When an Invoice Remains Unpaid: What It Means for Your VAT Deduction Claim

Effective January 1, 2025, a change to the Czech VAT Act (Act No. 235/2004 Coll.) introduces a new obligation for VAT payers who fail to pay their liabilities for received taxable supplies on time. The newly added Section 74b applies specifically to cases where a VAT payer claimed an input tax deduction but did not pay for the received supply in a timely manner.

If an invoice (or part of it) is not paid within six months of its due date, the debtor is obliged to adjust the claimed deduction and repay the corresponding portion of the input VAT to the tax authority. The adjustment is made only for the unpaid part of the supply. Therefore, if the invoice was partially paid, the reduction of the VAT claim applies only to the unpaid balance.

Once the outstanding amount is settled, the VAT payer may reclaim the previously adjusted input VAT, but no earlier than in the tax period in which the payment was actually made. The right to increase the deduction can be exercised no later than within 2 years of the original due date. For quarterly VAT payers, if the invoice is paid within the quarter in which the obligation to adjust would otherwise arise, no adjustment is required.

It is important to note that the new rule does not apply to reverse-charge supplies. Furthermore, the adjustment is made unilaterally, meaning that no corrective tax document from the supplier is required.

As a result, VAT payers will need to closely monitor the due dates of their payables and keep detailed records of any unpaid invoices—especially those that have exceeded the six-month limit since their due date. Need help adapting to the new rules? Our tax experts are here to support you.