The Most Common Errors in Accounting and Tax Documents

A properly issued tax document is essential for claiming the right to a VAT deduction. At the same time, it serves as a key accounting and tax record. Its required format and content are defined by VAT legislation.

In practice, however, mistakes in tax documents are quite common. Such errors can lead not only to complications during a tax inspection but also to the loss of the right to deduct VAT – or worse, an obligation to pay tax on a document that was incorrectly issued.

Types of Tax Documents According to the VAT Act

The VAT Act distinguishes several types of tax documents. A tax document is defined as a written record that meets the conditions set out in the VAT Act. According to the law, tax documents can be issued either in paper or electronic form.

However, a document is considered electronic only if it is both issued and received electronically. The use of an electronic tax document must be agreed upon with the recipient of the supply. Importantly, the responsibility for issuing the document on time and ensuring that all the information it contains is correct lies entirely with the supplier—the person making the supply.

The primary document under the VAT Act is the standard tax document (§ 28), which is issued by the taxpayer when making a taxable supply. In addition to this, there are several other types of documents, such as:

• Simplified tax document (§ 30)
  
• Payment schedule (§ 31)
  
• Payment calendar (§ 31a)
  
• Corrected tax document (§ 45)
  
• Summary tax document (§ 31b)
  
• Usage document (§ 32)
  

Among these, the most commonly used are the standard tax document and the simplified tax document.

Each of these has its own statutory requirements. If a document lacks any of the mandatory information, it may be deemed invalid for VAT purposes.

Differences Between a Regular and a Simplified Tax Document

The VAT Act outlines the fundamental rules for issuing tax documents, as well as the mandatory elements each document must include.

A standard tax document must comply with all the requirements listed in § 29 (1) of the VAT Act. These include:

• Name of the supplier
  
• Tax identification number (TIN) of the supplier
  
• Name of the customer (recipient of the supply)
  
• TIN of the customer
  
• Invoice (document) number
  
• Quantity and type of goods or services supplied
  
• Date of issue
  
• Date of taxable supply or payment (if earlier than the supply date and relevant for VAT purposes)
  
• Unit price excluding VAT and any discount (unless already included in the unit price)
  
• Taxable base
  
• VAT rate
  
• VAT amount stated in Czech crowns
  

In addition, the second paragraph of the Act requires some special notations, where applicable:

• A reference to the legal provision (national or EU) if the supply is VAT-exempt
  
• The phrase “issued by the customer” if the recipient is authorized to issue the tax document
  
• The phrase “the tax is paid by the customer” if the reverse charge mechanism applies
  
• An indication that the supply involves a new vehicle, along with required data confirming this
  
• A note on trilateral transactions, if applicable, where the intermediary issues the invoice to the buyer
  

Thanks to the control mechanism, the so-called control report compares the tax documents of suppliers and buyers. The control report lists documents with a value exceeding CZK 10,000, including VAT. If a single document is listed differently in this report, the tax authority requires the relevant parties to correct or explain the discrepancy.

Errors in tax documents may result in the buyer being unable to claim the VAT deduction, or the supplier being required to pay additional VAT.

Errors in applying the right to deduct VAT

However, errors are made not only by those who issue tax documents, but also by those who claim the right to deduct VAT based on them. Buyers frequently make mistakes when applying the right to deduct tax. This most often occurs in the following situations:

• the document is not issued to the VAT payer, for example, it is issued to another person or a different buyer
  
• there is no valid tax document within the meaning of § 29 of the VAT Act — i.e., mandatory details are missing (usually the tax identification number)
  
• the deduction is claimed based on a document that is formally correct, but the supply is not related to economic activity, for example, private purchases
  
• the full deduction is claimed based on the document, even though a reduced or proportional coefficient should have been applied
  
• the document is claimed in the wrong tax period, for example, due to confusion between the date of issue and the date of supply.

What You Can’t Do with Documents

In business practice, it’s interesting to observe the so-called “established processes and rules” that are widely followed but not actually regulated by law. Entrepreneurs often confuse these established practices with legal obligations. However, these “rules” are not mandatory, and the law imposes no such requirements. For example:

• a tax document does not need to bear a stamp, even though many entrepreneurs routinely ask for one
  
• it is not necessary to print an invoice — a fully electronic version is sufficient if it meets the conditions of authenticity and integrity (see § 34 of the VAT Act)
  
• Czech law does not require a QR code or other form of document protection, although this may be standard in some foreign systems
  
• a document issued by a foreign taxpayer does not need to show the Czech VAT rate if the supply falls under the reverse charge regime
  

It is therefore essential for both entrepreneurs and accountants to understand not only the formal legal requirements, but also the exceptions and nuances that can have a significant impact on the VAT treatment of documents.

Need help navigating Czech tax law or reviewing your VAT documentation? At 360WEDO, our team of experts can guide you through the details, prevent costly mistakes, and ensure your accounting is fully compliant. Contact us to schedule a consultation and streamline your business with confidence.Source:
https://www.podnikatel.cz/clanky/jake-nejcastejsi-chyby-se-objevuji-na-danovych-dokladech/