being taken into account).

In consequence of the above sanction, Art 89b subparagraph 6 of the VAT Act was repealed – the additional tax liability imposed on taxpayers who did not fulfil their duty of tax correction deducted from unpaid invoice, was done away with.