Reverse Charge in the Czech Republic

Reverse Charge for Non-established Companies in Czech Republic

According to art 194 of the VAT Directive, Member States may implement an optional reverse charge on supplies made by non-established businesses.

Czech Republic has introduced this reverse charge on certain supplies performed by a non-established supplies, provided that the requirements are met:

Domestic supplies of services and delivery of goods via systems or networks:

Supplies of goods with installation:

Reverse charge does not apply if the customer is not VAT registered.

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Reverse Charge on B2B Services

Article 196 of the VAT Directive requires the reverse charge mechanism on all services subject to the B2B rule introduced in art. 44 of the same Directive. The B2B rule locates the transaction where the business customer is located. In case the customer is a private individual, B2C rules locate the transaction where the supplier is located.

According to the general B2B rule, any business resident outside Czech Republic supplying services to a Czech based customer will not charge any VAT and the transaction will be reverse charged by the customer.

There are however a number of exceptions to this rule. Where these exceptions apply, reverse charge is still applicable in Czech Republic provided the following conditions are met:

• Services connected to immoveable property are located where the property is located.
• Passenger transport services will be located where the transport takes places (apportioned if necessary).
• Catering services are located where the catering takes place.
• Short term leasing of means of transport are located where the vehicle put at the disposal of the customer.
• Access to conferences, fairs and exhibitions is located where the event takes place.

The general rule may also be deviated where the supplier has a permanent establishment in the country of the customer and the PE has intervened in the supply.

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Reverse Charge on Specific Goods and Services in Czech Republic

Domestic reverse charge may also apply to domestic supplies of certain goods and services made by companies in Czech Republic. The following reverse charge scenarios apply irrespective of the country of establishment of the Supplier:

• Supply of investment gold.
• Supply of immovable property and immovable property in compulsory sale procedure.
• Supply of designated categories of scrap and waste.
• Transfers of CO2 emission allowances.
• Supply of gas and electricity through networks to a taxable dealer.
• Supplies of construction services and supply of staff in construction and assembly work.
• Delivery of goods originally provided as a guarantee.
• Delivery of goods after transfer of retention of title (reservation of ownership) to an assignee and the exercising of this right by the assignee.
• Certain deliveries of communication services.

Additionally, the local reverse charge applies to certain supplies of goods made between Czech VAT registered taxpayers exceeding CZK 100,000:

• Mobile phones
• Laptops and tablets
• Game consoles
• Certain integrated circuits
• Cereals and technical crops
• Certain raw or semi-processed metals
• Reverse charge does not apply if the customer is not VAT registered.

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