In Czechia, registration for VAT (Value Added Tax) is mandatory for companies that reach or expect to reach a certain level of turnover (sales), and it can also be done voluntarily under certain conditions. The VAT number is known as the "daňové identifikační číslo" (DIČ). Please find below our guidelines regarding VAT registration in the Czech Republic.
Types of VAT registrations in Czechia
Mandatory VAT Registration: If the turnover of your company exceeds 1,000,000 CZK (approximately 40,000 EUR) over the past 12 consecutive months, it is required to register for VAT.
Voluntary VAT Registration: Even if your turnover is below the threshold, you can choose to register for VAT voluntarily. This can be beneficial if you want to reclaim VAT on your startup costs or if you conduct business with other VAT-registered businesses.
Intra-Community Transactions: If you are involved in an intra-community supply of goods or services (transactions within the EU), you may be required to register for VAT regardless of your turnover. This includes acquiring goods from other EU member states above a certain threshold or supplying services to businesses in other EU countries where the place of supply is where the customer is based.
Non-EU Businesses: Non-EU businesses that provide taxable supplies in Czechia may need to register for VAT without any threshold limit.
Distance Selling: There are also specific rules for distance selling to non-VAT registered individuals in Czechia from other EU countries. If your turnover from such sales exceeds a certain threshold set by Czech law, you must register for VAT in Czechia.
Digital Services: For companies providing digital services to consumers in the EU, there are special VAT MOSS (Mini One Stop Shop) schemes that might require registration.
Immediate Registration: If you expect that your turnover will exceed the mandatory registration threshold soon, you should register for VAT in advance.
When you are required to register for VAT, you must submit an application to the relevant tax office within 15 days after the end of the month in which you exceeded the threshold or anticipate doing so. The application for VAT registration is filed with the Financial Administration of the Czech Republic (Finanční správa České republiky).
Exemption from the VAT registration in Czechia – when you do not need to register for Czech VAT?
In some cases, taxpayers can be exempt from VAT registration in Czechia, under certain conditions:
Below Threshold: If the turnover of the business does not exceed the threshold of 1,000,000 CZK (approximately 40,000 EUR) in a consecutive 12-month period, the taxpayer can be exempt from mandatory VAT registration.
Small Business Scheme: Similar to other EU countries, Czechia may offer a small business scheme for small entrepreneurs. Under this scheme, if the turnover is below the threshold, the business is exempt from VAT and does not charge VAT to their customers. However, they also cannot reclaim any VAT on their purchases.
Specific Activities: Some specific activities and services are exempt from VAT without the right to deduct input tax. These can include certain types of educational, cultural, health, and social services, financial and insurance services, real estate, and rental services, among others.
Reverse Charge Mechanism: If a business is involved in services where the VAT is to be paid by the recipient under the reverse charge mechanism, it may not need to register for VAT.
Non-Taxable Activities: If a company only performs activities that are not subject to VAT, such as certain types of banking, insurance, and educational activities, they may not need to register.
Occasional Transactions: Some occasional transactions, such as the sale of a new means of transport to another EU country, may not require VAT registration.
Intra-community Acquisitions: If a business makes intra-community acquisitions (purchases from other EU countries) below a certain threshold, it may not need to register for VAT.
Distance Selling: EU-based businesses engaged in distance selling to customers in Czechia who do not exceed the Czechia distance selling threshold are exempt from registering for VAT in Czechia.
It's important to note that while businesses may be exempt from mandatory VAT registration, they can still opt for voluntary registration if it's financially beneficial for them to reclaim input VAT.
Documents required for VAT registration in Czechia.
When registering for VAT in Czechia, you will need to submit a variety of documents to the Czech tax authorities. The specific documents can vary depending on whether you are a domestic or foreign entity, the nature of your business, and other factors. Typically, you would need to provide the following:
VAT Registration Form: A completed application for VAT registration, which in Czechia is known as form "Žádost o registraci k dani" for domestic entities or "Žádost o registraci pro účely DPH" for EU entities not established in Czechia.
Identification Documents: For individuals, this may include a copy of a national ID card or passport. For companies, this would be the extract from the Commercial Register (Výpis z obchodního rejstříku) where the company is registered.
Proof of Business Activity: Documents that demonstrate the intention to conduct a business activity that is subject to VAT. This could be a business plan, contracts, invoices, or other relevant documents.
Proof of Address: A document confirming the place of business in Czechia, such as a lease agreement or a utility bill.
Articles of Association: For legal entities, a copy of the Articles of Association, Memorandum of Association, or similar founding documents.
Power of Attorney: If a representative is handling the VAT registration process, a power of attorney may be required to authorize them to act on behalf of the business.
Bank Account Details: Information about the business bank account.
Foreign entities might also need to provide:
Evidence of Economic Activity in Another EU Member State: For EU businesses, a certificate from the home country’s tax authority confirming the business is actively trading and registered for VAT.
Tax Representative: Non-EU businesses may need to appoint a fiscal representative who is resident in Czechia and provide documentation relating to the appointment.
All documents from foreign countries typically have to be officially translated into Czech by a certified translator. Moreover, certain documents may need to be apostilled or super-legalized depending on the country of origin.
Does my company need a Fiscal representative in Czechia?
A fiscal representative is generally required for VAT purposes in Czechia for non-EU businesses that are registering for VAT in Czechia but do not have a physical presence there. Nevertheless, there are some specific scenarios when a fiscal representative might be required:
Non-EU Businesses: If your business is established outside of the European Union and you are required to register for VAT in Czechia, you will likely need to appoint a fiscal representative. The representative must be a resident in Czechia and is responsible for ensuring that the company complies with the local VAT regulations and filing requirements.
EU Businesses in Certain Cases: While EU businesses typically do not require a fiscal representative in another EU member state due to the Single Market rules, there may be exceptions based on Czech tax law or if there are specific VAT obligations that require local expertise and a point of contact within Czechia.
Complicated VAT Affairs: If your business model involves complex VAT transactions in Czechia, such as importing goods or holding stock in a warehouse, it might be beneficial or sometimes required to have a fiscal representative, even if not legally mandated.
Non-Compliance: In cases where there have been instances of non-compliance, the Czech tax authorities might require a business to appoint a fiscal representative as a condition for (re)registering for VAT.
The fiscal representative takes on joint liability for the VAT due by the non-resident business, which is why the role is typically taken by professional firms that specialize in tax matters.
Timeline for VAT registration in Czechia
The duration for VAT registration in the Czech Republic can vary depending on several factors, including the completeness and accuracy of the application submitted, the current workload of the tax office, and whether any additional information or documentation is required. Generally, after submitting the VAT registration form, it might take:
Approximately 30 days for the tax office to process the VAT registration under normal circumstances.
It may take longer if the tax office has questions or if there is a need for an audit or additional verification of the information provided.
During this period, the tax office may contact the business for additional documentation or clarification regarding the application.
If there are specific deadlines associated with the need for VAT registration, such as an upcoming transaction that requires a VAT number, it's recommended to apply as early as possible to account for any potential delays.
It is always a good practice to keep in touch with the tax office following your application submission to check on the status of your VAT registration and promptly address any inquiries they may have. This proactive approach can sometimes help expedite the process.
Possibility of rejection of the VAT registration in Czechia.
The Czech tax authorities have the right to reject a VAT registration application if certain conditions are not met. Here are some reasons why a VAT registration might be rejected:
Incomplete or Incorrect Application: If the application form is not correctly filled out, or required documents are missing or filled out incorrectly.
Insufficient Economic Activity: If the tax authorities determine that there is no genuine economic activity being carried out by the business, or if the activity does not require VAT registration.
Past Compliance Issues: If there have been significant previous compliance issues with tax laws, such as unpaid taxes or a history of tax evasion, this may affect the decision.
Lack of Proof for Intra-Community Transactions: For businesses applying for VAT registration to conduct intra-EU trade, failure to provide evidence of actual or planned trade with other EU member states may result in rejection.
Criminal Activity: Any links to criminal activities or indications of the business being part of fraudulent schemes can lead to rejection.
Doubts about Identity or Intent: If there are doubts about the identity of the business owners or the true intent of the business, the authorities might reject the application.
Insufficient Physical Presence: Especially for foreign entities, a lack of sufficient physical presence in Czechia could be a reason for rejection.
If an application is rejected, the tax authorities will provide the reasons for the decision. An applicant typically has the right to appeal the decision or resubmit the application after addressing the reasons for the initial rejection. It's advisable to work with a tax professional or legal advisor who can guide you through the process and help you meet all necessary requirements to minimize the risk of rejection.
Is nil VAT reporting obligatory in Czechia?
In Czechia, as in many other countries, once a business is registered for VAT, it usually has the obligation to file periodic VAT returns, even if it has no VAT to report for a given period — these are commonly referred to as "nil" VAT returns. Below we present some key points regarding nil VAT returns in Czechia:
Filing Frequency: Depending on the size of the company and the amount of VAT it usually processes, the business may be required to file monthly or quarterly.
Obligation to File: Even if the business has not engaged in any taxable sales or purchases during a reporting period, it generally must still file a VAT return by the deadline, reporting zero VAT.
Consequences of Non-filing: Failure to file a VAT return, even a nil return, can result in penalties and interest charges. Moreover, a pattern of non-compliance can lead to closer scrutiny by tax authorities and additional audits.
Deregistration: If a business is consistently reporting nil VAT because it no longer makes taxable supplies, it may be required to deregister for VAT or may choose to deregister voluntarily, if allowed under Czech VAT law.
Exemptions: There may be specific exemptions or simplified reporting obligations for small businesses or certain types of transactions, but these would typically need to be clearly stated in the VAT legislation or by the tax authorities.
VAT refund timelines in Czechia
In Czechia, as in other EU member states, the timelines for VAT refunds can differ depending on the status of the entity applying for the refund (e.g., whether it's a domestic or foreign company) and the specifics of the refund application.
For domestic companies:
VAT refunds are usually processed with the regular VAT return. If the VAT return results in a surplus of input VAT over output VAT (meaning the company paid more VAT than it collected), the surplus can be carried forward to the next period or refunded. The timeline for this refund varies:
For a standard VAT payer, the tax authorities generally have a deadline of 30 days after the submission of the VAT return to process the refund.
If the company is recognized as a "reliable VAT payer", it can apply for a quicker refund, and the tax authorities may have a shorter period, such as 15 days, to process it.
For EU-based companies not established in Czechia:
These companies would apply for a VAT refund through the VAT refund mechanism as per the EU Directive (2008/9/EC, also known as the 8th Directive), using the electronic portal provided by their home country tax authority. The deadline for the Czech tax authorities to process these claims is generally four months from the receipt of the application. This period can be extended if the authorities request additional information.
For non-EU-based companies:
Non-EU companies may claim a VAT refund under the 13th Directive (86/560/EEC, also known as the 13th Directive), and the process is more manual compared to EU companies. The application for the refund has to be submitted directly to the Czech tax authorities, typically by June 30 of the calendar year following the refund period. The Czech tax authorities have six months to process these refund applications from the date of receipt.
What are the VAT rates in Czechia?
VAT rate | Rate type | Description |
21% | Standard rate | |
15% | Reduced rate | applies to most food products, books, pharmaceuticals, baby nutrition, some services in the fields of sports, culture, and more |
10% | Reduced rate | applies to certain goods and services, including essential foodstuffs like bread and milk, medicines, books, and newspapers without advertising, and some types of accommodation services |
0% | Zero rate | applies to international transport, exports, Intra-community Supplies |
The Czech VAT legislation includes various scenarios where transactions are either a VAT reduction, exempt from VAT, or subject to a zero rate. Here are some examples:
Healthcare services provided by healthcare professionals.
Social services and related goods and services when provided by social security organizations or recognized charities.
Education services provided by educational institutions.
Financial and insurance services.
Real estate transactions, excluding new buildings or buildings that have been substantially renovated within five years.
Cultural events and services related to cultural activities from certain suppliers.
Postal services provided by the national postal service.
Betting, lotteries, and other forms of gambling.
Extraordinary exemptions or rate reductions can be introduced in response to specific economic situations or natural disasters. For instance, during the COVID-19 pandemic, some countries introduced temporary VAT rate reductions for certain goods and services, like medical supplies or services related to tourism and hospitality. Such measures are usually temporary and subject to specific conditions outlined in the respective legislation or government decrees.
What are the VAT thresholds in Czechia?
The VAT registration threshold in Czechia for local businesses was set at CZK 1,000,000 (about EUR 40,000) of taxable turnover over the past 12 consecutive months. This means that if a company's turnover exceeds this threshold, it is required to register for VAT.
There are, however, some specifics to consider:
The threshold does not apply to foreign businesses operating in Czechia; they must register for VAT if they are undertaking taxable supplies within Czechia, regardless of turnover.
The threshold also does not apply if you are selling goods via distance selling (e-commerce) to non-taxable persons in the EU. For these sales, a separate EU-wide threshold applies which, as of my last update, was set at EUR 10,000 for the total intra-community distance sales and electronic service sales.
Additionally, if a business provides services for which the place of supply is in another EU member state and the recipient is not VAT registered, this turnover is not counted towards the Czech VAT registration threshold.
Businesses can also opt to register for VAT voluntarily even if they do not exceed this threshold. This voluntary registration may be beneficial for a variety of reasons, such as reclaiming input VAT paid on business expenses.
What is the format of my Czech VAT number?
In Czechia, a VAT number is known as a "DIČ" (Daňové identifikační číslo) for tax identification purposes. A Czech VAT number for a local company consists of the prefix 'CZ' followed by either 8, 9, or 10 digits. The structure depends on the legal form and the process of registration of the entity.
Here's the breakdown:
For most legal entities: The VAT number will have 8 digits following the 'CZ' prefix.
For individuals: The number can have 9 or 10 digits, which usually corresponds to the individual's birth number (rodné číslo), prefixed by 'CZ'.
An example of a Czech VAT number would be: CZ12345678 or CZ1234567890
When companies conduct business within the European Union, they use this VAT number for VAT-related purposes, such as intra-community trade and VAT reporting.
VAT submission deadlines and type of fillings in Czechia
In Czechia, VAT returns generally need to be submitted by the 25th day of the month following the taxable period. The frequency of submission can be monthly or quarterly, depending on the VAT payer’s status and the amount of VAT due. Here are the specifics:
Monthly VAT Returns: Usually for businesses with a higher volume of transactions or those who have opted for monthly submissions. If the VAT payer is registered for monthly filings, the return for the month of January, for example, should be filed by February 25th.
Quarterly VAT Returns: Smaller businesses or those with less frequent transactions may be eligible or required to submit VAT returns on a quarterly basis. In this case, the VAT return for the first quarter (January to March) would typically be due by April 25th.
Additionally, if you are a newly registered VAT payer, you may be required to submit monthly VAT returns for the first calendar year following your VAT registration.
There are also special considerations and deadlines for:
EU Sales Lists (Recapitulative Statements): If you make sales to VAT-registered businesses in other EU countries, you need to submit an EU Sales List (Recapitulative Statement). The deadline for this is also generally the 25th day of the month following the reporting period, which can be monthly or quarterly, mirroring your VAT return period.
Annual Summary Statements (Souhrnné hlášení): Some businesses may need to submit an annual summary statement. This is usually due by January 31st of the following year.
The Czech tax authority may also occasionally announce extended deadlines or specific adjustments to these dates, for example, in response to special circumstances or issues such as system outages.
VAT payment deadlines in Czechia
If the VAT return results in VAT being owed, you must ensure that payment is made to the tax authorities by the VAT submission deadline, i.e. 25th day of the month following the taxable period. The payment details such as bank account number and specific payment references should be obtained from the Czech tax authority. In case you are making a wire transfer from abroad the transfer should be made reasonably earlier as the payment must be booked on the VAT tax authorities bank account by the payment deadline.
How should I file the Czech VAT reporting?
In Czechia, VAT returns are generally filed electronically. You will need to use the tax authority’s online portal, which is accessible with a secure identity verification method, often provided by the tax authority.
Please note information included in this article is subject to change. Therefore, it is advisable to check the latest regulations with the Czech Financial Administration or consult a tax advisor for up-to-date and personalized advice.
Comments