VAT in Czech Republic is locally called "Dan z pridane hodnoty"(value-added tax). Registration takes about a month, and the company gets a unique Czech VAT number. All European Union countries have their own established format for this number. The Czech prefix has the abbreviation CZ.
All VAT-related regulations in the Czech Republic are governed by the VAT Act, which has been in effect since 1994. The law contains the most important requirements that guide EU directives on VAT matters. The rules mainly concern registration, declaration and compliance with Czech VAT. As a member of the EU, the Czech Republic is committed to their absolute compliance.
The standard VAT rate in the Czech Republic is 21% on supplies of goods and services. Some goods (e.g., food products) are charged at 15% and a second rate of 10% is charged for selected categories of goods. Czech tax rates are: 15% for income not exceeding CZK 1.2 million and 22% for income above CZK 1.2 million.
In the Czech Republic, all companies that have not exceeded a turnover of CZK 1 million for the last 12 months are exempt from VAT. Once this amount is exceeded, the company becomes a VAT payer from the first day of the third month following the month in which the turnover of CZK 1 million was exceeded. The company is then obliged to report to the tax office within 15 days counted from the end of the month in which the set turnover was exceeded.
When is VAT compulsory in Czech Republic?
Examples of mandatory registration for Czech VAT include the following transaction situations:
any construction work in the Czech Republic performed for a person who is not a Czech VAT payer.
mail order sales to the Czech Republic that will exceed a turnover of CZK 1 million 140 thousand for the calendar year.
The company also becomes a mandatory VAT in Czech Republic payer in the following cases as well:
if it receives a service from a company from another EU member state
if the amount of purchases of goods from another member state exceeds CZK 326 thousand.
Reductions and deductions from VAT in Czech Republic
If the companys turnover for the previous calendar year did not exceed CZK 2 million, then VAT accounting is done quarterly. If the turnover for the previous calendar year was between 2 -10 million Czech crowns, the company decides for itself whether it wants to settle VAT quarterly or monthly. If the turnover exceeds 10 million crowns, the company is obliged to settle VAT monthly. VAT returns are submitted by the 25th of the following month. Starting at the beginning of next year, the limit on turnover that does not require registration for VAT will increase to CZK 2 million (about PLN 380,000). Currently, VAT exemption applies to companies with a turnover of up to CZK 1 million. VAT in Czech Republic can be deducted by companies from any business-related expenses. VAT can also be deducted on the purchase of a passenger car, repairs and fuel costs.