Discover the different VAT rates in the Czech Republic within this Pexpat’s Guide to VAT, including when and how to apply.
VAT Rates in the Czech Republic and When to Apply
Value-added tax (VAT) in the Czech Republic is a consumption tax applied to the purchase price of goods and services. The rates of Czech VAT vary depending on products and services, as well as the taxable person registered for VAT. These selected persons must submit a so-called VAT Control Statement to the responsible financial authorities.
The VAT Control Statement is based on particular tax documents to record tax evidence according to the VAT Act. VAT Reporting includes declaring issued and received tax documents, along with simplified tax invoices.
Only taxable entities who register for VAT in the Czech Republic have the obligation to submit a VAT statement. These persons have a “CZ VAT ID number” (DIČ), and are obligated to declare certain transactions.
Now, if you become a VAT payer, you need to know which VAT rates apply to your products and services. Applying the correct rate is crucial for both calculating taxes and for the process of pricing your products and services.
But what are the different VAT rates in the Czech Republic? Who needs to apply to be a VAT payer? Read on to learn about VAT in the Czech Republic, VAT rates, and when as well as how to apply.
What are the different VAT rates in the Czech Republic?
In the Czech Republic, there are two new VAT rates (21 percent and 12 percent) for 2024.
The standard rate of VAT - 21%
The reduced rate of VAT - 12%
These new rates consolidate the previous year’s three rates of 21, 15, and 10 percent. This aims to simplify the VAT system by unifying the previous two reduced rates into one reduced rate of 12%.
Other changes include the new zero VAT rate on books, and lower food product rates. Bus and irregular transport is also down from 21 percent to the reduced 12 percent rate. This is with higher rates on beverages, certain services, and draft beer.
Note: Items which VAT Law (in the reduced VAT section) does not mention, will have the standard 21% VAT rate.
What products fall under the reduced VAT?
The reduced VAT rate of 12% includes the following types of products:
Food products (including drinks and food for pets, and ingredients for production; with the exclusion of alcoholic beverages and tobacco);
Drinking water (including hot water);
Living plants including seeds (as well as seedlings, crowns, spores, tubers and bulbs of edible vegetables and fruit);
Milling industry products (including mill products for gluten-free diets, malt, starches, wheat, gluten and mixtures of these products).
Printed material (such as brochures, flyers, etc);
Print media (newspapers and journals in which adverts are no more than 50% of the content);
Colouring books and maps;
Medical equipment (including protective equipment, and relevant medical devices);
Radiopharmaceuticals (or medicinal radio compounds, including: vaccines, medicines);
Children’s car seats, and;
Which services fall under the reduced VAT rate?
The following services also fall under the the reduced 12% VAT rate:
Standard public transport (of passengers and luggage);
Public transportation by water (of passengers and luggage);
Barber and hairdressing services;
Childcare and caretaking;
Catering services (now also including beer if consumed at a restaurant);
Water supply treatment (including sewage treatment);
Water treatment and supply (via networks, and sewage treatment processes);
Air passenger transport;
Funeral services (except funeral services for animals);
Energy saving materials and equipment (heating supply, air conditioning, etc);
Catering services (excluding additional services such as service, seating, toilets, etc).
VAT rises to the standard 21% rate
In 2024, the following products and services increase to the standard 21% VAT rate:
Up from 15 percent to 21 percent - beverages, firewood, flowers, municipal waste services, performance services
Up from 10 percent to 21 percent - bicycle repair services, cleaning services, draft beer, hairdressing and barber services, rental services (books, movies, music, etc), saunas, shoe repair services
Not sure about VAT rate calculation? Try our VAT payment calculator
Periodic changes to VAT rates in the Czech Republic
If ever unsure of the VAT rate for products or services, one way to confirm is via contacting the Institute of Binding Assessment. For a fee, you’ll get assurance that the rate you have chosen for your product or service is 100% accurate.
Who needs to register as a VAT payer?
As a taxpayer in the Czech Republic, it’s necessary to pay VAT if your annual income exceeds 2 million CZK. In some cases, however, it might be a profitable venture to register for Czech VAT voluntarily.
Other cases include inheritance of a company from an entity that is a VAT payer, or gaining assets via privatization, merger, or the sale of a company.
In such cases, it’s possible to request cancellation of the VAT registration. However, to do this, 1 year must have passed since VAT registration, and income cannot surpass 2 million CZK.
What is Light VAT in the Czech Republic?
Light VAT registration is officially called “identikovana osoba k DPH” in Czech. It is useful for businesses and entrepreneurs who must register for VAT because they invoice (regularly) to EU clients. To register for VAT-Light in the Czech Republic, the business must also have an under CZK 2 million annual turnover.
In short, this is for those who invoice a European-registered business from the Czech Republic. Officially, this is called the European-Reverse charge. It means that you will not charge European registered business clients VAT.
It does NOT mean that you will have to pay any additional VAT. Your VAT will always be zero with Light-VAT invoices. However, to invoice in this way, it’s necessary to apply for Light VAT on a monthly basis through the relevant Financial Office. This is to inform tax offices that business is occurring between a Czech business and a registered business within the European Union.
When is it necessary to register for Light VAT?
It is only possible to register for Light VAT after you have a trade / business license in the Czech Republic. Then, after you create the first invoice for an EU-registered business-client, you must register for Light VAT.
This involves first registering as a Light VAT payer. Then, on a monthly basis, it will be necessary to receive approval from Czech tax offices to invoice EU clients. This means creating a formal request along with the invoice, which you will submit to financial authorities.
Where to get assistance and more information
At Pexpats, our expertise is in everything freelancers and taxpayers need to get and stay legal in the Czech Republic. To date, our professional advisors have helped thousands of entrepreneurs not only relocate but also set up shop. For assistance on anything, from VAT registration, to complete business license or relocation services, simply check out our service packages.
Get help setting up your Light VAT registration
Why not make your life easier? Pexpats handles anything and everything expats need: consultation services, fulfilling appointments, filing applications, visiting official offices and much more. Simply book a spot with one of our professional advisors to get started today.