What does this guide contain?
The guide provides you with practical VAT information for the Czech Republic:
- Your VAT registration in the Czech Republic
- Your VAT obligations TVA in the Czech Republic
- The invoicing rules in the Czech Republic
VAT REGISTRATION IN THE CZECH REPUBLIC
When do you have to register for VAT?
It is mandatory for your company to apply for VAT registration with the Czech tax authorities before starting your activities. In accordance with the Czech Tax Code No. 280/2009 Coll. (Section 247a), failure to register for VAT may become subject to a penalty of up to CZK 500,000.
What documents do I need to provide when I register?
If your company wishes to register for VAT in the Czech Republic, it is essential to contact the Czech tax authorities. There is no need to contact the tax authorities in your country of establishment.
In particular, your company will need to submit the following documents:
- The VAT registration form(s) completed in the language of the country
- A copy of the articles of association
- An extract from the trade register
- A certificate of VAT liability
- Power of attorney (if using a fiscal agent)
- Proof of activity on the territory of the country concerned: a contract, an order form, etc.
The Czech tax authorities may require some of these documents to be translated into Czech.
How long does it take to get a VAT number?
If your file is complete, it generally takes one month to obtain the VAT number from the competent Czech tax office.
Is a fiscal representative necessary?
Czech VAT authorities may require non-European companies to appoint a fiscal representative. This is a local company that will represent you to the local VAT authorities. He is responsible for the respect of all your VAT obligations, including those of which he was not aware. For this reason, he may require a deposit (e.g. a bank guarantee) from you before accepting the representation assignment.
European companies are not obliged to appoint a tax representative. However, to facilitate their relations with the local tax authorities, they may appoint a proxyholder to carry out the tax formalities on their behalf. In this case, it is not necessary to issue a bank guarantee. The company remains solely responsible for paying its VAT debts.
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VAT OBLIGATIONS IN THE CZECH REPUBLIC
Is it necessary to keep VAT accounting ledgers?
Your company must keep ledgers sufficiently detailed to enable the application of VAT and its control by the Czech tax authorities.
When do you have to file a VAT return?
Your company has to report its VAT position by filing periodical VAT returns on a monthly basis (standard tax period). Quarterly reporting period may be allowed provided the turnover in the previous calendar year did not exceed CZK 10 million. This option is however not possible for the first two years after registering for VAT.
The VAT return must be filed electronically by the 25th day of the month following the end of the taxable period (month/quarter) to which it relates.
In addition, taxable persons registered for VAT are obliged to submit a so-called “VAT Control Statement”. That obligation was introduced as a tool to detect and prevent tax evasion and fraud. Its aim is to enable the tax authority to obtain additional information (e.g. VAT number of the customer and date of supply) on selected transactions carried out by taxable persons registered for VAT and identify suspicious groups of taxable persons (e.g. carousels). VAT Control Statement does not substitute a VAT return or a Recapitulative Statement for Intra-community supplies. It must be submitted on a monthly basis (even if the taxpayer is allowed to file its VAT return on a quarterly basis).
The VAT Control Statement must be filed electronically by the 25th day after the end of each month.
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A penalty for late filing is applicable if any supply is taxable in the Czech Republic (see Article 63b of the Regulation 282/2011). In this case the penalty for late submission of a VAT return amounts to 0,05% of the Czech VAT which is due up to a maximum of 5% of the assessed Czech VAT (however, the penalty cannot exceed CZK 300,000). The penalty may be reduced to 50% if the return is submitted within 30 days from the stipulated deadline and it is the first late submission in the calendar year.
Do I have to submit an annual return?
Your company is not required to file an annual recapitulative VAT return.
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Member States may require the taxable person to file a return containing all the data referred to in Articles 250 and 251 and concerning all transactions carried out during the previous year. This return shall include all the information necessary for any adjustments. They authorize, and may require, the return to be made by electronic means under conditions which they determine (Art. 261 of the VAT Directive).
What is the deadline for paying Czech VAT?
The company must pay the VAT due no later than the 25th day of the month following the taxable period.
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For late payment of VAT: Interest computed for each day starting from the 5th working day when VAT was payable until payment is received by the tax authorities. The late payment interest rate is determined by the Czech National Bank interest rate increased by 14%. The late payment interest is applicable in all cases where VAT is paid late.
When should the intra-EU statement be filed?
The recapitulative Statement [ESL] must be filed on a monthly basis.
The Statement must be filed by the 25th of the month following reporting period. Filing the statement on a quarterly basis is not possible.
The eye of the VAT expert
A recapitulative statement is drawn up for each calendar quarter within a period and according to procedures to be determined by the Member States. However, Member States may provide for recapitulative statements to be submitted on a monthly basis. Member States may allow, and may require, recapitulative statements to be submitted electronically under the conditions they determine (Art. 263 of the VAT Directive).
INVOICING RULES IN THE CZECH REPUBLIC
Does the invoice have to include VAT? Reverse Charge?
As a supplier of goods or services, your company is normally obliged to issue an invoice with VAT to its customer. This is the general rule. However, there are many derogatory situations which transfer this obligation to pay tax to the customer himself. These situations are known as "reverse charge" situations.
The special reverse charge rules have been introduced in the Czech Republic for foreign companies:
For supplies of goods:
Reverse charge mechanism is applicable to all domestic supplies of goods made by a business not established nor VAT registered in the Czech Republic, provided that the customer is VAT registered in the Czech Republic.
For supplies of services:
Reverse charge mechanism is applicable to all domestic supplies of services, provided that the customer is VAT registered [regardless established or not] in the Czech Republic.
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Optional reverse charge (art. 199c of the VAT Directive)
Article 199c of VAT Directive permits Member States, by way of derogation from Article 193 of that Directive and under conditions, until 30 June 2022, to introduce a generalized reverse charge mechanism on non-cross border supplies of goods and services, providing that the person liable for the payment of VAT is the taxable person to whom all supplies of goods or services are made above a threshold of € 17,500 per transaction.
The Council Implementing Decision (EU) 2019/1903 of 8 November 2019 authorizing the Czech Republic to apply the generalized reverse charge mechanism derogating from Article 193 of the EU VAT Directive (2006/112) was published in the Official Journal of the European Union. The Czech Republic is authorized to apply the generalized reverse charge mechanism – as described in Article 199c of the EU VAT Directive (2006/112) – from 1 January 2020 until 30 June 2022.
What are the mandatory mentions on an invoice?
The VAT Directive lays down the minimum information that you must include on your invoice. In some cases, countries may add additional compulsory information. Particular attention should be paid to the conversion rates when the currency used on the invoice is not that of the country in which the transaction takes place, and to the specific statements justifying the legal reason why VAT is not charged.
What VAT rate should be mentioned on an invoice?
The Czech Republic has 3 different VAT rates :
- Standard rate : 21%
- Intermediary rate : 15%
- Reduce rate: 10%
The eye of the VAT expert
VAT rate on catering services is reduced from 21% to 15% (since 01/01/2016).
VAT rate of 10% is applicable to foodstuffs, medications for humans and books (since 01/01/2015).
VAT REFUNDS IN THE CZECH REPUBLIC
How can I recover VAT in the Czech Republic?
There are several methods to obtain refunds of Czech VAT. The practical formalities for reclaiming foreign VAT will differ depending on whether or not your company is established in Europe and/or is identified for VAT in the Czech Republic:
- If your company has a VAT number in the Czech Republic, it will have to submit a refund application in the form and within the timeframe required by local regulations. Any VAT credit cannot be carried forward. Refund is done immediately [generally within one month from the deadline for submission of the annual VAT return] provided that the amount exceeds CZK 100.
- If your company is established in a European country and does not have a VAT number in the Czech Republic, it will have to apply for a VAT refund electronically from its country of residence, in the form and within the time limits required by Directive 2008/9.
- If your company is established outside Europe and does not have a VAT number in the Czech Republic, it will have to appoint a tax representative to submit its refund application in the form and within the time limits required by the 13th Directive.
Is Czech VAT recoverable on all expenses?
VAT incurred on purchases, imports or intra-Community acquisitions of goods and services can be reclaimed by a foreign company provided that these expenses are for taxable activities and provided that the appropriate documentation is available.
No input VAT can be recovered on any of the following expenses:
- goods and services for personal consumption, travel costs, accommodation and catering of foreign persons.
- goods and services connected with the representation of foreign persons, phone bills, taxi services and gas and fuel costs.
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