Czech VAT derives from the EU VAT Directive and it is thus harmonised with the VAT system of other EU countries.
Subject of the Czech VAT
The following services and supplies are subject to Czech VAT:
- Supplies of goods with the place of supply in the Czech Republic,
- provision of a service with the place of performance in the Czech Republic,
- intra-Community acquisition of goods realised in the Czech Republic,
- import of goods into the Czech Republic (you can also read more about the import VAT). For the VAT purposes, the import of goods means the entry of goods from a third country into the territory of the European Union. The entry of goods into the territory of the European Union from a country defined by the law shall also be deemed to be an import of goods. In the case of importation of such goods, the customs office shall proceed as if the goods were imported from a third country.
There is a basic rule that VAT must be declared and paid only when carrying out economic activity. Non-entrepreneurs do not have to pay VAT or deal with VAT-related matters.
Entrepreneurs have to file VAT returns and pay VAT on one side, but at the same time they can claim input tax in the Czech Republic. Therefore they only pay VAT from their added value.
Taxable supply of goods and services
The taxable supply shall be deemed to have been effected
- on the date of supply in accordance with Section 13(1) of the VAT ACT,
- on the date of the sale of the goods at public auction in accordance with a special provision of law or
- the date on which the imported goods are put to the free circulation (see our blog to Import VAT).
In the case of the supply of immovable property, the taxable supply shall be deemed to have been effected on the date on which the immovable property is handed over to the acquirer for use or on the date of delivery of the notification stating the date of registration of the change of ownership, whichever is earlier. Where immovable property is put to use, the taxable supply shall be deemed to have been effected on the date on which the immovable property is put to use.
Where a service is supplied, the taxable supply shall be deemed to have been effected on the date of supply or on the date of issue of a tax document, except in the case of an instalment or payment plan or a document for consideration received, whichever is the earlier.
The VAT payer is obliged to issue a tax invoice in the case of
- the supply of goods or services to a taxable person or a non-taxable legal person, with the exception of exempt supplies without the right to deduct tax,
- the distance sale of goods,
- the supply of goods to another EU Member State which are exempted from tax with a right to deduct tax (i. e. EC-supply),
- the receipt of an advance payment.
The tax document must be issued within 15 days of the date on which the obligation to declare the tax or to declare the transaction arose. The VAT payer may authorise in writing the person for whom the supply is made or a third party to issue the tax document (i. e. the self billing). Where the authorisation is given electronically, it shall be signed with a recognised electronic signature.
The VAT payer shall, within the time limit for the issue of the tax document, make such efforts as may reasonably be required of him to ensure that the tax document is placed at the disposal of the recipient of the transaction.
A tax invoice shall contain the following information:
(a) identification of the person making the transaction,
(b) the VAT identification number of the person making the transaction,
(c) the designation of the person for whom the transaction is effected,
(d) the VAT identification number of the person for whom the transaction is effected,
(e) the registration number of the tax invoice,
(f) the scope and object of the transaction,
(g) the date of issue of the tax document,
(h) the date on which the transaction is effected or the date on which the consideration is received, if different from the date on which the tax document is issued, the obligation to declare the tax arose before the transaction was effected or to declare the transaction on the date on which the consideration was received,
(i) the unit price, exclusive of tax, and the discount, if not included in the unit price,
(j) the taxable amount,
(k) the VAT rate,
(l) the amount of the tax; this tax shall be stated in Czech currency.
Czech VAT rates
The EU VAT Directive allows Member States to introduce one or two reduced VAT rates in addition to the standard rate of tax, which is at least 15%. However, the reduced rate may not be less than 5 %, must allow full deductibility and may only be applied to certain specified services or goods. The Czech Republic has introduced a second reduced rate for certain types of goods since 2015 and has also complied with the other general requirements of the EU VAT Directive, such as the percentage and the allowance of input deductions.
Therefore there are currently three VAT rates in the Czech Republic. Most goods and services are subject to the VAT rate of 21 %. For some selected goods and services, e.g. food, water, electricity, etc. (including basic foodstuffs, heating, water) the reduced tax rate of 15 % applies. In addition, there is a so-called second reduced tax rate of 10 %, which is levied e.g. on books, children's food.
Czech VAT returns and control statements
A VAT payer who carries out a taxable supply of goods or services with the place of supply in the Czech Republic shall be obliged to declare VAT on such supply. The declaration is done via the VAT return, control statement and EC list (i. e. the recapitulative statement).
In the case of acquisition of goods from another EU Member State with the place of performance in the Czech Republic, the VAT payer or the identified person who acquires the goods is also obliged to declare the tax. Where a taxable supply is carried out by a person not established in the Czech Republic (e. g. established in another EU country), the person who received the supply shall be obliged to declare the VAT, namely
1. the supply of a service pursuant to Sections 9 to 10d of the Czech VAT Act,
2. the supply of goods with installation or assembly, where the person not established in the territory of the Czech Republic is not VAT registered as a taxable person, or
3. the supply of goods through systems or networks.
Do you need help with VAT registration process in the Czech Republic? Contact us and we will help you.