Czech Republic

Europe

VAT in Czech Republic Explained: Rates, Thresholds, and Compliance

October 15, 2024


Standard VAT Rate	Reporting Frequency	VAT Rate for ESS	Digital Reporting		Reporting Currency
21%	Monthly/Quarterly	21%	Resident	VAT Control Statement	CZK
21%	Monthly/Quarterly	21%	Non-Resident	VAT Control Statement	CZK

VAT in Czech Republic - Three Types of Rates

There are three types of VAT rates in Czech Republic:

Standard VAT rate,
Reduced VAT rate,
Zero VAT rate.


Czech Republic VAT Rate	Type	Applicability
21%	Standard VAT Rate	Applies to all taxable supplies in the country besides those subject to other VAT rates;
12%	Reduced VAT Rate	Applies to books in print and digital format, newspapers, and magazines, heat and cold.
0%	Zero VAT Rate	Applies to specific intra-EU acquisitions, transport of passengers, intra-EU supply of goods.

How Much is VAT in Czech Republic’s Regions?

Having a special VAT rate defined for specific regions is not a common practice but an exemption. Therefore, there is no special VAT rate in Czech Republic, and general rules and VAT rates apply across the country.

VAT Registration Threshold

VAT Czech Republic law and related regulations provide insight into the VAT registration threshold. According to those rules, the registration VAT threshold in Czech Republic for domestic taxable persons is CZK 2 million (around EUR 79,000) in 12 consecutive months. Domestic Taxable persons below the threshold do not need to register for VAT in Czech Republic.

On the contrary, since no VAT registration threshold is defined for foreign taxable persons, they cannot benefit from the VAT registration exemption if they engage in taxable activities in the Czech Republic.

As an EU Member State, Czech Republic incorporated an EU-wide EUR 10,000 VAT registration threshold for intra-EU distance sales of goods and B2C supplies of services. Regarding the electronically supplied services, EU rules state that non-EU suppliers have no registration threshold.

Types of Taxable Activities in Czech Republic

Several economic or business activities are considered taxable from a VAT perspective. Under VAT Czech Republic law, any legal entity or individual engaged in such activity is treated as a VAT-liable or taxable person.

The supply of goods and provision of services in the Czech Republic for a fee, the reception of reverse-charge services by a taxable person in Czechia, and the export and import of goods are all activities that impose the application of VAT rules.

VAT Registration Process

Registering for VAT is an important process for resident taxable persons whose annual turnover is above the VAT threshold in Czech Republic and for foreign taxable persons supplying goods or services on the Czech market.

Czech Republic VAT Registration for Domestic Businesses

Domestic taxable persons, e.g., domestic businesses, should submit electronically VAT registration applications to the Czech Tax Authority through the General Financial Directorate’s Electronic Tax Portal. The registration obligation arises once the CZK 2 million limit has been exceeded. Businesses have 15 days to apply once the threshold is exceeded.

The VAT registration process is usually completed within 30 days of submitting the correct application.

Besides mandatory registration, domestic businesses can register for VAT voluntarily.

Czech Republic VAT Registration for Foreign Businesses

As mentioned, there is no set registration threshold for taxable persons not residing in the Czech Republic and conducting activities subject to VAT in Czech Republic. These taxable persons, such as foreign businesses, should submit a VAT registration form within 15 days from the end of the calendar month in which they became considered taxpayers.

Non-EU businesses may need to appoint a tax representative to complete the VAT registration process, whereas companies established in another EU country do not face this requirement.

VAT Returns in Czech Republic

Depending on their turnover, VAT-registered taxable persons should submit monthly or quarterly VAT returns. Regardless of which VAT return is filled, the deadline is by the 25th day after the end of the reporting period.

The VAT return can be filed in three ways: through an online portal called Mojedane.cz, through the Electronic Submissions for the Financial Administration (EPO) application, or by data mailbox.

Penalties for Failure to File Tax Return

The Tax Administration will impose penalties on taxpayers who miss a filing deadline or do not submit a VAT return, which represents additional financial burdens on taxpayers.

Penalties vary from CZK 300,000 for late filing up to CZK 500,000 for missing the registration date, not meeting reporting obligations, or non-compliance with record-keeping rules.

VAT Rules for Electronically Supplied Services

Services provided automatically online, utilizing the Internet or similar digital networks that require non or minimal human intervention are digital services, digital products, and electronic services. These definitions are also synonymous with Electronically Supplied Services (ESS), regulated under the EU VAT Directive 2006/112/EC.

In essence, ESS relies heavily on technology and automation, and its provision would not be possible without it.

The Czech Republic implemented this definition of the EU, which is widely applicable at the EU level and represents a harmonized regulatory EU framework. Moreover, the EU VAT Directive brought a harmonized taxability rules for ESS:

Taxability Rules for ESS:

The importance of EU taxability rules for ESS lies in establishing a clear and more equal playing field for all participants in the EU e-commerce market. Furthermore, it reduces administrative burdens and enables e-commerce businesses to conduct their activities and achieve VAT compliance more easily.

The most notable ESS rules under the EU VAT Directive stipulate a general place of supply rule for B2B ESS supply and the application of the VAT rate set in the country where the consumer is located for B2C ESS supply.

The EU-wide threshold set at EUR 10,000 affects distance sales of goods and ESS supply rules. This threshold is part of the 2021 E-commerce package and states that if the supplier's annual turnover is above the limit, the VAT rate of the consumer's EU Member State of residency applies, for example, the VAT rate Czech Republic.

However, when supplies are below the threshold, suppliers may decide whether to apply the VAT rate of their country of establishment or register for OSS schemes.

How much is VAT in Czech Republic on ESS?

The Czech Republic VAT rate for ESS is 21%.

E-Commerce Rules

The 2021 E-commerce reformatory package is one of the most well-known VAT packages that redefined the EU VAT landscape and influenced global changes. The primary purpose of the reforms was to ease the requirements for VAT compliance, primarily for businesses involved in cross-border transactions. On the other hand, with this package, EU governing bodies wanted to ensure that EU consumers do not face unknown and unnecessary financial burdens.

The E-commerce package introduced a EUR 150 threshold for goods in consignments imported from non-EU countries, known as cross-border sales of low-value goods.

Intra-EU distance sales rules also evolved, and a unified threshold on the EU level was introduced, abolishing the national threshold. Before implementing a single threshold, businesses had to pay attention to different thresholds depending on which countries they operated in.

The deemed supplier rule, under which digital platform operators became VAT-liable for VAT on supplies they facilitate, influenced the platform economy.

Finally, the reform brought a new scheme and new rules to the 2015 Mini One Stop Shop (MOSS), creating a more extensive One Stop Shop (OSS) system containing three schemes:

Union Scheme,
Non-Union Scheme,
Import Scheme.

VAT EU Reporting

Two types of reports concerning EU supplies need to be submitted. The first is a tax return called the recapitulative statement, known as the EC Sales list, and the second is a statistical report called Intrastat.

EC Sales List

When a Czech VAT-registered taxable person makes a sale transaction for goods or services to another VAT-registered person in another EU country, a recapitulative statement should be submitted.

The recapitulative statement or EC Sales List (ESL) should be submitted no later than 25 days after the reporting period ends.

Intrastat

Once the Intrastat threshold is exceeded, a statistical report on supplies made in the EU territory is required. The threshold is set at CZK 15 million for goods imported (arrivals) and CZK 15 million for goods exported (dispatches).

The Czech Republic also has a threshold for Intrastat simplified reporting of CZK 30 million. Those taxable persons whose arrivals or dispatches are above this threshold can submit Intrastat without specifying individual data on goods.

Digital Reporting

There are no mandatory e-invoicing or SAF-T reporting requirements in the Czech Republic. However, one specific VAT statement is considered an appendix to the VAT return.

E-invoicing is allowed, and a system for sending and receiving e-invoices is in place, but it is not mandatory.

Local Businesses

The VAT Control Statement is currently the only report needed in the Czech Republic, apart from the VAT return. This report should be filled out electronically and summarizes the most important lines from the VAT returns. The obligation to file a VAT Control Statement applies to all VAT-registered taxable persons in Czechia, such as local businesses.

Non-Resident Businesses

The same rules regarding the VAT Control Statement apply to local businesses to any nonresident taxable person, e.g., businesses registered for VAT in Czech Republic.

Is there a VAT registration threshold in the Czech Republic?

Yes, there is, and it is set at CZK 2 million (around EUR 79,000) in 12 consecutive months. Those below this threshold do not need to register for VAT but can do it voluntarily.

When do foreign taxable persons register for VAT in the Czech Republic?

Since no registration threshold is defined for foreign taxable persons, they should register for VAT from the start of taxable activities, regardless of the annual turnover.

Is the EC Sales List (ESL) mandatory in Czechia?

The EC Sales List (ESL) is mandatory in Czechia, just like in other EU countries. In the Czech Republic, the ESL is defined under the same term as in the EU VAT Directive, the Recapitulative Statement.

What are the Intrastat thresholds in the Czech Republic?

There are two different Intrastat thresholds in Czechia. The first one is set at CZK 15 million for EU imports and exports, that is, arrivals or dispatches of goods from and to another EU Member State. In addition to this, a CZK 30 million threshold is also defined. Once the second threshold is exceeded, taxable persons may submit a simplified Intrastat report.

Are there any digital reporting requirements in Czechia?

The most common digital reporting requirements, such as B2B, B2C, or B2G e-invoicing or SAF-T, are not mandatory. However, taxable persons can issue and receive e-invoices, and government bodies are obliged to receive B2G e-invoices. Nevertheless, a yearly VAT Control Statement should be completed and submitted electronically. This statement serves as an appendix to the VAT return and contains data on key elements from VAT returns.

Do foreign VAT-registered businesses should submit a VAT Control Statement?

Yes, they do. All foreign VAT-registered businesses and natural persons should submit an annual VAT Control Statement.

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