VAT in the Czech Republic is harmonized by the EU VAT Directive 2006/112/EC the same way as in all other EU countries. Anyway, it is important to bear in mind that there are significant differences between the application of VAT in individual EU countries.
Tax rates
In CZ there are three VAT rates, standard rate of 21%, 15% rate applicable to food, certain drugs, accommodation services, health, and social care, and 10% rate to a certain food, drugs, printed materials, catering, accommodation, and others.
Who has to register for CZ VAT?
An entity established in CZ has to register for VAT as a “full-fledged” CZ VAT payer when they exceed a turnover of CZK 1.000.000 in the preceding 12 months. There is a status in CZ of a so-called identified person for VAT purposes. This kind of registration means that the identified person is liable for VAT on intracommunity transactions only, it has to pay VAT from them, has no right to a deduction but behaves as a VAT non registered entity in local CZ transactions.
Persons not established in CZ (having no seat or VAT permanent establishment in CZ) have to register as CZ VAT payers if they perform a taxable supply in CZ (where it is not a customer who is liable to report VAT) or make the EU goods delivery in CZ. Those persons have to register as VAT identified persons in CZ if they acquire goods or services from the EU in CZ, or render certain services into the EU.
There is a possibility to voluntarily register for VAT in CZ.
The registration process takes around one month, this period may, however, be shorter or longer based on the tax administrator’s longing for additional documents.
VAT reporting
The tax period for VAT in CZ is a month (in ceratin cases a calendar quarter). Until the 25th day of the next month, it is necessary to file a VAT return. Together with a VAT return, it is necessary to file a so-called control statement. It is a report that shows in detail (broken down to individual invoices) all input and output VAT related transactions. If the entity is engaged in the intracommunity transactions, be it the supply of goods or rendering of services, it has to report EU sales lists. All of those reports have to be filed in an electronic way. Annual VAT return is not filed in CZ.
Taxable transactions
Supply of goods, services, acquisition of goods from the EU, and import of goods by a taxable person in CZ are considered, as well as in other EU countries, to be taxable transactions.
Local reverse charge mechanism
CZ makes use of the RCH system locally to the maximum extent that the EU VAT Directive enables. Supplies of construction and assembly works and construction workers, scrapped materials, certain gold, also immovable property in some cases are subject to local RCH. Supplies exceeding in one delivery CZK 100.000 of cell phones, electronics, raw metals, semi-finished devices with chips, gaming consoles, laptops, grain, among others are liable to local RCH.
VAT refunds
VAT refunds for both EU and some third country taxable persons and non-taxable persons from third countries are possible.
VAT refund to taxable persons from the EU and Switzerland, Norway and Macedonia is possible. Those persons must not have their seat or VAT establishment in CZ and must not perform a taxable supply in CZ with the exception that it is a customer who reports VAT from the transaction. They can apply for the CZ VAT refund in accordance with the 2008/09/EC directive in the country where they are established through their local tax administrator’s web portal.
Tourists from the third countries can apply for the refund of VAT incurred on their purchases in CZ. They have to have a sales invoice stamped at the customs and subsequently ask the seller for the VAT refund.