Reporting Taxable Transactions in an Incorrect Tax Period

Although Section 104 of Act No. 235/2004 Regulating the Value Added Tax is fairly straightforward and it has been part of the Act for a long time, the tax administrators’ approach to its application has varied. Conclusions reached by a special Coordination Committee in May 2018 could help unify the process.

The Coordination Committee 521/02.05.18, which finalised its activities in May 2018, addressed the application of Section 104 of Act No. 235/2004 Regulating the Value Added Tax (hereinafter only as the “VAT Act”) and the unification of its interpretation, specifying which cases should be governed by this provision. Their final report lists all the permitted options applicable pursuant to the individual paragraphs of Section 104 of the VAT Act. 

The provisions of Section 104(1) of the VAT Act governs situations when a taxable transaction is reported in an incorrect tax period, but this error ultimately does not result in tax evasion. The tax is either paid before it is due, or the statement of facts has no impact on the final tax liability. The tax administrator does not perform any additional assessment of the tax or the late-payment interest, and it is not necessary to file an additional tax return.

In line with the conclusions reached by the Coordination Committee, the list stipulated in Section 104(1) of the VAT Act can be applied to the situations specified below, provided that the taxable transaction concerned is reported in the preceding or subsequent tax period:

1. Exempted transactions which are deductible

   1. 1. supplying goods to another Member State pursuant to Section 64 of the VAT Act;
      2. export pursuant to Section 66 of the VAT Act;
      3. providing services to a third country pursuant to Section 67 of the VAT Act;
      4. exemption in special cases pursuant to Section 68 of the VAT Act;
      5. transport and services directly related to the import and export of goods pursuant to Section 69;
      6. passenger transport pursuant to Section 70 of the VAT Act.

2. Exempted transactions which are not deductible (see Section 51 of the VAT Act).

3. Received taxable transactions in the reverse charge mode which are fully or partially deductible, provided that the settlement coefficient for a calendar year in which the right of deduction could have been first claimed equals to or exceeds 95% and that the output and input tax is declared simultaneously:

   1. 7. procuring goods from another Member State;
      8. procuring goods by the purchaser via a three-sided business transaction;
      9. receiving a service from another Member State/from a third country;
      10. import of goods;
      11. received domestic performance in the reverse charge mode.

In all the situations specified above the tax administrator should fully respect the application of Section 104(1), i.e.

• the tax administrator does not perform an additional tax assessment;
• the tax administrator will not demand a report of these transactions by means of an additional tax return for the tax period in which the duty to declare the tax arose;
• the tax administrator will not claim the late-payment interest pursuant to the tax code.