The Topic of Bad Debts and Unpaid Receivables in VAT Will Become Even More Important from 2027

On 11 May 2026, Members of Parliament were circulated with the draft statutory wording of the Electronic Sales Reporting legislation, so-called EET 2.0, which also includes the changes set out below, expected to take effect from 1 January 2027.  

Loss of the right to deduct VAT for a debtor already 3 months after the due date  

In 2025, a new rule was introduced under which a debtor is required to reduce the VAT deduction originally claimed if the debtor does not settle its liability within 6 months after the month in which the liability became due. The proposed amendment shortens this period to just 3 months, meaning that the measure may become relevant for a much larger number of VAT payers.  

In this context, it is worth highlighting one practical detail. The obligation to reduce the original VAT deduction is linked exclusively to the period after the due date, regardless of the reasons for the non-payment of the liability. The obligation to reduce the VAT deduction therefore arises, for example, even where a dispute is ongoing or a complaint procedure is underway, but the original invoice remains overdue.  

It continues to apply that, if payment for the received service or the acquired goods is made at a later stage, the VAT deduction may be increased again.  

In view of the shorter period, we recommend paying increased attention to the area of unpaid liabilities and, where appropriate, implementing measures to minimise the associated risks.  

Refund of VAT for small unpaid receivables  

From 2025, VAT payers have been able to reduce their taxable base in respect of smaller, specifically defined, unpaid receivables, provided that the debtor has been requested in writing at least twice to settle the debt, on the condition that no other ground for a reduction of the taxable base for bad debts applies. It was expected that the simplified procedure for adjusting the taxable base for smaller unpaid receivables would become very popular and widely used; however, this has not materialised.  

In order to increase the attractiveness of the relevant provision, several parameters will be adjusted, under which it will be possible to reduce the taxable base for smaller unpaid receivables: 

• The cap for a single receivable will increase from CZK 10,000 to CZK 20,000 (incl. VAT); 
• The minimum period after the due date will be reduced from 6 to 3 months;
• The annual aggregate cap per one debtor will increase from CZK 20,000 to CZK 100,000 (incl. VAT). 

For completeness, it is important to note that only the small receivables referred to above for which the VAT payer has actually applied this VAT refund are counted towards the annual aggregate cap of receivables that can be adjusted within the calendar year. In other words, for example, the mere existence of larger unpaid receivables does not exclude the possibility to apply a VAT refund for smaller receivables. 

Should you require further information on the above changes, or if you would like to assess whether the new opportunities and obligations apply to you, we would be pleased to discuss your specific situation with you. 

Authors:

Petr Drahoš, Senior Manager, Tax Department

Marek Šmíd, Senior Consultant, Tax Department