EU VAT guide – Czechia

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How much is VAT in Czechia? 

The Standard VAT Rate (Dan z pridane hodnoty (DPH)) in Czechia is 21%. 

Some supplies are exempt from VAT. This applies to business activities like health care, insurance, and postal services.

The exact list of taxable transactions and allocated Czechia VAT rate can be found in VAT Czechia regulations. 

VAT thresholds in Czechia 

Valuable information about the VAT threshold in Czechia and applicable provisions can be found in the VAT legislation. Also, a helpful source of information is an interpretation of the appropriate information shared by Tax Authority officials. 

VAT registration threshold for resident businesses: When the turnover reaches the threshold of CZK 2,000,000,00 in the period of 12 consecutive months, the taxpayer is obliged to register for VAT.

VAT registration threshold for non-resident businesses: No registration threshold.

VAT registration threshold for intra-EU distance sales of goods and B2C supplies of services: EU-wide harmonized threshold of EUR 10,000.

VAT registration threshold for non-EU established suppliers of Electronically Supplied Services: No registration threshold.

VAT Taxable Activities in Czechia

A taxable person by Czechia VAT Law is a legal person or individual who carries out economic activity independently, whatever the purpose or results. 

Types of taxable activities that trigger the imposition of Czechia VAT: 

• The supply of goods and rendering of services in Czechia for consideration;
• Receipt of reverse-charge services by a taxable person in Czechia;
• Export of goods;
• Import of goods.

Other case scenarios exist where domestic or foreign businesses should impose Czechia VAT on their transactions. 

Tax Representative in Czechia 

For non-EU-established businesses, having a tax representative for all VAT compliance-related activities is often mandatory. Tax persons with tax residence in third countries or territories with mutual assistance agreements signed with Czechia can fulfill their tax obligations without the mandatory requirement to contract a tax representative. 

For EU-established companies, having a tax intermediary isn’t compulsory. Still, the economic operator could acquire the professional to ease up and streamline compliance challenges for its operations in the country. 

VAT on Electronically Supplied Services in Czechia 

Electronically Supplied Services 

Within the scope of the EU VAT Directive 2006/112/EC, Electronically Supplied Services represent services provided through the Internet or other similar forms of digital networks. A distinctive feature of this type of service is its reliance on automation, which requires little or no human involvement in its delivery. 

The absence of such a technological mark would make delivering these services impossible. 

Consistent with the EU VAT Directive and its Implementing Regulation, Czechia has adopted this standardized definition of ESS. This adoption guarantees a uniform approach to the taxation and regulation of digital services throughout the EU, aiming to eliminate discrepancies and ensure equitable treatment.

However, the widespread use of terms like “digital services,” “digital products,” and “electronic services” can introduce confusion and irregularities in their tax and legal interpretation. 

This situation underlines the need for the tax authorities to try to clarify the understanding of these types of services and the ones closely similar to them or ancillary to them. 

Taxability Rules for ESS

The rollout of the E-commerce regulatory package that significantly amended provisions that cover the taxability rules covering digital economy transactions also brought expected clarity and consistency as regards the interpretation of tax rules governing this section.

This legislative enhancement has notably streamlined taxability determinations, diminished compliance expenses for taxable entities and tax administrations, and simplified procedures for all involved parties. 

Important changes introduced with the E-commerce Package from 2021:

• B2B Electronically Supplied Services: Determining the place of supply for these transactions follows the general place of supply rules.
• B2C Electronically Supplied Services: Taxable entities established outside the EU should apply VAT rates in alignment with EU-standardized rules, setting the VAT rate based on the consumer’s domicile. 
• Distance sales of goods and ESS supply: For EU-based suppliers engaging in these operations, the annual turnover threshold of EUR 10,000 is pivotal in determining applicable VAT rules. Suppliers not exceeding this threshold can apply either their home country’s VAT regulations or choose to report all of their transactions via OSS schemes. 
• Distance sales of goods and ESS supply: When the threshold surpasses the ceiling of EU 10,000, suppliers should follow the place of supply rules applicable in the customer’s country of residence. 

This means VAT charges are based on the rate effective in the country to which goods are dispatched or where the recipient of services is based, embracing the concept of levying taxes at the point of consumption to guarantee a fair tax revenue distribution throughout the EU.

This harmonization of VAT rules not only facilitates a more straightforward compliance landscape for EU businesses but benefits international companies operating within the EU Common Market. 

How much is VAT in Czechia for Electronically Supplied Services?

VAT rate Czechia: A standard VAT rate of 21% is applied in most cases on sales of Electronically Supplied Services in Czechia

E-Commerce VAT Rules in Czechia 

On July 1, 2021, the EU regulators implemented important amendments to the VAT Directive, aiming to address the unique challenges of a rapidly growing digital economy. These reforms were designed to reduce the magnitude of VAT compliance difficulties for businesses involved in cross-border activities.

Relevant Features of the 2021 E-Commerce VAT Reforms:

• Cross-Border Sales of Low-Value Goods: The introduction of the EU-wide threshold for imports of low-value goods from third countries or third territories and the related possibility to report tax liabilities under the simplified scheme. 
• Intra-Community Distance Sales: The reforms have eliminated the previously established threshold for intra-community distance sales of goods. These thresholds have been defined per national rules, further complicating the transfer of goods’ supply. 
• Domestic Sales by Deemed Suppliers: In certain cases, digital platform operators will be the responsible taxable persons for VAT. 
• Provision of B2C Services: The scope of provision of services that could be reported under the OSS schemes has been drastically broadened. This expansion simplifies VAT reporting for businesses providing digital services across the EU, fostering a more streamlined approach to VAT compliance and reducing administrative burdens.

These adjustments reflect the EU’s commitment to simplifying VAT compliance, reducing business operational hurdles, and enhancing transparency and fairness in the digital single market.

E-Commerce VAT Simplification:

In addition to the key updates brought about by the E-commerce package in 2021, this legislative action significantly reevaluated the One-Stop Shop (OSS) schemes. This review of the simplified reporting schemes proposed introducing an additional EU-wide reporting tool known as the Import One-Stop Shop (IOSS).

The E-Commerce VAT package made the following special schemes available:

• Union One-Stop-Shop Scheme;

• Non-Union One-Stop-Scheme;

• Import One-Stop-Shop Scheme.

Overview of EU VAT Special Schemes

Non-Union Scheme can be leveraged by

The Non-Union OSS scheme can be exclusively used by merchants established outside the EU boundaries. This simplified reporting tool enables sellers outside the EU to declare a wide range of business-to-consumer (B2C) cross-border service transactions. 

This approach facilitates ease of VAT reporting for non-EU vendors engaging in the European market.

Union Scheme can be leveraged by:

• EU-based businesses: Taxable entities that are residents in one of the Member States can take advantage of this scheme if they provide B2C services or engage in intra-community distance sales of goods. An important condition that cannot be overlooked is that domestic supplies, i.e., where the customer is a resident of the same MS, cannot be reported under this scheme. 
• Non-EU Based Businesses on Intra-Community Sales: Businesses not based in the EU are also eligible to use the Union Scheme specifically for intra-community distance sales of goods.
• Digital Marketplaces: Whether based in the EU or not, digital marketplaces facilitating intra-community distance sales of goods and for certain domestic supplies can leverage the Union Scheme. 

Import Scheme can be leveraged by:

The IOSS scheme can be used by a large number of taxable persons. Taxable persons whose place of business is within the EU or outside the Union. The scope of taxpayers who can benefit from this scheme also covers digital marketplaces in some situations. 

OSS Return and Payment 

Czechia’s VAT regulations do not offer a specialized registration and reporting framework specifically designed for taxable persons delivering digital services to Czech customers. However, non-resident taxpayers could adhere to the OSS schemes, and following the advantages of this reporting system, they would be exempted from registering for Czech VAT. 

Establishing and rolling out the EU-wide OSS schemes significantly simplifies the compliance process for foreign businesses serving customers in Czechia. Before adopting amendments to the EU VAT regulations in 2021, many cross-border operating taxpayers selling goods or services to Czech customers had to undergo local VAT registration.

If the taxable person cannot report their transactions under OSS schemes when the place of supply is within Czechia boundaries, they should get acquainted with the domestic regulations and start acting upon them. 

Electronic Platform and Deemed Supplier Rules 

Czechia has adopted the EU VAT directive updates introduced through the 2021 E-commerce reform. Implementing the uniform EU VAT rules significantly reduces compliance and administrative costs for businesses with clients in the country.

By embracing the VAT Directive, Czechia introduced the “deemed supplier” concept, greatly simplifying the taxation process for certain types of online sales. Under the EU VAT Directive, a digital marketplace operator is recognized as a “deemed supplier” when it facilitates supplies for the two following scenarios:

• When goods valued at EUR 150 or less are imported from outside the EU, and when the original suppliers sell directly to EU customers using the intermediary services of the digital marketplace or;
• When goods in free circulation within the EU are offered by vendors whose residence is outside the EU to customers based in the Member States through the usage of the facilitation service provided by the digital platform.

This approach simplifies tax obligations for digital marketplace transactions, aligning Czechia’s VAT practices with EU standards and supporting a more unified digital market environment.

These provisions ensure a more straightforward VAT process for digital marketplaces and their transactions within the EU.

This adoption reflects Czechia’s dedication to adhering to EU VAT standards, aiming to improve the transparency and uniformity of tax regulations applicable to digital sales. Consequently, this adjustment introduces new obligations for deemed suppliers, significantly altering the VAT implications of this sales model.

This regulatory framework introduces additional responsibilities for deemed suppliers, vastly changing this sales model’s VAT obligations for taxable entities. In this multi-sided business model, we have two separate transactions: 

1. The initial supply from the original vendor to the digital platform is recognized as a business-to-business (B2B) transaction.
2. The subsequent supply from the platform to the final consumer is classified as a business-to-consumer (B2C) transaction.

This ensures compliance and facilitates smoother operations under the simplified tax framework provided by the EU.

Invoice Requirements in Czechia 

General invoice information:

• Date of invoice issuance;
• Date of the supply of goods or provision of services;
• Unique invoice numbers issued in sequence.

Seller information:

• Company name;
• Full address(head office);
• Billing address if different from company address;
•  VAT number.

Customer information:

• Name;
• Full address;
• VAT number;
• Delivery address;
• The billing address is different from the delivery address.

Fiscal Information:

• Description and breakdown of the goods or services – quantity, discounts, unit price excl. VAT;
• Total without VAT;
• VAT amount in CZK;
• The VAT rate(s) applied and the breakdown of VAT per rate;
• Invoice Total.

Additional information required in particular cases:

• Exemption reference – guaranteed by precise norm;
• Reverse charge – term if applicable;
• Self-billing – term if applicable;
• Tax Representative information for non-resident business.

Foreign Currency Invoice in Czechia  

In Czechia, it’s permissible to issue tax invoices in foreign currencies, but the VAT amount on the invoice must be shown in local currency.

VAT Return in Czechia 

Domestic returns

Domestic taxpayers and non-established foreign businesses who conduct business under the national VAT Czechia rules should submit monthly or quarterly declarations. 

Penalties for late reporting and omitted declarations 

Taxpayers should charge Czechia VAT on their transactions when the responsibility rises and submit the VAT return. If they do the return fillings after the deadline, they can expect to allocate more funds than they would if they had filled the return within the permitted time frame. 

In the case of the late filing of VAT returns and payments, the Czechian Tax Authorities enforce the following penalties:

• For late filing of the VAT return, the taxable person could face a fine of up to CZK 300,000;
• For late registration, reporting obligations, and not-fulfillment of the recording obligations, the tax administration could impose a fine of up to CZK 500,000.

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