VAT in Czech Republic
VAT in Czech RepublicUpdated on Friday 10th April 2020
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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.
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. 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 the 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
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
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.
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 introduced in July 2020. 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 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.
Persons who need further information on the Czech VAT can address to our law firm in Czech Republic.