The different VAT rates in the Czech Republic are:
- Ordinary rate: 21%: This is the most common VAT rate and applies to most goods and services that are not specifically covered by the reduced rates. Examples include electronics, clothing and furniture.
- Reduced rate: 15%: This VAT rate applies to certain goods and services, including certain foodstuffs, water supply, waste disposal services, certain types of transport, and some cultural and sporting events.
- Reduced rate: 10%: This rate applies to certain essential goods and services, such as basic foodstuffs (bread, milk, fruit and vegetables), books, some medical products and services, and certain cultural and sporting events.
Who must have a Czech VAT number?
Are you wondering if you are liable for VAT in the Czech Republic? Check this list below to see. As soon as a foreign company carries out at least one of the actions listed below, it will be liable for VAT in the Czech Republic. It must then be registered in the Czech VAT register to obtain a local VAT number. In some cases, the “One Stop Shop” scheme can be used within the EU. The list below shows some of the transactions that will trigger the obligation to register for VAT:
- Export and import of goods in the Czech Republic
- Owning or receiving inventory or consignments in the Czech Republic
- Purchase of goods from countries within the EU to the Czech Republic (intra community deliveries)
- Sale or delivery of goods in the Czech Republic
- You build / manufacture the product in the Czech Republic and receive parts from other European suppliers in the Czech Republic.
- Certain services performed in the Czech Republic, or where the customer is resident or established in the Czech Republic
- Electronic commerce when the services are delivered to persons who are not liable for VAT, established or domiciled in the Czech Republic
- Reverse charge of VAT on purchases of goods or services made by a taxable person who is not established in the Czech Republic, when the company is already VAT-registered in the Czech Republic for customs purposes
- Reverse charging of value added tax on subcontractors, when it comes to services related to construction and public works
Having a Czech VAT number will not create a permanent establishment.
Even if you get a Czech VAT number, it does not mean that you have a permanent establishment in the Czech Republic and have to pay corporation tax. A permanent establishment will require more than the VAT number only
Who has to register for Czech VAT ?
If you need to register for VAT in the Czech Republic, is your business meets one of the requirements mentioned below:
- You must be able to prove that your business carries out a VAT-liable activity in the Czech Republic, such as import, export, purchase or sale of goods, or services that are taxable there.
You must submit a written application to the Czech Tax Office (Finanční úřad) with necessary documents, such as a company registration certificate, copies of invoices and contracts, and possibly a power of attorney (power of attorney) authorizing a local representative to act on your behalf your company.
You must appoint a Czech tax representative if you are not established in the EU. This is a local person or company authorized by the tax authorities to represent foreign companies in VAT matters. The tax representative will be responsible for submitting VAT returns and paying VAT on behalf of the company.
What are the requrments after registering for a Czech VAT number
You must comply with Czech VAT registration requirements, including submitting VAT returns and paying VAT within the deadlines set by the tax authorities.
After you have registered for VAT in the Czech Republic, you will receive a Czech VAT number. This number must appear on all invoices and other documents relating to your economic activity in the country.
It is important to note that registering for VAT in the Czech Republic does not necessarily mean that you have to establish a permanent establishment there. However, it is important to be aware of local rules and regulations to ensure your business complies with all tax requirements and avoids potential fines or penalties.
How to can you get a Czech VAT number?
To obtain a Czech VAT number, you must follow certain steps and provide specific information to the Czech tax authorities. Below we have divided the process into two bulleted lists, one describing the steps to be taken and the other showing the required information to be submitted.
How to get a Czech VAT number:
- Find out if your business requires a Czech VAT number: Assess your company’s activities in the Czech Republic and check whether you need to register for VAT, based on the various factors mentioned earlier in this conversation.
- Prepare the necessary documentation: Gather the necessary information and documents as outlined in the list below.
- Complete the relevant documentation.
- Submit application and documentation: Submit the completed VAT registration form together with the necessary documents to the Czech tax authorities, either electronically or by post.
- Wait for the VAT registration number: Once the Czech tax authorities have processed your application and verified the information provided, they will issue a Czech VAT number for your business.
What documentation is requred in order to obtain a Czech VAT number?
Documentation required to obtain a Czech VAT number:
- The application form for a Czech VAT number
- Registration form for non-established foreign companies
- Copy of the company’s articles of association with a simple Czech translation (if applicable)
- Trade register certificate (less than 3 months old)
- Copy of the identity card of the legal representative
- Proof of activity in the Czech Republic (e.g. invoice or purchase order)
- Import VAT
For EU and EEA companies importing goods to the Czech Republic, it is not always a requirement to have a Czech VAT number in order to import goods. However, it becomes necessary when certain thresholds or conditions are met, for example when a company is engaged in taxable transactions in the Czech Republic.
VAT statement in the Czech Republic
The frequency of submitting VAT returns in the Czech Republic may vary based on the business’s annual turnover and the composition of the turnover. There are different submission frequencies for VAT statements: monthly, quarterly and annually. Here is a brief overview of the different submission frequencies and what they entail:
Monthly submission: Businesses with an annual turnover above CZK 1,000,000 (approximately €39,000), or businesses that mainly sell goods and services to other taxable persons, must submit VAT returns monthly. This means that companies must report and pay VAT for each calendar month within a set deadline, which is usually within the 25th day of the following month. For example, VAT for January must be reported and paid by 25 February.
Quarterly submission: Companies with an annual turnover below CZK 1,000,000 (approx. €39,000) and which mainly sell goods and services to consumers (end users) must submit VAT returns quarterly. This means that companies must report and pay VAT for each quarter within a set deadline, which is usually within the 25th day of the month following the quarter. For example, VAT for the first quarter (January to March) must be reported and paid by 25 April.
Annual submission: For some small businesses, such as freelancers or small businesses that meet certain requirements and have an annual turnover below CZK 250,000 (approximately €9,750), it may be possible to submit VAT returns annually. This means that companies must report and pay VAT for the whole year within a set deadline, which is usually during the first quarter of the following year.
Note that these thresholds and amounts are approximate and subject to change by the Czech authorities. It is recommended to consult a VAT tax expert or lawyer who is familiar with the Czech VAT regulations for advice tailored to your business.
Do you have to have a VAT representative?
In the Czech Republic, it is not always mandatory for foreign companies to have a VAT representative, but it may be advisable depending on the company’s situation and activities in the country. In general, a VAT representative can assist with handling VAT-related obligations and ensuring compliance with local tax rules.
For EU companies that are VAT registered in the Czech Republic, there is usually no requirement to appoint a local VAT representative. These companies can handle VAT-related tasks directly with the Czech tax authorities.
However, there may be a requirement to appoint a local VAT representative for companies based outside the EU. These representatives take responsibility for the company’s VAT obligations in the Czech Republic and act as an intermediary between the company and the Czech tax authorities.
Although it is not mandatory to have a VAT representative, it can be beneficial to engage one, especially if the company does not have local expertise in Czech VAT legislation. A VAT representative can help with:
- Registration of the company for VAT in the Czech Republic.
- Submission of VAT returns and other tax reports.
- Handling the communication with the Czech tax authorities.
- Guidance on VAT rules and regulations that apply to the company’s activities in the Czech Republic.
If you are unsure whether your company needs a VAT representative in the Czech Republic, it is recommended to consult a tax expert or lawyer familiar with the Czech VAT regulations for advice tailored to your business.
At Eurofiscalis, we have extensive experience in assisting European companies operating in Europe. If you would rather spend your time on something else, contact us.