VAT Registration TYPES IN CZECH REPUBLIC
When to register for VAT for a Trade License or SRO company
VAT regulations are becoming more complex by the year. Surprisingly, it is not the Czech government but the EU that is responsible for most changes. Therefore, it is clever to determine if you need to be VAT registered, and if so, in what way. In Czech Republic there are 2 main types: 'Full VAT' (Plátce DPH) and 'VAT-light' (Osoba identifikovaná k Dani).There are a couple of indicators that point to an obligation to register for VAT (EU-directive of 1.1.2013):
- You are invoicing services to VAT-registered companies in the EU -> VAT-Light registration
- You are buying / selling goods to EU clients -> Full VAT registration
- Your revenue from Czech sources is more than 2 M CZK / year (before 2023 this was 1 M CZK) -> Full VAT registration
- You have large expenses in Czech Republic (and you want to claim back the VAT) -> Full VAT Registration
- You import from the EU: cars, tabacco, alcohol, fuel or goods exceeding a value of 326.000 CZK. -> special case
VAT Registration: obligatory vs voluntary
You will have an obligation to register for Full VAT if your revenue from CZECH SOURCES exceeds or will exceed 2.000.000 CZK within 12 months (not per calendar year, but per 12 months). Before 2023, this limit was 1.000.000 CZK .If you invoice to EU-BASED COMPANIES services or goods, you have to register for VAT-Light - even for a single 500 EUR invoice.
The most practical way of doing this is after you sent the first invoice to VAT-registered client in another EU country.
It is also possible to register voluntarily for VAT, for example if you expect large expenses with VAT but you did not reach the Revenue limit yet. It must be said that most of the time (>90%) a request for voluntary registration for Full VAT is denied, and a registration for VAT-light, obligatory or not, is usually granted.
VAT Registration: Full registration vs "VAT-light"
A Full VAT registration means that you will have to file a VAT Report and Kontrolní Hlášení every month, for a period of 2 years, even in the months that you did not conduct any business. In addition, in case you sell into the EU, you will have to file a Souhrné Hlášení VIES (EC Sales List) (see below).If you have little or no Revenue from CZ sources, but invoice (services) to EU Businesses with a VAT number you must register for VAT-light, you would invoice with 0% under the 'Reversed Charges scheme' (an EU directive). Note that you do not actually charge VAT, nor have to send VAT to the Tax Office. An invoice with 0% VAT is, however, not the same as an invoice without VAT. 0% VAT - for invoicing within the EU, "no VAT" - for invoicing outside the EU
A benefit of the VAT-Light is that you only need to file in the months a transaction with an EU client took place (so not every month, as with a Full VAT registration).
Downsides of VAT-Light are:
- You cannot claim any VAT back on Czech expenses.It is lik having no VAT registration inside Czech Republic at all.
- Worse: if you buy a good or service with 0% VAT from an EU supplier, you are supposed to report this purchase in a VAT Return and send the Czech VAT to the Czech Tax Office
Kontrolni Hlaseni - VAT reporting in CZ. For Full VAT only
In case you are Fully VAT-registered and your Czech supplier charges Czech VAT, a Kontrolni Hlaseni needs to be filed for each transaction over 10.000 CZK. Simply put, it is a table, with on each line each separate transaction in Czech Republic.Souhrné Hlášení VIES / EU Sales List. For both Full VAT and VAT-Light
In case you are VAT-registered (any kind) and your VAT-registered customer is based in the EU, an electronic EU Sales Lists need to be filed. Simply put, it is a table, with on each line all transactions combined with 1 customer. In most cases, 0% VAT is charged.Filing - electronic only
The VAT Return, Kontrolní Hlášení and Souhrné Hlášení VIES cannot be filed in paper form anymore, but only sent as electronic files, which need to be generated by accounting software or manually entered though the online portal of the Czech Tax Office (in Czech, of course). There are also several online invoicing systems taking care of the VAT filing. Starting 2023, each Trade License holder will have / should have a Datova Schranka, which can be use for filing as well.It seems overkill to hire an accountant for processing one (consultancy) invoice per month - but wrong / late filing is subject to penalties that can be 10.000s of CZK. So one really has to know precisely how to create invoices and use the software / portal (!)
Wrong Information
- You *do not* file VAT Returns 1x per year, like the Income Tax Return
- Invoicing B2B in EU *requires* VAT-Light and filing VAT Returns, you *should not* ignore these obligations