Czech VAT Registration Types
There are Various 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 1 M CZK in 12 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?
- Do I register for a Full VAT Registration, a 'VAT Light' Registration, or a VAT-ID for a non-CZ business?
In the text below the different types are briefly described, but in order to make things easier we have made an online questionnaire that evaluates your case and will give a recommendation whether to register for VAT and what type of registration it would be:
Obligatory Full VAT registration with Revenue over 1 M CZKThe basic rule is that if your income / revenue from czech sources (i.e. from clients based in Czech Republic) is higher than 1.000.000 CZK in 12 consecutive months, you must register as VAT payer.
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 with Revenue less than 1 M CZKIt is also possible to 'voluntarily' register for VAT (even) if your revenue is less than 1.000.000 CZK per 12 months.
The most common argument is that you will have big expenses in Czech Republic, such as buying a car or goods / equipment, and you want to claim the VAT.
Important Note: Nowadays (2015, 2016) 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.
This obstruction with the voluntary Full VAT registration has two effects: our registration fee is higher, and it does not have to be successful. Therefore we recommend filling in the VAT evaluation form and/or booking a consultation.
Obligatory VAT registration because of selling / invoicing / trading in EURegistering for VAT becomes obligatory in the following cases:
- 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"
Note: in case you operate a webshop, using a czech-registered business, but clients (end-users) are from the EU, then you will charge 21% VAT, unless you are selling licenses for electronic books and alike (which would require for each country where you sell a local VAT number - which is practically undoable. In such case it is much easier to use Amazon as platform).
Full VAT Registration
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 for 24 months a VAT Report, even if in that month there was no trade.
New from 2016 is that 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, which is quite complicated to do without the help of an accountant using 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 it's limitations.
'VAT-Light' RegistrationA '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 1 M CZK.
- 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.
Important: New 2013 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 1M CZK mark
Previously, crossing the 1 M CZK was not considered such an issue. Nowadays, the moment that the 1 M 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 RegistrationsRequirements vary per type of registration, however usual requirements are:
- a bank account 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)
|Type of Service||CZK||EUR||VAT Registration of Czech-based entities
Note: Price depends on VAT registration type. VAT-Light: 2000, Full VAT obligatory: 3500, Full VAT voluntary: 5000 (because of additional prepration of documents). In case of Full VAT registration, the Tax Office will require up-to-date accounting (charged separately)
|2.000 - 5.000||80 - 200|
|CZ VAT ID Registration for Foreign entities
Note: Price depends on VAT registration type and number of pages of the foreign company extract that need to be court translated. Deposit is for a standard Czech VAT ID registration + 2 pages Court-translations (@ 1.500 CZK/page). The Tax Office may require additional proof of reasons for registration (service charged separately @ 1.000 CZK/hour)
|Deposit 7.500||Deposit 300|
Note: The Tax Office may require up-to-date accounting (charged separately)
|VAT Reports (sent in electronically monthly / quarterly)
(excluding preparational monthly / quarterly accounting work)
|750 / pcs||30 / pcs|
|Kontrolni Hlaseni (electronic filing, only in case of VAT transactions within Czech Republic)
(only in combination with a VAT Report AND only in the months that invoices were sent to CZ customers or expenses were made in CZ)
|500 / pcs||20 / pcs|
|EC Sales Lists (electronic filing, only in case of VAT to EU clients)
(only in combination with a VAT Report AND only in the months that invoices were sent to EU customers)
|500 / pcs||20 / pcs|
|Preparational Accounting work before a VAT Return can be filed.
Hourly fee depends on complexity.
|1.000-1.500 / hour||40-60 / hour|
|The deadline for providing papers is the 5th of each month. Clients that do not provide all documents by the fifth run the risk that there will not be enough time to process the papers during office hours (hourly fee outside office hours +50%) or not before the deadline (which results in penalties from the Tax Office)|
A full overview of Accounting- and Business Services can be found here: Pricelist for Accounting and Business Services