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Czech VAT Registration Types



There are 3 Types of VAT Registration

The decision to register for VAT is something you need to consider carefully, because if you register, you will have to add VAT to any invoice you send to a customer inside Czech Republic and to any non-VAT registered customer outside Czech Republic. This raises your fee / price by 21%, so for a customer who is not VAT registered, it can become less attractive to buy from you.

On the other hand, many businesses (also consultants / programmers) must register for VAT in case they send invoices to businesses based in another EU country - a fact that is often overlooked.

The often-heard 'register if your revenue is over 1 M CZK' is not true per se. It is revenue over 2M CZK (since 2023) in 12 consecutive months from Czech sources - If you invoice 4 M CZK outside CZ and also not in EU - there is no obligation to register for VAT(!)

Before considering registration for VAT 2 basic questions need to be answered:

  • Is the registration obligatory or voluntarily?
  • Whay type of registration do I need?


Obligatory Full VAT registration - Revenue over 2M CZK

The basic rule is that if your income / revenue from Czech sources (i.e. from clients based in Czech Republic) is higher than 2.000.000 CZK in 12 consecutive months, you must register for Full VAT.

Note on the 12 months: the 12 months are NOT calculated from the beginning of the year, but really in a timespan of 12 months (so June 2010 - May 2011, July 2010 - June 2011, August 2014 - July 2015 etc).

Voluntary Full VAT Registration - Revenue less than 2M CZK

It is sometimes possible to 'voluntarily' register for VAT (even) if your Revenue is less than 2.000.000 CZK per 12 months.

The most common argument is that you will have big expenses in Czech Republic and you want to claim the VAT.

Important Note: Nowadays the Tax Office has made it extra-difficult to register voluntarily for Full VAT. Not only does it demand proof of Revenue, a pages-long questionnaire and a letter explaining the need for a Full VAT registration, it will do everything to frustrate the registration process. The Tax Office has by law 30 days to acknowledge a registration request, but if it does not manage in time or does not see the need for registration, it wil respond with a 'vyzva' - a request for more information. With the request, the 30-day limit is cancelled, so the process may take much longer or not complete at all.


This obstruction with the voluntary Full VAT registration has two effects: our registration fee is higher, and it does not have to be successful.

Full VAT Registration - Filing the VAT Return, ESL and KH

Businesses registered for VAT after 1.1.2013, will have to file monthly VAT Returns, which also automatically means monthly accounting and filing a Kontrolni Hlaseni (KH), even for small businesses such as trade licenses!

Note that it will be necessary to file a VAT Report, even if there was no trade.

For VAT transactions within Czech Republic a Kontrolni Hlaseni (KH) must be filed, and for any month that there was invoicing to an EU member state, an Electronic Sales List ESL needs to be filed.

All documents can only be filed electronically in XML format, which is quite complicated to do without the help of an accountant or special software.

Only after 24 months a request can be filed to change monthly VAT filing into quarterly VAT filing. This request does not have to be granted by the Tax Office.

An alternative to a full VAT registration is a 'VAT Light registration', although it has its limitations, see below:

Obligatory VAT-Light registration - selling in EU

Registering for VAT becomes obligatory when selling B2B in the EU (offering services, for example). There are limitations:

  • Offer services to companies in another EU memberstate - "VAT-Light" would be sufficient.
  • Buying / selling goods from EU B2B suppliers, using reverse-charge (0 % VAT) - "VAT-Light"is not ideal, "Full VAT" would be better.
  • Import from an EU country cars, tabacco, alcohol, fuel (with excise duties) or goods exceeding a value of 326.000 CZK . -Must be "Full VAT"


'VAT-Light' Registration - benefits over Full VAT

A 'VAT-Light' Registration (officially called 'identikovana osoba k DPH' in Czech) is useful if you must register for VAT because you send invoices (regularly) to EU clients, but at the same time have a turnover from czech sources under 2 M CZK.

Benefits are:
  • You will not have to charge 21% VAT on invoices to clients in CZ (your business is regarded "not VAT Registered inside CZ")
  • There is no need to file a Kontrolni Hlaseni (KH), since per definition, the VAT-Light only works outside CZ
  • You can charge 0% VAT on invoices to VAT-registered clients in EU (reverse-charges)
  • There is no need to file a VAT Tax Return, and Electronic Sales List (ESL) every month, only for the months you invoiced


However, there are also a number of disadvantages.
  • this VAT number can not be used to re-claim VAT on Czech expenses and
  • 21% czech VAT will be charged on foreign purchases, without possibility to claim it back.


VAT registration for FOREIGN business and AMAZON sellers

Registering for VAT becomes obligatory in the following cases:
  • Goods / services are sold in Czech Republic
  • Your stock is in a warehouse in Czech Republic
  • You are using Amazon or similar platforms with warehouses in Czech Republic

Important:Rules for VAT Registration

  • VAT registration will be from the first day of the next month the VAT-registration became obligatory, or
  • VAT registration will be backward from the first day of the month after you crossed the 2M CZK mark

Previously, crossing the 2M CZK was not considered such an issue. Nowadays, the moment that the 2M CZK was crossed (or the obligation to register for VAT arose due to invoicing into the EU) will be precisely calculated, and if that moment is several months back in time, for all those months VAT Reports (and KHs and ESLs) will need to be filed retroactively. Of all invoices that were issued in the mean time, VAT will need to be sent to the Tax Office (unless the invoices are subject to 0% VAT - reversed charges), and an additional penalty + interestes will be added.

We can only recommend to apply in time for a VAT Registration, to avoid any expensive dealings with the Tax Office.

Requirements for VAT Registrations

Requirements vary per type of registration, however usual requirements are:
  • a bank account, preferrably in CZK at a Czech bank - this can be very problematic for foreign businesses, many banks do not want to open an account for such a company, and if they are willing to do so, the director will need to come to CZ to leave a signature sample and copy of ID
  • Contracts (in Czech) with the (future) clients / suppliers, the agreement for the business bank account, sales invoices and expenses.
  • OR: instead of a contract, at least 1 invoice to an EU client (for "VAT-Light" registration only)
  • Accounting up-to-date. The accounting of the running year till the date of registration must be in order, so the tax office can evaluate the business activities (only for the "Full VAT" Registration).
  • A multi-page questionnaire as to why the VAT registration is necessary - we fill this in for you (only for voluntary registrations)
  • An introduction letter explaining why the VAT registration is necessary - (only for voluntary registrations)

VAT Type Evaluation Form



Fees

A full overview of Accounting- and Business Services for SROs can be found here: Pricelist for Accounting and Business Services

For Trade licenses it is possible to use a much simpler model since they use single-entry accounting.
Very often it is enough to do just the annual Personal Income Tax Return, and for VAT Returns (if required) we have a simple Online VAT Filing System

03/03/2023