General information
All regulations related to Czech VAT have been implemented by the VAT act since 1994. There are the most important articles resulting from EU directives in the field of VAT. The Czech Republic, as a member of the European Union undertakes to strictly comply with directives. These rules apply mainly to registration, VAT returns and the Czech VAT compliance. The VAT Act is controlled by the Czech Ministry and the Finance Tax Authorities.
Who is obligated to register for Czech VAT?
Every foreign company that sells goods or services on the local market is required to register for Czech VAT to prevent tax evasion. The Czech Republic, being a member of the European Union, like other EU countries, needs VAT registration in situations typical for this process:
• shipping or purchase of goods from other EU countries (intra-community sales),
• import of goods to the territory of the Czech Republic,
• all trade, purchase and sale in the Czech Republic,
• sale of goods to local customers on the basis of consignment storage agreements in the Czech Republic,
• live events, including exhibitions, conferences, concerts,
• own-cost delivery of goods
Registration thresholds Czech VAT
With the introduction of the VAT OSS, the limits for distance sales to the EU have been unified and currently it is EUR 10,000 net excluding the value of foreign VAT. It is a fixed value independent of the conversion rate or the country of the buyer. This means that entrepreneurs no longer have to monitor sales limits to individual European Union countries.
What information is necessary to obtain a Czech VAT number and registration?
The relevant forms and the following documentation are required from the Czech tax office:
• confirmation of registration of the company for VAT purposes in a foreign country,
• business license,
• an extract from the company’s national commercial register.
The said documentation should be translated into the Czech language using the services of a sworn translator.
Where to get a Czech VAT number?
To be able to register as a Czech VAT payer, it is necessary to submit an online application in Czech financial administration system and then sign the paper copy confirming the electronic submission of the application.
After correct submission of the documents, the company will receive a Czech VAT number. It has the same format as in other European Union countries but is preceded by the prefix CZ.
What are the tax rates in the Czech Republic?
The Czech Republic applies a standard VAT rate of 21% and two reduced rates of 15% and 10%.
The 21% standard VAT rate is generally used for all taxable goods and services. The reduced VAT rate 15% is applicable for food (excluding essential nutrition for children and gluten-free foods) and non-alcoholic drinks, food to take away, water supply, medical equipment for the disabled persons; children’s car seats; part of domestic passenger transport; for admission to cultural events, shows and amusement parks and admission to sports events; services for artists like writers and composers; social housing; renovation and repair of private households; cleaning of private dwellings; domestic care services; some agricultural supplies; sporting facilities for accommodation in hotel; social services; undertaker and cremation services; medical and dental care; home help services; pharmaceutical products; domestic waste collection and street cleaning; waste water and sewage management; catering services provided in restaurants and cafes; cut flowers and ornamental plants; food production.
The reduced 10% VAT rate concerns groceries (selected baby foods and gluten-free foods); a newspapers and magazines; certain pharmaceutical products; some books.
Preferential reduced 0% VAT rate is applied on intra community supplies transactions and international transport.
VAT exemption
Transactions exempt from VAT without the possibility of deducting the input tax: basic postal services and delivery of postage stamps, radio and television broadcasting, financial activities, insurance activity, sale of land (except for building plots), rental of real estate (with the exception of exclusions), education, medical services and delivery of medical goods, social assistance, operation of lotteries and other similar games, the supply of goods that have been used for VAT-exempt selected transactions carried without the right to deduct and goods for which the taxpayer has no right to deduct.
VAT exemption with the right to deduct input tax: delivery of goods and, purchase of goods from another member of EU, export of goods, provision of services with implementation in a country outside the EU, transport and services directly related to the import and export of goods, passenger transport, transport of goods
The taxable period determined in Czech Republic
The registered company is obligated to report its VAT in taxable periods. There are two to ways do it. Filing VAT return in monthly periods or quarterly. Quarterly reporting period is allowed provided the turnover in the previous calendar year did not exceed CZK 10 million.
Moreover, entrepreneurs registered for VAT are obliged to submit a VAT Control Statement. This obligation was introduced as a solution to find and prevent tax evasion. It is created to enable the tax authority to obtain more information on transactions carried out by taxable persons. VAT Control Statement does not replace a statement for Intra-community supplies or a VAT return. It must be submitted on a monthly basis.
Filling the periodical VAT return
Periodical VAT returns have to be filed by electronic means to Czech VAT tax authorities before the 25th day of the calendar month following the tax period (month/quarter) to which it relates.
The VAT Control Statement have to be submitted by the 25th day after the end of each calendar month.
VAT directives indicate that the tax period should be set by each member of EU at one month, two months or three months. The VAT return should be submitted within a deadline determined by member of EU.