VALUE ADDED TAX

The Czech VAT Act complies with the EU Directives relating to VAT (i.e., the 6th, 8th, and 13th
EU Directives). VAT is generally imposed to:

• all “taxable supplies” within the Czech Republic
• goods imported or acquired into the Czech Republic

Taxable supplies within the Czech Republic include: provision of services, delivery of goods, transfer and use of rights and transfer of real estate, buildings and structures, acquisition of goods from other EU member states, etc.

VAT is levied on the import of goods from third countries. With effect from 1 January 2005. payment of import VAT is deferred to the VAT return when the goods are imported by entities that are registered VAT payers. Businesses are also obliged to account for VAT upon acquisition of goods from other EU member states. Certain domestic services are VAT-exempt without entitlement to reclaim input VAT (e.g., financial services, insurance services, rent paid to entities not registered for VAT purposes, etc).

Export of goods is VAT exempt.
Some services (e.g. consultancy, advertising) are not taxable in the Czech Republic if provided to a customer registered as VAT payer customer in another EU member state or to an entity from a third country. There is an entitlement to reclaim input VAT connected with most of these services. On the other hand, businesses are obliged to account for VAT in terms of the “reverse charges” principle once they acquire such a service (e.g., consultancy, advertising) from a provider in another EU member state or third country.

There are two VAT rates:

• 19% for most goods and services;
• 9% for some selected goods and services (including essential food products, books, special
• healthcare products).

All taxpayers (individuals and legal entities) whose turnover exceeds CZK 1,000,000 (about € 40,000) in any consecutive 12-month period must register as a VAT payer with the financial authorities. The taxation period can be one month or one quarter.

Based on materials published by CzechInvest.