Affecting both domestic and foreign businesses, a number of actions triggers the obligation to register for VAT in Czech Republic. To provide a basic overview, our Czech experts prepared a comprehensive eBook on value-added tax. Find out more about VAT rates, registration of taxable persons, communication with local tax authorities, compliance and VAT return filing, VAT refund to EU member states or third countries and penalties.
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Basic and reduced VAT rates
The basic VAT rate in the Czech Republic equals 21%. A reduced VAT rate of 15% is applicable to specific goods, such as food and non-alcoholic beverage items, plants, special healthcare products or pharmaceutical products. A 10% VAT rate applies to another selection of goods and services, such as infant nutrition, drugs, vaccines, books, water and sewer rates, public transportation, hotel accommodation, catering, entry to cultural and sport events, minor repairs or hairdressing services.
Export within and outside the European Union
The supply of goods to another EU member state is exempt from VAT, provided that:
- The goods are physically delivered to another EU member state
- The goods are transported by a supplier, customer or third person on their behalf
- The customer provides valid EU VAT ID number for intracommunity purposes
- The transaction is reported in the Recapitulative statement
The export of goods outside the EU is exempt from VAT, provided that:
- The goods are physically transported to third country by supplier or customer
- The supplier has confirmation of custom authorities or other documents confirming export from the EU
The taxable amount equals the total amount that was received or shall be received for a taxable supply, including any excise duties, however, it does not include the value added tax.
VAT registration of domestic taxable persons
Voluntary and obligatory registration
Voluntary VAT registration is possible, but only for a taxable person. However, if the turnover threshold reaches CZK 1,000,000 within any 12-month period, registration for VAT becomes obligatory.
The due day to file the obligatory VAT registration falls on the 15th day of the calendar month following the calendar month in which the turnover threshold has been reached.
Group registration for taxable entities
In the Czech Republic, taxable entities who have their seat, place of business or fixes establishment within Czech territory and are financially, economically and organizationally connected, may participate in group VAT registration and therefore be considered as a single taxable person for VAT purposes.
Other specifications of the VAT registration
In case a taxable person does not fulfil the obligation to register for VAT, the tax authority is entitled to do so ex officio.
Besides the obligatory registration, Czech taxable entities must register for VAT for intra-community purposes in case of service provision to another EU member state or in case of acquisition of goods or services from another EU member state.
VAT registration of foreign taxable persons
Definition of foreign taxable persons
Foreign taxable persons are entities without seat or fixed establishment located in the Czech Republic, who realize the delivery of goods or service provisions subject to Czech VAT obligations.
Obligatory registration for foreign taxable persons
Foreign taxable persons are obliged to register for VAT in the Czech Republic in case they deliver goods or provide services subject to Czech VAT obligations (except when the recipient is obliged to pay the tax) as well as in case of acquisition of goods from other EU member states.
For distance sales the threshold for the obligatory registration of foreign taxable persons is CZK 1,140,000 within a calendar year. The deadline to register for distance sale falls on the 15th day after the taxable person exceeds the threshold and becomes a VAT payer. From 1 July 2021 the threshold will be EUR 10,000 for all distance sales together with digital services provided to a non-taxable person. Alternatively, One-Stop-Shop single EU VAT return will be an option.
Communication with authorities
Local statutory representation for VAT
In the Czech Republic, local representation by a tax advisor is not obligatory. However, in specific cases, foreign entities are very likely to use the services of a tax advisor.
In communication with the Czech tax authorities, only Czech language may be used.
Communication with authorities
A taxable person can communicate with the tax authorities in written form, verbally to the protocol or electronically via the data box. The VAT return and EC sales must be filed electronically.
VAT compliance and return filing
Tax period and deadline for VAT return filing
In the Czech Republic, the calendar month is considered as a tax period. A later change to calendar quarter is possible under specific conditions. The VAT return shall be filed until the 25th day following the respective tax period.
EC sales list and other documents
The EC sales list shall be filed until the 25th day following the respective tax period which is in general a calendar month; eventually a calendar quarter.
Besides the VAT return, a control statement listing information from issued and received invoices must be filed as well.
VAT refund to EU member states
Minimum amount and applicable period
The minimum amount to be refunded is EUR 50 for the respective calendar year. However, the VAT refund may be requested also for shorter periods than the whole calendar year, but such period may not be shorter than 3 calendar months while the value of VAT must exceed EUR 400.
Deadline and place of filing for VAT refund
The deadline for filing of the VAT refund request is September 30 of the subsequent calendar year. The request shall be filed with the local tax authority in the other EU member state. The deadline for the VAT return is 10 working days after a decision on the VAT refund is issued. This decision is issued between 4 to 8 months after filing the VAT refund request.
Refund for foreign taxable persons
VAT refund for a foreign taxable person is possible, upon the fulfilment of specific conditions.
VAT refund to third countries
VAT refund conditions
Upon the fulfilment of specific conditions, including reciprocity (currently applicable to Switzerland, Norway and Macedonia), VAT refund to third countries is possible.
Minimum amount and applicable period for VAT refund
The minimum amount to be refunded is CZK 1,000 for the respective calendar year. However, the VAT refund may be requested also for shorter periods than a whole calendar year, but such period shall not be shorter than 3 calendar months and the value of VAT must exceed CZK 7,000.
Deadline and place of filing for VAT refund
The deadline for filing a VAT refund request falls on June 30 of the subsequent calendar year. The request shall be filed with the Tax office in Prague, Czech Republic. The deadline for the VAT return is 6 months after filing the VAT refund request.
Penalties for VAT non-compliance
Depending on the specific situation, following penalties can be imposed in case of VAT non-compliance:
- Fine up to CZK 300,000
- Late payment interest that is calculated as the National Bank’s repo-rate (currently 0,25 %) increased by 8 %
Penalty in the amount of 20 % of the assessed VAT amount
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