Ready to expand your market reach to the Czech Republic? Learn some key details about the Czech Republic VAT system to make the right strategic decisions for your business.
What to Know about Czech Republic VAT
The Czech Republic is a diverse economy known for being export-oriented. Although it is a member of the European Union (EU), it uses its own currency—the Czech koruna or CZK—rather than the euro. If you do business in the country, your Czech Republic VAT liability may seem higher than usual because of the conversion difference.
Besides this first surprising detail, find five more interesting facts about the country’s VAT system to ensure compliance and reduce the risk of oversights that may weigh on your bottom line.
1. The Standard VAT Rate Is 21%
Like its fellow member states, the Czech Republic VAT regime follows the main directives outlined by the EU. One of these fundamental requirements is adopting a minimum standard rate of 15%. The country’s standard rate is 21%, levied on most goods and services.
The country charges reduced VAT rates of 10% and 15% on particular categories, such as foodstuffs, agricultural supplies, pharmaceutical products, newspapers, and books. When you do business in the Czech Republic, it’s crucial to apply the correct VAT rate and collect the corresponding tax due.
Overcome the burden of calculating your Czech Republic VAT liabilities when you work with Sterlinx Global. Our team will handle your increasingly complicated tax obligations, so you can focus on making complex business decisions.
2. Know the Thresholds for VAT Registration
Registering for Czech Republic VAT is necessary when performing taxable transactions, such as distance selling via the Internet. The registration threshold, however, differs depending on where your business is headquartered.
EU-based e-commerce sellers must apply for a VAT number if their annual turnover exceeds €10,000 or roughly CZK 240,400. This EU-wide threshold implemented on 1 July 2021 was part of the revised cross-border trade rules on VAT that abolished country-specific limits.
While there is no registration threshold for foreign companies, they must keep in mind that they need to register as a taxpayer if they make a taxable supply of goods. This registration obligation won’t apply if the VAT is to be declared and paid by the recipient instead.
If you’re confused about whether you’re required to be registered for VAT as a non-established person, know that the Czech Republic accepts voluntary registration. Once you have your unique identifier, you must collect tax from taxable transactions and remit the amount to the authorities.
3. You Can Register for Czech Republic VAT Yourself
Once you decide to be VAT-registered in the Czech Republic, you have two registration options. Understanding each process will help you find which is the most strategic alternative for your business.
Standard VAT Registration
Under this method, you can apply for a Czech Republic VAT number through the Tax Office for the Moravian-Silesian Region. It is the tax office managing the obligations of businesses without a registered office or fixed establishment in the country.
Along with the application form, you must include the following annexes:
- Articles of Association
- VAT or similar tax registration certificate from another country
- Trade license or certificate or other authorisation to business activity
- Business register statement
The above documents should be officially verified copies of the original and translated into Czech. Although official translations are not required, it’s best to have them done by a certified translator in case the tax office asks for them. After compiling the application form and annexes, submit them electronically.
Unlike other EU member states, you don’t need a fiscal representative to register for VAT in the Czech Republic. But if you have no physical presence in the country, it’s faster and more efficient to work with an experienced local tax agent. We at Sterlinx can assist you.
You must also furnish a power of attorney if you use an agent.
IOSS stands for Import One Stop Shop, an electronic platform introduced under the EU’s revised VAT rules on cross-border e-commerce. If you’re an Amazon seller planning to tap into the Czech Republic market, you may register for VAT via the IOSS.
With a single registration, you get an IOSS number that you’ll use to report collected VAT from sales made within the EU. Through the IOSS platform, you can file the corresponding returns for your VAT liabilities. Some countries, however, require an intermediary to handle the submission and payment of VAT to local tax offices.
Keep in mind that the IOSS only covers import goods with consignment values of €150 and below. If the value of your products is above the threshold, you may need to obtain your Czech Republic VAT number to disclose taxable transactions.
4. You Must Submit Other VAT Reports Besides Returns
Once you register for Czech Republic VAT, you will have reporting obligations to meet to comply with the country’s tax legislation.
As a VAT payer, you must report taxable transactions through periodic returns submissions. The standard reporting frequency is monthly. However, it can be changed to quarterly if your annual turnover for the immediately preceding year is less than CZK10.0 million, you are considered a reliable VAT payer, and you have been registered for 3 years.
VAT returns are due by the 25th of the month after the relevant tax period, which can be a month or a quarter. Also, they must be submitted electronically, according to the VAT Act. Keep in mind that any VAT due should also be remitted on the set deadline for returns.
VAT Control Statements
On top of periodic returns, non-established VAT payers must submit VAT control statements and file them electronically. They are supplementary fillings covering additional details taken from invoices of certain taxable transactions. This requirement aims to help authorities detect and stop VAT fraud and tax evasion.
To know which information you should include in the control statement, work with Sterlinx Global—we can help you figure it out before the deadline.
5. Non-Compliance Means Penalties
As registered for Czech Republic VAT, failure to comply with the imposed deadlines result in penalties. Take note of the following fines you might face if you fail to perform your obligations on time:
- Late returns filing: minimum of CZK 500 plus interest, but maximum penalty is 5% of the VAT due or CZK 300,000
- Late payment of VAT obligations: an interest rate of 14% on the VAT due, only if the outstanding amount is higher than CZK 200
- Late filing or non-submission of VAT control statement: CZK 1,000 to CZK 50,000
Avoid incurring penalties for non-compliance when you work with a fiscal representative or tax agent like us.
Frequently Asked Questions
How long does VAT registration in the Czech Republic take?
After submitting the completed forms and required documents, including their translated versions, expect to receive your VAT number within 30 days for an approved application. However, there may be delays in the processing, so err on the side of caution with a longer preparation period.
Can I estimate my Czech Republic VAT liabilities myself?
Sure, you can. However, doing so often leads to inaccurate calculations due to incorrect rates, miswritten numbers, and missed transactions. Ensure you’re paying the right VAT liability when you let a tax professional handle it. The benefits of savings and reduced risk of fines outweigh the costs.
When do I register for Czech Republic VAT?
Ideally, you should register yourself for VAT before doing business in the country. You may face a fine of up to CZK 500,000 for not being VAT-registered despite engaging in taxable transactions. If you’re a non-established business, you must register for VAT within 15 days after the initial taxable transaction.
The Bottom Line
Diversifying your business in the Czech Republic can be worth the investment if you understand the rules of the country’s VAT regime. Navigate the complexities of Czech Republic VAT with a partner like Sterlinx Global. Let us handle your tax obligations, so you can expand across borders without worrying about compliance.