How VAT Applies to Freelancers in the Czech Republic
Find answers to common VAT concerns for Czech freelancers doing business on AirBnB, Booking.com, Google, Facebook, Uber and more.
Determine How VAT Applies to Your Czech Business
If you’re wondering how Czech VAT applies to your taxes and affects your net income, join the crowd. More and more Czech freelancers these days are doing business with European-registered companies, and they have questions.
Common concerns revolve around VAT refunds for platforms like Google Ads, Facebook, and YouTube, and for accommodation or transportation services. (We’re looking at you AirBnB and Booking.com hosts, as well as the Uber and Wolt drivers.)
However, to understand how VAT works with your Czech Trade License activities and taxes, we must define ‘supplier’ vs ‘consumers’. It’s also necessary to examine the VAT Domestic Reverse Charge procedure, and Light VAT in the Czech Republic.
Read below for the simple breakdown. We’ll guide you through Czech VAT taxation to help you get those VAT refunds right.
Service Suppliers vs Service Consumers
Czech VAT payers fit into two categories: the service supplier, and the service consumer. Each entails a different payment procedure depending on the scope of the taxpayer’s business. There are also different Czech VAT rates varying on the service (or product), as well as the taxable person registered for VAT.
Let’s take freelancers working on platforms like Google Ads, Facebook, YouTube, AirBnB, Uber, and Wolt. In these cases, we define the supplier versus the consumer as follows.
- A freelancer is a service supplier when they receive payment from the platform.
- The freelancer is a service consumer when they pay for services on the platform.
This distinction between the supplier and consumer is necessary to determine which party is responsible for paying VAT. Here, the so-called European VAT Domestic Reverse Charge applies, wherein the consumer’s home country always pays VAT.
The European VAT Domestic Reverse Charge
If a Czech-based freelancer regularly invoices European-registered business clients outside of Czechia, they must register for Light VAT.
Light VAT (“identikovana osoba k DPH” in Czech ) exists for earners under CZK 2 million who invoice EU-registered clients. Officially, this is the so-called European VAT Domestic Reverse Charge. It means that you will not charge European-business clients VAT.
However, it does NOT mean you will pay any additional VAT. In fact, with Light VAT invoices, your VAT will always be zero.
An example of the VAT Domestic Reverse Charge:
- A freelancer on a Czech trade license supplies services to an EU-registered business outside of Czechia.
- The Reverse Charge mechanism applies, meaning the Czech supplier pays no VAT.
- Instead, the EU-based customer pays VAT (on top of the service cost) directly into HMRC.
- In this way, there is no loss of income for the supplier, as their due VAT is zero.
This is in part why the distinction between the supplier and consumer is necessary. Again, the home country of the consumer always pays VAT. Let’s get into more examples below.
How Czech VAT applies to YouTubers
More and more Czech freelancers are asking how to handle VAT for income from YouTube videos. YouTube is an Irish (EU) registered business, so the reverse charge mechanism applies.
However, regarding VAT, we first have to distinguish the YouTube supplier versus the consumer. In the case of YouTube, the supplier is the YouTuber. This is someone who generates income from channel subscribers and video views through the YouTube Partner Program.
YouTube compensates content makers like this for running ads over their videos, with higher compensation the more video views. Now, because the content is the direct cause of the ads, this makes the content creator the service supplier to YouTube. This means that when filing taxes, the 60/40 method can still apply to income for Czech-based YouTubers.
What to do if earning income from YouTube videos in Czechia:
- Establish yourself as a Light VAT payer.
- Charge YouTube without VAT, and do monthly Light VAT reporting (you don’t pay any VAT).
- Declare income as a Czech-based freelancer applying the 60/40 tax reporting method.
VAT for Advertising on YouTube
If a freelancer generates income from advertising on YouTube, the freelancer becomes the consumer. Take for example YouTube ads running for a Czech business. In this case, the platform, YouTube, acts as the supplier.
And, because YouTube is not located in the Czech Republic, it is not responsible for paying VAT. This is due to the fact that YouTube is an EU-registered business, so the reverse charge mechanism applies.
Here, the Czech Republic cannot charge YouTube as a supplier any VAT. However, keep in mind, this doesn’t result in any loss of income for the freelancer. YouTube invoices the freelancer without VAT on the EU reverse charge. The freelancer then pays VAT into the National VAT of the Czech Republic.
An example of how to handle Czech taxes for advertising on YouTube:
- Have an existing business or establish a trade license in the Czech Republic.
- Register as a Light VAT payer as soon as you receive your first invoice.
- Do monthly Light VAT reporting, paying VAT instead of YouTube to Czech tax offices.
- YouTube technically charges you Irish VAT less for their services, but you pay that 21% into Czech VAT on their behalf.
Advertising VAT - Facebook and Google Ads
If advertising on Facebook or Google Ads, the EU reverse charge mechanism also applies. Both businesses have EU-registered business entities, and each acts as the supplier when running ads on their platform.
Czech-based advertisers on these platforms thus take on the responsibility of paying VAT as the consumer. They pay into the Czech National VAT, but they pay no additional VAT on invoices for Facebook or Google services. It’s the same as with advertising a Czech business on YouTube.
Again, this does not result in a loss of income for the consumer, as VAT goes into the local Czech tax offices.
An example of how Czech taxation works for Facebook and Google advertising:
- You have an existing business or registered trade license in the Czech Republic.
- The platform sells you advertising services, and issues your first invoice.
- You register as a Light VAT payer when you receive the first invoice.
- You do monthly Light VAT reports, and pay VAT instead of the supplier into the Czech National VAT.
- At the end of the year, you file a VAT return in order to..?
VAT for AirBnB, Booking.com, and Taxi Services
Also among the most common VAT concerns are those for rental and taxi services. Take for example hosts on AirBnB and Booking.com, or taxi services like Uber, Taxify, and Wolt. Each of these companies acts as an intermediary service between customers (guests, riders) and suppliers (hosts, drivers).
All of these companies are EU-registered businesses, and they collect fees via a commission pay structure from service providers. However, as they are outside of Czechia, Czech tax authorities cannot collect any VAT from their business in the country.
This responsibility falls onto the service supplier, who should pay 21% VAT. Note: that’s 21% VAT on their commission fee (to AirBnB, Uber, etc), not on the total income the supplier earns. For example, if a customer pays CZK 100 for an Uber ride, Uber takes a 25% commission fee. That’s CZK 25 which the driver should then pay 21% in the Czech National VAT.
An example of how Czech VAT applies to AirBnB / taxi services:
- The supplier (host, guest) has an existing business or registered trade license.
- They register for Light VAT when they receive the first invoice from the intermediary (AirBnB, Booking.com, Uber, etc.)
- The supplier issues monthly Light VAT reports to the local tax office, paying into Czech VAT for services from the intermediary.
- Suppliers apply the 60/40 method when filing taxes. Note: AirBnB and Booking.com count as short-term rental, so the 60/40 method still applies (and can save on taxes).
How to Calculate VAT Payments
If your annual turnover exceeds CZK 2 million, or you regularly invoice EU-registered business clients, you must register for VAT. You might also need to pay VAT in various circumstances (mergers, privatization, or the sale of a company). Whatever the case, our completely free, online VAT Payment Calculator can simplify your accounting. Use it to determine the VAT to include on your Czech invoices, whether 10%, 15% or the standard 21%.