Value-added Tax

Tax rates

The standard VAT rate is 21 % and applies to most goods and services. The first reduced rate of 15 % applies only to certain services and essential goods and a second reduced rate of 10 % applies to medications, books and baby food.

Taxpayers may ask the Ministry of Finance for a binding ruling in respect of the correct application of the tax rate.

Tax period

The tax period for value-added tax is one calendar month. Depending on the amount of turnover reached in the previous calendar year, a tax payer may, generally after two years from registration, decide to apply a calendar quarter as the tax period.

Registration and tax returns

VAT registration is mandatory for a Czech entity if its turnover of supplies with the place of supply in the Czech Republic exceeds CZK 1,000,000 (approx. EUR 38,000) within any twelve consecutive calendar months. If a Czech entity acquires goods from another EU member state exceeding CZK 326,000 (approx. EUR 12,500) or purchases services from a non-established entity with a place of supply in the Czech Republic, it becomes identified for Czech VAT purposes.

Besides an entity with a local establishment, a foreign entity or entity from another EU member state can be obliged to register for VAT in the Czech Republic as well.

VAT returns must be completed and submitted electronically together with payment of the related VAT within 25 days of the end of the tax period. Identified persons and VAT payers not established in the Czech Republic are only obliged to submit the VAT Return for tax periods where taxable transactions were effected. If an excess VAT deduction occurs, the Financial Office should refund this overpayment within 30 days of the VAT return being filed. If the VAT return is filed electronically, the Financial Office generally refunds the overpayment within 15 days. This period can be extended if the Financial Office initiates a tax audit. In practice, the Financial Office mostly conducts tax audits of newly established companies, companies seated outside the Czech Republic or in cases of unusually large VAT overpayment occurred.

EC sales lists for goods sold or transferred to another EU member state, triangulation supplies, or services provided to other EU countries must be submitted electronically for each calendar month (or in case of services provided by a quarterly VAT payer, for each calendar quarter) within 25 days of the end of the given month.

The Czech Republic also allows some recovery of VAT incurred prior to VAT registration. Careful structuring of an inward investment venture will ensure that VAT paid by the business is recovered to the greatest extent possible and as rapidly as possible.

Group VAT registration

A group of related companies can register as a single VAT entity. Group registration enables the reduction of the administrative burden for some companies and may improve cash flow.

Recovery of Czech VAT

There are procedures to allow recovery of Czech VAT incurred by foreign entities or entities from other EU member states for business purposes. There is naturally some restriction in recovery, but it generally follows the same principles applied to any other entity operating in the country. The Czech Republic will only provide VAT refunds to foreign entities if they are established and VAT-registered in other EU member states or established in a country with which a reciprocal refund arrangement is concluded (i.e., currently: Macedonia, Norway and Switzerland). Correct administration has to be followed in order to receive the VAT refund: application for a refund for the calendar year in which the supply was effected can be made by an entity established in another EU member state no later than by 30 September of the following year through the electronic portal of that EU member state. Entities established in a third country with a reciprocal refund arrangement have to file a written application in Czech at the Czech Tax Office, by 30 June of the following year.

VAT on goods and services from abroad

VAT on goods imported from countries outside the EU is accounted for by the importer using the import VAT deferral system, the same VAT rate, as the one that would apply to a domestic supply of those goods is valid. Goods purchased from another EU member state are subject to acquisition VAT accounting. In both cases it means that the person importing/acquiring the goods is obliged to self-charge the output VAT through its own VAT return and, at the same time, is entitled to claim the input VAT through the same VAT return subject to general deduction rules.

Under certain conditions, the sale or transfer of goods to the Czech Republic triggers an obligation on the part of a foreign company to register for VAT purposes in the Czech Republic.

Services provided to a person eligible to pay tax are generally considered effected where the recipient of the service has his seat, establishment or place of business and are subject to the reverse charge mechanism in the hand of the recipient. Beginning on 1 January 2010, the place of supply of specific services is determined in compliance with the provisions of Council Directive 2008/8/EC.

VAT Control Statement

Selected entities (VAT payers) are obliged to provide data related to realised or input taxable supplies with a local place of supply (including advance payments) and data related to taxable supplies under special a scheme for investment gold. These data are reported in the VAT Control Statement which is additional evidence to the VAT return.

The VAT Control Statement has to be submitted electronically in the prescribed form within 25 days of the end of the given month (only natural persons follow their deadline for submitting VAT return).

Registration of sales

Starting from December 2016 registration of sales has come into effect. The new system should increase efficiency in controlling and preventing fraudulent actions relating to sales where cash and similar payment methods are used. Selected VAT payers (i.e. entities that pay or are obliged to pay income tax in the Czech Republic) will be obliged to electronically submit their sales records to the Tax Administration and issue receipts to their customers.

The system of sales registration is being introduced gradually:

  • Since 1 December 2016 - persons providing catering and accommodation services;
  • Since 1 March 2017 - persons performing retail and wholesale business;
  • Since 1 July 2019 at earliest - other business activities with exception of those included in the next phase;
  • Since 1 July 2019 at earliest - selected crafts and business activities (e.g. husbandry, transport, freelancers).

VAT on supplies between related parties

The VAT base for supplies of goods or services to related parties (under specific conditions) is a common market price.

Local reverse charge

A local reverse charge mechanism applies to supplies of investment gold, immovable properties in particular cases specified in Act on VAT, scrap, construction and assembly work classified under codes 41 to 43 of CZ-CPA and provision of workers for these purposes and to delivery of goods provided as security in the execution of such a security.

The VAT liability for such supplies is transferred to the recipient of the supply, who may at the same time claim this input VAT at the same VAT return subject to general input VAT deduction rules.

The local reverse charge is temporarily extended in 2017 also to supplies of selected goods as emission permits, precious metals, mobile phones, integrated circuits, portable automatic data processing machines, game consoles, cereals and technical crops, delivery of gas and electricity to a trader specified in Section 7a Subsection 2 of Act on VAT, delivery of gas and electricity certificates, provision of telecommunication services. This is applicable only if the total amount of the tax base exceeds CZK 100,000.

Mini One Stop Shop

From 2015, all telecommunication, broadcasting and electronically supplied services will be taxable at the place where the customer is established, has his permanent address or usually resides (this rule is now also valid for providers from the EU). To avoid unnecessary administration, a provider with its seat or establishment in the Czech Republic can, subject to other conditions, register with the so-called Mini One Stop Shop scheme in the Czech Republic. This scheme would then allow them to submit a special single quarterly VAT return and pay tax from all selected services provided within the EU at one place.

Unreliable payer, unreliable person

Starting from 1 July 2017, apart from the institute of unreliable payer, a new institute in the form of unreliable person is introduced. If a person that is not a payer seriously violates their obligations relating to tax administration, the tax administrator shall decide that such a payer is an unreliable person. If an unreliable person becomes a payer, they shall also become an unreliable payer at the same time. If an unreliable person or unreliable payer becomes a group member, such a group shall also become an unreliable payer at the same time. If the registration of an unreliable payer that is a group is cancelled, the members of such a group shall become unreliable payers on the day following the day when such group ceased to be a payer.

Liability for unpaid VAT

VAT can be exacted from the recipient of the supply, if the price does not comply with the arm’s length principle or if the supplier is identified as an unreliable payer in a public registry run by the Financial Office. Liability for unpaid VAT also applies if the price for the supply is paid to a foreign bank account or, for supplies exceeding CZK 540,000 to a Czech bank account not stated in a public registry run by the Financial Office. The joint liability also applies if a supplier of fuel is not stated as a fuel distributor in a special registry.

Liability of recipients of taxable supplies if the consideration for such transaction is provided in virtual currency

Effective from 1 July 2017, the amendment of Act on VAT broadens the range of situations when the recipient of taxable supply shall be reliable for any unpaid tax if the consideration for such transaction is provided in virtual currency.

Contact persons:
Tomáš Urbášek, PricewaterhouseCoopers Česká republika, s.r.o., náměstí Svobody 20, 602 00 Brno, tel.: +(420) 724 369 349, e-mail: tomas.urbasek@pwc.com
Petr Mašek, PricewaterhouseCoopers Česká republika, s.r.o., náměstí Svobody 20, 602 00 Brno, tel.: +(420) 724 369 356, e-mail: petr.masek@pwc.com

Breakdown of double-taxation treaties

The Czech Republic has concluded the following double-taxation treaties with respect to taxes on income and property:

Tab. 15: Breakdown of double taxation treaties

Country

Comes into force

Effective date

Collection of Laws

Albania

10 September 1996

1 January 1997

270/1996 Coll.

Armenia

15 July 2009

1 January 2010

86/2009 Coll. (int.tr.)

Australia

27 November 1995

CR: 1 January 1996

A: 1 July 1996, WHT 1 January 1996

5/1996 Coll.

Austria

22 March 2007

1 January 2008

31/2007 Coll., correction 39/2007 Coll.

Protocol 100/2012 Coll. (int.tr.)

Azerbaijan

16 June.2006

1 January 2007

74/2006 Coll.

Kingdom of Bahrain

10 April 2012

1 January 2013

59/2012 Coll. (int.tr.)

Barbados

6 June 2012

1 January 2013

69/2012 Coll. (int.tr.)

Belarus

15 January 1998

1 January 1999

31/1998 Coll.

Protocol 99/2011 Coll. (int.tr.)

Belgium

24 July 2000

1 January 2001

95/2000 Coll. (int.tr.)

Protocol ratif. 17 March 2014

Bosnia and Herzegovina

12 May 2010

1 January 2011

58/2010 Coll. (int.tr.)

Brazil

14 November 1990

1 January 1991

200/1991 Coll.

Bulgaria

2 July 1999

1 January 2000

203/1999 Coll.

Canada

28 May 2002

1 January 2003

83/2002 Coll.

Chile

21 December 2016

1 January 2017

5/2017 Coll. (int.tr.)

China

4 May 2011

1 January 2012

65/2011 Coll. (int.tr.)

Does not apply to Taiwan

Colombia

6 May 2015

1 January 2016

39/2015 Coll. (int.tr.)

Croatia

28 December 1999

1 January 2000

42/2000 Coll. (int.tr.)

Protocol 82/2012 Coll. (int.tr.)

Cyprus

26 November 2009

1 January 2010

120/2009 Coll.

Denmark

17 December 2012

1 January 2013

14/2013 Coll. (int.tr.)

Egypt

4 October 1995

1 January 1996

283/1995 Coll.

Estonia

26 May 1995

1 January 1996

184/1995 Coll.

Ethiopia

30 May 2008

1 January 2009

54/2008 Coll.

Finland

12 December 1995

1 January 1996

43/1996 Coll.

France

1 July 2005

1 January 2006

79/2005 Coll.

Georgia

4 May 2007

1 January 2008

40/2007 Coll.

Germany

17 November 1983

1 January 1984

18/1984 Coll.

Greece

23 May 1989

1 January 1990

98/1989 Coll.

Hong Kong

24 January 2012

CR: 1 January 2013

HK: 1 April 2013

49/2012 Coll. (int.tr.)

Hungary

27 December 1994

1 January 1995

22/1995 Coll.

Iceland

28 December 2000

1 January 2001

11/2001 Coll. (int.tr.).

India

27 September 1999

CR: 1 January 2000

I: 1 April 2000

301/1999 Coll.

Indonesia

26 January 1996

1 January 1997

67/1996 Coll.

Iran

4 August 2016

1 January 2017

47/2016 Coll. (int.tr.)

Ireland

21 April 1996

CR: 1 January 1997

I: 6 April 1997 / 1 January 1997

163/1996 Coll.

Israel

23 December 1994

1 January 1995

21/1995 Coll.

Italy

26 June 1984

1 January 1985

17/1985 Coll.

Japan

25 November 1978

1 January 1979

46/1979 Coll.

Jordan

7 November 2007

1 January 2008

88/2007 Coll.

Kazakhstan

29 October 1999

1 January 2000

3/2000 Coll. (int.tr.)

Korea

3 March 1995

1 January 1995, WHT 3 March 1995

124/1995 Coll.

The Korean People's Democratic Republic

7 December 2005

1 January 2006

3/2006 Coll. (int.tr.)

Kuwait

3 March 2004

1 January 2005

48/2004 Coll. (int.tr.)

Latvia

22 May 1995

1 January 1996

170/1995 Coll.

Lebanon

24 January 2000

1 January 2001

30/2000 Coll. (int.tr.)

Lichtenstein

22 December 2015

1 January 2016

8/2016 Coll. (int.tr.)

Lithuania

8 August 1995

1 January 1996

230/1995 Coll.

Luxembourg

31 July 2014

1 January 2015

51/2014 Coll. (int.tr.)

Macedonia

17 June 2002

1 January 2003

88/2002 Coll. (int.tr.)

Malaysia

9 March 1998

CR: 1 January 1999

M: 1 January 2000

71/1998 Coll.

Malta

6 June 1997

1 January 1998

164/1997 Coll.

Mexico

27 December 2002

1 January 2003

7/2003 Coll. (int.tr.)

Moldova

26 April 2000

1 January 2001

88/2000 Coll. (int.tr.)

Protocol 97/2005 Coll. (int.tr.)

Mongolia

22 June 1998

1 January 1999

18/1999 Coll.

Morocco

18 July 2006

1 January 2007

83/2006 Coll.

Netherlands

5 November 1974

1 January 1972

138/1974 Coll. (int.tr.)

Protocol 112/1997 Coll. (int.tr.)

Protocol 58/2013 Coll. (int.tr.)

New Zealand

29 August 2008

1 January 2009

75/2008 Coll. (int.tr.)

Nigeria

2 December 1990

1 January 1991

339/1991 Coll., correction 371/1999 Coll. (int.tr.)

Norway

9 September 2005

1 January 2006

121/2005 Coll.

Pakistan

30 October 2015

CZ: 1 January 2016

PAK: 1 July 2016

58/2015 Coll. (int.tr.)

Panama

25 February 2013

1 January 2014

91/2013 Coll. (int.tr.)

Philippines

23 September 2003

1 January 2004

132/2003 Coll. (int.tr.)

Poland

11 June 2012

1 January 2013

102/2012 Coll. (int.tr.)

Portugal

1 October 1997

1 January 1998

275/1997 Coll.

Romania

11 August 1994

1 January 1995

180/1994 Coll.

Russia

18 July 1997

1 January 1998

278/1997 Coll., Protocol 56/2009 Coll. (int.tr.)

Saudi Arabia

1 May 2013

1 January 2013

42/2013 Coll. (int.tr.)

Serbia and Montenegro

27 June 2005

1 January 2006

88/2005 Coll. (int.tr.)

Protocol 26/2011 Coll. (int.tr)

Singapore

21 August 1998

CR: 1 January 1999

S: 1 January 2000

224/1998 Coll., Protocol ratif. 24 June 2014

Slovakia

14 July 2003

1 January 2004

100/2003 Coll. (int.tr.)

Slovenia

28 April 1998

1 January 1999

214/1998 Coll.

South Africa

3 December 1997

1 March 1998

7/1998 Coll.

Spain

5 June 1981

1 January 1982

23/1982 Coll.

Sri Lanka

19 June 1979

1 January 1979

132/1979 Coll.

Sweden

8 October 1980

1 January 1981

Capital : 1 January 1982

9/1981 Coll.

Switzerland

23 October 1996

1 January 1996, WHT: 1 December 1996

281/1996 Coll., Protocol 99/2013 Coll. (int.tr.)

Syria

12 November 2009

1 January 2010

115/2009 Coll.

Tajikistan

19 October 2007

1 January 2008

89/2007 Coll.

Thailand

14 August 1995

1 January 1996

229/1995 Coll.

Tunisia

25 October 1991

1 January 1992

419/1992 Coll.

Turkey

16 December 2003

1 January 2004

19/2004 Coll. (int.tr.)

Turkmenistan

18 March 2016

Additional legislative process needed leading to the entry into force of the Treaty

 

Ukraine

20 April 1999

1 January 2000

103/1999 Coll., Protocol ratif. 24 June 2014

United Arab Emirates

9 August 1997

1 January 1998

276/1997 Coll.

Information 122/2004 Coll. (int.tr.)

United Kingdom

20 December 1991

CR : 1 January 1992

UK : 6 April 1992

89/1992 Coll.

United States

23 December 1993

1 January 1993, WHT : 1 February 1994

32/1994 Coll., correction 370/1999 Coll. (int.tr.)

Uzbekistan

15 January 2001

1 January 2002

28/2001 Coll. (int.tr.)

Protocol 92/2012 Coll. (int.tr.)

Venezuela

12 November 1997

1 January 1998

6/1998 Coll.

Vietnam

3 February 1998

1 January 1999

108/1998 Coll.

Yugoslavia (Bosnia and Herzegovina)

17 April 1983

1 January 1984

99/1983 Coll. (int.tr.)

The Czech Republic also negotiated agreements on the exchanging of tax information with Andorra, Aruba, the Bahamas, Belize, Bermuda, the British Virgin Islands, the Cayman Islands, the Cook Islands, Guernsey, Isle of Man, Jersey, Monaco and San Marino. Treaties with Ghana, Cameroon, Kosovo, Oman, Senegal and St. Maarten are currently in the ratification process. Negotiations with Botswana, Gabon, Iraq, Kyrgyzstan, Mauritius, Seychelles and Taiwan are ongoing.

  • Tomáš Urbášek
    PricewaterhouseCoopers
    Česká republika, s.r.o.
    nám. Svobody 20, 602 00 Brno
    + 420 542 520 255
    tomas.urbasek@cz.pwc.com

  • Petr Mašek
    PricewaterhouseCoopers
    Česká republika, s.r.o.
    nám. Svobody 20, 602 00 Brno
    + 420 542 520 254
    petr.masek@cz.pwc.com

  • Tomáš Ráček
    PricewaterhouseCoopers
    Česká republika, s.r.o.
    nám. Svobody 20, 602 00 Brno
    +420 542 520 257
    tomas.racek@cz.pwc.com

  • Dana Hlaváčová
    PricewaterhouseCoopers
    Česká republika, s.r.o.
    nám. Svobody 20, 602 00 Brno
    +420 542 520 261
    lucie.hlavacova@cz.pwc.com