Starting in 2027, the Czech Republic will introduce sweeping VAT reforms affecting vehicle deductions, bad debt adjustments, beverage rates, and cross-border digital reporting. The changes offer significant compliance relief but will also require key operational updates.
Key VAT Changes from 2027
The Czech Republic will abolish the CZK 420,000 (approx. EUR 19,300) cap on input VAT deductions for passenger vehicles. Businesses will be able to recover the full VAT on vehicles used exclusively for taxable business purposes. Where a vehicle is used for both business and private purposes, the deduction will be calculated proportionately to its business use.
From the same date, the Czech Republic will change the VAT treatment of unpaid invoices, shortening the period after which debtors must adjust input VAT deductions and expanding the relief available to creditors for smaller unpaid receivables. For debtors, the period for adjusting previously deducted input VAT will be reduced from six to three months after the month in which the invoice became due. For creditors, the waiting period for adjusting the taxable amount of smaller unpaid receivables will also be shortened from six to three months.
The transitional rules will also allow creditors to apply the new, more favorable conditions to certain unpaid receivables arising from taxable supplies made between January 1, 2025 and December 31, 2026, provided their taxable amount has not already been adjusted by January 1, 2027.
The VAT treatment of non-alcoholic beverages will be simplified. A consistent 12% reduced rate will apply to all non-alcoholic beverages supplied as part of restaurant or catering services. Outside these services, non-alcoholic beverages will generally remain subject to the standard 21% rate. The 12% rate will continue to apply outside restaurant and catering services only to tap water, milk-based beverages, and plant-based alternatives to milk-based beverages.
OSS rules will change as part of the EU-wide VAT in the Digital Age (ViDA) reform. The rules determining when VAT becomes chargeable under the Union and non-Union OSS schemes will be clarified. In particular, issuing an invoice will no longer, by itself, determine when VAT becomes chargeable for supplies covered by these schemes.
The deemed-supplier rules for electronic marketplaces and platforms will also be expanded. The Union OSS scheme will be extended to certain supplies of electricity, gas, and heating and cooling energy. Eligible suppliers will be able to report these transactions through a single OSS return rather than registering for VAT in multiple Member States. This measure is temporary and will apply only until June 30, 2028.
Conclusion
The 2027 VAT reforms represent a significant effort by the Czech Republic to modernize its tax system, align with EU standards, and ease operational burdens for compliant businesses. By removing the vehicle deduction cap and streamlining the rules for unpaid invoices, beverages, and digital platform transactions, the changes should improve administrative efficiency and tax certainty. Taxpayers should adjust their legal and accounting processes ahead of implementation.
