Czech Government Agrees Second Reduced VAT Rate
The Czech Government on July 2, 2014, confirmed that it intends to introduce a second reduced rate of value added tax (VAT) of ten percent.
After months of indecisive debate, the new reduced rate was approved by the Cabinet, and a rival proposal that a five percent rate should be introduced was ditched.
If endorsed by the Czech Republic’s bicameral legislature and the President, the new ten percent rate would be effective from January 1, 2015, and would apply to medicines, books, and food for infants. A proposal to also include diapers was dropped, after concerns that a concessionary rate would contravene EU VAT rules.
Two other proposals concerning the Czech Republic’s existing rates of value-added tax have been rejected. It had been proposed that the nation’s 21 percent and 15 percent rates of VAT could each be lowered by one percent, or that they could be amalgamated under a 17.5 percent rate. Concerns were raised that introducing three rates would make the regime too complex and increase compliance costs.
The cost of introducing a third, ten percent rate of VAT was originally estimated at CZK4.2bn (USD200m) annually, but new reports attach a cost to the measure of just CZK2.9bn.
Source: tax-news
