VAT Registration in Czech Republic - Updated for 2021
VAT in Czech RepublicUpdated on Wednesday 09th June 2021
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Czech Republic applies the Value Added Tax (VAT), as any other member-state of the European Union. The local authorities imposed three different VAT rates, applicable at a standard rate or at a reduced rate. Both local and foreign persons should be familiar with the VAT system available here, as it applies to all products and services traded on the Czech market. Our Czech team of lawyers can assist persons who require an in-depth presentation on the VAT rates and VAT compliance. They can also help foreigners start a business in Czech Republic.
VAT regulations in Czech Republic
The amended VAT legislation came into force from the beginning of 2015, bringing several modifications. Companies involved in radio and television broadcasting services, as well as those with operations in the field of telecommunications and electronics are now part of the Mini-One-Stop-Shop (MOSS), which refers to the fact that such companies are entitled to pay VAT in the country of the recipient of services.
More about the VAT regulations in Czech Republic can be discussed with our advisors.
VAT rates in Czech Republic
Companies with operations in Czech Republic will be imposed with a 21% VAT rate, which is the standard rate applicable to most products and services, taxable under the current law, in 2021. Other types of business activities related to food products for children, various pharmaceuticals or book industry are taxed at a reduced rate of 10%. This tax was introduced starting with 1st of January 2015.
Other services are taxed at 15% rate, if they refer to foodstuffs, water, public transportation, cultural and sports events, publishing industry or hotel accommodation; our team of Czech lawyers can offer more details on all the services and goods taxed at a VAT of 15%. The following goods and services are subject to 15% VAT rate:
- non-alcoholic beverages, medical equipment for disabled persons;
- cleaning services for private households, shows, and amusement parks;
- firewood, particular pharmaceutical products, the use of sporting facilities;
- domestic waste collection, treatment of wastewater, some domestic passenger transportation.
One of our Czech attorneys can tell you more about the VAT tax rates applicable in Czech Republic and about the registration for this tax.
Tax compliance for Czech legal entities in 2021
Czech companies are required to register for VAT purposes. Newly incorporated companies will receive a VAT number, which, in Czech Republic, is comprised of 10 characters, set out by the following formula: CZ + eight digits. As a general rule, companies have to comply for VAT returns purposes on a monthly basis, but the local legislation prescribes quarterly reporting if the turnover did not exceed CZK 10 million. Quarterly reports are not allowed in the first two financial years. Monthly reports have to be submitted no later than the 25th day of the month. It is important to know that the Czech legislation does not require annual fillings. After the company was registered for VAT, the investor will have to respect the accounting requirements (bookkeeping, invoice regulations). Companies in Czech Republic are subject to the following local VAT accounting requirements:
- Companies must issue invoices for the goods and services offered for sale purposes in Czech Republic.
- The maintenance of the accounting records must be made for at least 10 years.
- Corrections and credit notes need to be made if invoice modifications are necessary.
- Invoices comprising VAT information must respect the Czech VAT Act.
Instead of dealing with the rules and conditions imposed for VAT compliance in Czech Republic, you should talk to one of our Czech lawyers and ask for complete legal advice. We are at your service if you are interested in opening a business in Czech Republic.
Who must pay the VAT in Czech Republic?
The VAT registration must be done by companies importing goods from the EU in the Czech Republic. Buying and selling products in this country are subject to VAT. The same tax rate is applicable to clients outside the Czech Republic who purchase products or services from this country. Intra-community acquisitions are also subject to VAT taxation. Companies having distance selling operations must align with the VAT requirements in the Czech Republic. Also, companies holding inventory with the purpose of distribution or sale of the stock must pay VAT. The admission for varied events in the Czech Republic must comprise the VAT rate. One should solicit information about the VAT in Czech Republic and respect the applicable legislation in this sense. Feel free to talk to one of our advisors and find out more about the VAT in Czech Republic.
Registration for VAT in Czech Republic in 2021
The registration for VAT in Czech Republic can be made as soon as the company is incorporated in this country. The process is not complicated and the legal representative of the firm must commence the process with the entitled authorities. Among the needed documents for VAT registration in Czech Republic, we mention the Certificate of Incorporation of the company that comprises important information about the firm. Also, specific forms need to be completed with the financial authorities, but for more details and in-depth support for registration, you can talk to one of our specialists. They can tell you more about the VAT rules for 2021. We present you other facts to consider about the VAT registration in Czech Republic, mentioning that one of our experts can help company owners by managing all the formalities:
- The VAT registration is imposed on companies exceeding the CZK 1 million turnovers in one year.
- Voluntary VAT registration can be made even if the threshold is not exceeded.
- The Czech VAT registration is made in approximately 2 months. However, the process can speed up if all the documents are provided in time, helped by our specialists.
- DIC is the VAT number allocated to companies in Czech Republic. This code shows that the firm is registered for taxation in this country.
The VAT registration in Czech Republic can be handled in a professional manner by our advisors.
The VAT generalized reverse charge to be introduced
The Generalized Reverse Charge Mechanism on domestic supplies has been accepted by the financial authorities in the Czech Republic, mentioning that if approved by the European Commission, the mechanism will be soon introduced. This is considered an important anti-VAT fraud measure. If at the moment the cash payment of VAT imposed on goods and services can be withdrawn for B2B transactions of more than EUR 17,500, the client can report the VAT input and output as a book-only entry for the VAT return. If this measure will be implemented, the Czech Republic will be the first country to introduce the Generalized Reverse Charge Mechanism or GRCM in the European Union.
Making investments in Czech Republic
The Czech Republic is a destination appreciated by foreign investors who discover the potential of this country. Being one of the most developed countries in Europe, the Czech Republic already hosts an impressive number of companies with foreign capital, which benefit from a strong and protected business climate. Among the advantages offered we mention the affordable costs for the competitive labor force, the incentives for investments, the permissive legislation both for foreigners and for the local entrepreneurs, but also the advantageous taxation regime.
The tourism sector, the real estate field, the manufacturing, the agriculture, and the retail sectors are among the well-developed in the Czech Republic, and fields in which numerous investors generate large profits. The highly skilled workforce, the low operational costs, the stable economy, and the appealing tax structure also stand and the base of the decision of making investments in the Czech Republic. The following facts and numbers outline more the business direction in this country:
- around USD 155,024 million was the total FDI stock for Czech Republic in 2018;
- world Bank Ranked the Czech Republic 35th out of 190 economies in the world;
- the Czech Republic is considered the second largest FDI recipient in Central Europe;
- Austria, Germany, the Netherlands, and Luxembourg are the main investors in the Czech Republic;
- the visa scheme was introduced in 2018 for non-EU citizens who make investments of at least EUR 1.9 million.
FAQ about Czech VAT
1. What is the VAT rate in Czech Republic?
21% is the standard VAT rate in Czech Republic. This rate applies to most products and services available for sale purposes. The VAT rate of 15% applies to public transportation, water, foodstuff, hotel accommodation, cultural and sports events. A reduced VAT rate of 10% is imposed on different food products for children, and pharmaceuticals.
2. Who needs to register for VAT in Czech Republic?
Companies exceeding the threshold of CZK 1 million must be registered for VAT purposes in Czech Republic. The formalities of the registration for taxation in this country can be handled by our Czech lawyers. Both domestic and foreign companies must be registered for VAT in this country.
3. Is VAT necessary for operations within EU countries?
Yes, it is mandatory to register your Czech company for VAT before starting the activities, whether in the country or outside the borders. Moreover, the EORI number that comprises the VAT code is required for trading operations within the EU countries. You can solicit our legal advice on this topic.
4. Can the VAT registration be made online in Czech Republic?
Yes, there is the possibility of VAT registration online, helped by one of our advisors with experience in this field. All the formalities for registration can be attentively handled by us.
5. What is the format of the VAT number in Czech Republic?
The VAT number is formed of CZ, the country code, plus 8 digits. The financial authorities in Czech Republic issue the VAT number.
6. Is there a VAT number for international or intra-community transport?
No, the Czech Republic does not impose a VAT for such transport. We remind you that we can assist foreigners in VAT registration in this country.
7. How does a company comply with the VAT in Czech Republic?
The VAT is normally mentioned by an invoice. There are different VAT rates for varied categories of products and services in Czech Republic.
8. What types of reports are required for VAT in Czech Republic?
According to the tax legislation in Czech Republic, there is no need for quarterly VAT reports for the first 2 years of the company. After this period, monthly reports are imposed, but no later than the 25th of each month.
9. Does a company needs to keep accounting records?
Yes, there is an obligation of keeping the accounting records for at least 10 years in the firm, if the company is not suspended.
10. Who can a Czech lawyer help me with the VAT registration?
An experienced Czech attorney can help both local and foreign company owners properly register for VAT. Different requirements must be fulfilled, so an expert in the field is needed for VAT registration in Czech Republic, in compliance with the applicable laws.
Persons who need further information on the Czech VAT can address to our law firm in Czech Republic.