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Czech VAT
In 2004 the Czech Republic joined the EU VAT regime and it is part of the EU single market economy. VAT Directives issued by the EU lay out the principles of the VAT regime to be implemented by each member country. These Directives take precedent over the local legislation.
Czech VAT law
Czech VAT is supervised by the local tax office, Financni Urad.
Czech VAT registration
Both EU and non-EU Foreign companies may register for VAT in the Czech Republic without establishing a local company or forming a permanent establishment – this is known as non-resident VAT trading. There is no VAT threshold for the registration of non-resident traders; a VAT number must be in place before the commencement of taxable supplies. There is some limited flexibility for reclaiming Czech VAT incurred prior to the registration but potential fines can be high.
There are strict rules on when a registration can be permitted. Common scenarios which require a Czech VAT registration include:
- importing goods into the Czech Republic
- organising live events, conferences etc. in the Czech Republic
- selling goods from the Czech Republic to other EU countries
- distance selling to private individuals living within the Czech Republic, e.g. internet sales.
Registering for Czech VAT generally takes three weeks, although this can vary.
Czech VAT compliance
There are detailed regulations controlling the recording and processing of Czech transactions. These include guidelines on:
- Czech invoice requirements, including electronic invoices
- foreign currency reporting and translation
- correcting errors from prior returns
- credit notes and corrections
- what accounting records must be maintained.
In the Czech Republic there are strict rules on the layout and format of VAT records to be kept by companies or their tax agents.
Czech VAT rates
The standard VAT rate in the Czech Republic is 21% since 1 January 2013. There are two VAT rates in the Czech Republic. A reduced rate of 15% on foodstuffs, livestock, water and domestic fuel, books and newspapers; construction; cultural and sports events; household services. A reduced rate of 10% on medicines, pharmaceuticals, e-books and baby foodstuffs. A number of services are exempt from Czech VAT, such as financial and postal services.
There are many variations to the rates above, including exempt taxable supplies. Please contact us to learn more.
Czech VAT returns
Companies with a Czech VAT number must submit periodic payments. Generally, filings and payments are submitted monthly in the Czech Republic. Any Czech tax credits should be paid within 30 days but typically it takes much longer.
Czech Intrastat
In addition to VAT returns in the Czech Republic, companies may be required to submit extra statistical information.
Czech Intrastat, which lists sales (dispatches) and purchases (acquisitions) within the EU region, must be filed monthly once the annual threshold is exceeded.
Czech VAT refunds
If a foreign company is providing taxable supplies in the Czech Republic but is unable to obtain a Czech VAT number, or is simply incurring Czech VAT on local goods or services, then Czech VAT may be recovered through a VAT reclaim.
From 1 January 2010 VAT refund applications are made through the tax authorities of the applicant’s home country.
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