VAT calculation since 1 October 2019

Based on the Amendment to the VAT Act from 1 April 2019 it is necessary to follow a method of tax calculation from 1 October 2019 – in accordance with the transitional provisions.

The VAT calculated “from top” is calculated as the difference between the amount corresponding to the amount of the payment for a taxable supply including tax (excluding the amount resulting from the rounding of the total payment in cash) and the amount calculated as a proportion of the amount defined in par. 37 of the VAT Act and a coefficient of 1.21 for the standard rate, 1.15 for the first reduced rate or 1.10 for the second reduced rate.

Calculation of the tax “from below” as defined remains the same, i.e. the tax is calculated as the product of the tax base and the tax rate. This change results in the unification of the amounts (identical results) of the calculated tax regardless of the chosen calculation method. Newly, there should be therefore no (not even small) differences in results.

Tax base CZK 100,000 CZK; tax rate 21 %; value of supply including tax CZK 121,000

Calculation “from below”: 100,000 x 0.21 = CZK 21,000
Calculation “from top”: 121,000 – (121,000 / 1.21) = 121,000 – 100,000 = 21,000 CZK

In my next post I will also comment on the new rounding method valid as of 1 October 2019.