VAT in the Czech Republic

Value Added Tax (VAT) is imposed on the domestic supply of goods, the transfer of real estate, the provision of services, including the transfer or use of rights, and the import of goods.

Czech companies must register for VAT if their deliveries in 12 consecutive months exceed CZK 1 million (slightly over 36,000 Euros). Foreign companies must be registered as payers within 15 days from the date of the first delivery to the Czech Republic, except in cases where the recipient of this delivery has withdrawn VAT using the reverse charge mechanism (since July 2016, such a mechanism has been applied in cases where the goods are supplied by a foreign company, not registered in the Czech Republic as a VAT payer to a local recipient - a VAT payer). Voluntary registration is also possible in the case when the company carries out or plans to carry out deliveries on the territory of the Czech Republic.

Some companies may register under a simplified procedure. These are mainly companies that provide / receive B-to-B services, or purchase goods from other EU members for an amount exceeding 326,000 CZK (a little over 12,000 Euros) per calendar year). VAT rates are set by the Czech government, but follow the general rules for using the standard and reduced VAT rate. The standard VAT rate is 21%. The reduced rate is 15% and applies to the following properties:

• Food products (with the exception of basic baby food);
• Some soft drinks;
• Takeaway food;
• Water supply;
• Medical equipment for the disabled;
• Child car seats;
• Some domestic passenger services;
• Some books (excluding e-books);
• Visiting cultural events, shows and amusement parks;
• Writers and composers;
• Social housing;
• Restoration and repair of private houses;
• Cleaning of private households;
• Some agricultural equipment;
• Hotel accommodation;
• Attendance at sporting events;
• Use of sports complexes;
• Social services;
• Funeral ceremonial services;
• Medical and dental care;
• Home care services;
• Firewood;
• Certain pharmaceuticals;
• Household waste collection and street cleaning.

A reduced rate of 10% applies to the following properties:

• Foods classified as basic baby food;
• Newspapers and periodicals;
• Pharmaceutical products;
• Some books.

At zero rate, transportation within the EU and international transportation are taxed. The history of establishing modern VAT rates looks like this:

The occurrence of tax liability for VAT in the Czech Republic is determined by the date of sale of the goods. For most goods, this is the date of delivery or transfer of ownership; for services, this is the end date of services. The tax must be paid to the tax authorities within 15 days after the end of the reporting period.

VAT returns must be submitted to the tax authority electronically (from January 1, 2012) by the 25th day of the month following the tax period (month or quarter, depending on the taxpayer's turnover).

VAT payers must also submit reports on sales/purchases, which will allow the tax authority to see the correspondence between purchases and sales. Taxpayers must also report supplies received from other EU countries, including supplies for personal purposes (for which, as a rule, there are only internal documents).

The main changes in the Czech legislation in 2017 in the field of VAT:

• Equating the purchase of fixed assets on lease with the purchase in the usual way (that is, the taxation of these operations will use the same rules);
• The obligation to declare VAT in the event of an advance payment received only arises if the relevant supply is sufficiently identified, i.e. the specific goods or services, the applicable VAT rate and the place of delivery are known;
• The right of the taxpayer to demand, under certain circumstances, a reduction in the tax deduction as part of the usual tax calculation, even for periods that relate to another calendar year;
• The obligation to treat taxable supplies made over a period of more than twelve months as having been made no later than the last day of the calendar year following the calendar year in which the supply began;
• Abolished special rules for associations with a transitional period of two years (i.e. until the end of 2018). Thus, in terms of VAT, each associated company will be valued independently;
• Introduction of an obligation to adjust (cancel) the initially declared VAT deduction in respect of unconfirmed shortages, destruction, loss or theft of assets. The adjustment must be made in the period in which the taxpayer discovered such circumstances or could have discovered them;
• Extended description of the local reverse charge mechanism (for example, in the case of providing personnel for construction and installation work);
• Consideration for VAT purposes of the purchase and sale of electronic communications as a service.