Filing the Local Purchases/Sales Report: Additional Expenses for Two-Thirds of Companies and a Substantial Administrative Burden for Half of Them
Prague, 7 April 2016 – Pursuant to the results of Deloitte’s survey of 237 company representatives conducted in March 2016, all respondents met the deadline for filing the Local Purchases/Sales Report as of 25 February. Nevertheless, its preparation imposed a substantial administrative burden on companies. A fifth of respondents (21%) spent more than three business days preparing the Local Purchases/Sales report; 39% of surveyed companies spent one to three business days, a third (32%) less than a day and 8% of respondents less than an hour.
+420 775 013 139
“The results of the survey indicate the most frequent issues in preparing the Local Purchases/Sales Report related to the registration numbers of documents; this was reported by 57% of respondents. Until the end of 2015, many payers recorded individual received documents under their own file numbers and the registration numbers of suppliers were not inserted in the payer’s system. The second most common issue reported by 50% of survey participants concerned the deadline for declaring tax with respect to input documents. Nor was this information recorded in the payer’s system until the end of 2015. Most companies had to make a series of adjustments in their systems,” said Radka Mašková, Director in the Tax function of Deloitte. “Maintaining records of the new data referred to above caused an additional administrative burden in accounting for individual received invoices,” added Jaroslav Beneš, Senior Manager in the Tax and Legal function of Deloitte.
Major Issues in Preparing the Local Purchases/Sales Report
Companies did not underestimate the preparation for the introduction of the Local Purchases/Sales Report. More than half of the surveyed companies (51%) commenced preparation for the introduction of the Local Purchases/Sales Report in November 2015 and over a third of respondents (35%) in the middle of 2015.
“Preparation of the Local Purchases/Sales Report required additional expenses for 65% of companies. The cost of preparation exceeded CZK 100 thousand for 18% of surveyed companies,” added Jaroslav Beneš. A large number of companies are unable to generate the Local Purchases/Sales Report directly in their accounting programme. A quarter of respondents (25%) needed to use special software or a tool for generating the Local Purchases/Sales Report and 5% completed data manually in the EPO application of the VAT Local Purchases/Sales Report form.
All respondents successfully managed to file the Local Purchases/Sales Report but half of them have not yet considered their response to additional inquiries and requests of the taxation authorities, if any. The scope of requests and inquiries generated by the taxation authorities creates a further administrative burden for taxable entities in addition to the preparation and filing of the VAT Local Purchases/Sales Report as such.
Local Purchases/Sales Report
Since 1 January 2016, all VAT payers have been obliged to report individual transactions in the Local Purchases/Sales Report. As a consequence, tax administrators have a robust instrument for tax inspection.
Tax administrators may, for instance, compare trends and data, identify deviations in the payer’s financial statements in comparison with similar companies and identify entities for the more-precise focus of tax inspections.
Data reporting through the Local Purchases/Sales Report places high demands on the quality of data entered into accounting systems.