VAT Rates in the Czech Republic

What are the VAT rates in the Czech Republic?

Czech Republic has opted for the reduced VAT rates on a number of items allowed by the VAT Directive.

VAT Rates by goods and services in the Czech Republic

The standard VAT rate is 21%. The standard VAT rate generally applies for all goods and services for which no exemption, 0% or one of the reduced VAT rates is foreseen.

The reduced VAT rate is 12%. This reduced rate was consolidated in January 2024, and prior to that date, there were two reduced rate applicable of 10% and 15%. The 12% reduced rate applies to certain food products, passenger air transport, medical and social care, restaurant and catering services, water distribution, admission to cultural and sporting events, and hotel accommodation, among others.

Some goods and services that were subject to a reduced rate are now standard rated, such as hairdressing, several repair services, etc.

Supplies and services at 0% are the standard supplies, such as exports or intra-Community supplies.

Finally, some supplies are VAT exempt, such as health services, public education, and financial services, among others.

For a precise confirmation of the VAT rate applicable to your product or service in the Czech Republic, we recommend that you contact us.

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VAT Deduction Limits in Czech Republic

Input VAT is generally deductible as long as the goods or services are used for business purposes.

However, certain expenses are subject to special rules:

• Hotel accommodation: input VAT is generally deductible.
• Business gifts of a cost higher CZK 500: input VAT is generally not deductible.
• Business entertainment: input VAT is generally not deductible.
• Passenger car purchase, hire and maintenance: input VAT is generally deductible.
• Advertising: input VAT is generally deductible.
• Mobile phones: input VAT is generally deductible.
• Fuel for vehicles: input VAT is generally deductible.
• Books: input VAT is generally deductible.

Particular VAT deduction rules apply to VAT refund claims of non-EU businesses. A valid and fully compliant VAT invoice must be issued for each expense on which VAT is deducted.

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Statute of Limitations in Czech Republic

The statute of limitations is three years in Czech Republic, starting from the day of deadline to filing the correspondent tax return. However, this time period may be extended under specific circumstances, although there is a maximum of 10 years from the beginning of the limitation period.

The statute of limitations period determines the periods on which the tax authority can go back to review the information declared, and apply additional VAT assessments, penalties or interests.

The statute of limitations also determines the period a taxpayer can voluntarily correct any errors on past submissions, as well as deduct input VAT.

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Tax Point Rules in Czech Republic

The tax point is the time when VAT becomes due. VAT due should be distinguished from VAT payable. VAT is due when the tax point occurs. VAT is payable between the day after the end of the reporting period and the due date to submit and pay the VAT return.

• General rule: When the supply of goods or services takes place, or by the date of payment, whichever occurs earlier. Particular rules apply to specific supplies of goods or services.
• When it comes to services, the taxable transaction is considered to be made when supplied, or the date of issue of the invoice, with the exception of an installment or payment schedule, on the day that occurs earlier.
• Advanced payments: Tax point is considered to have occurred when the advanced payment is received.
• Continuous supplies: In the case of services taxable in Czech Republic and supplied for more than 12 calendar months, the liability to account for VAT arises, at the latest, on the last day of each calendar year following the calendar year in which the provision of the service has started. This provision does not apply in case of advanced payments, or in the case of heat, cooling, electricity and gas.
• Intra-Community acquisitions and supplies: Tax point occurs on the invoice date or the 15th day of the month following the month in which the invoice was issued, whichever occurs earlier.
• Import: Tax point occurs when the goods are imported according to the relevant import documents.

Use and enjoyment rules in Czech Republic

When it comes to establishing the place of supply of a transaction, Member states may deviate from the general rules for B2B and B2C services according to the place where the services have been used and enjoyed. This exception may be introduced to avoid double taxation (positive use and enjoyment rules), to avoid non-taxation (negative use and enjoyment rules), or both.

• Czech Republic introduced an use and enjoyment scenario applicable to certain B2B supplies of services, particularly on supplies of services to a non-EU businesses VAT registered in the Czech Republic, when the actual use or consumption tales place in Check Republic.
• Additionally, there is another use and enjoyment scenario applicable to B2C supplies of short term and long term rental of vehicles. The service shall be taxable where it is actually used and enjoyed, allowing to deviate from the particular place of supply rules in case of mismatch. This raises the obligation of the non-EU supplier to charge Czech VAT when the service is actually used and enjoyed in the Czech Republic – the supplier will have to VAT registered in the country or use the OSS schemes-. Similarly, when the service is used and enjoyed in a third country, that shall be the place of supply.

The use and enjoyment rule is regulated in Art. 9a and 10d of the Czech VAT Act.

Bad debt relief in Czech Republic

Bad debt refers to an unpaid invoice for which the Supplier has paid the VAT to the tax administration: this is, an invoice has been issued with VAT, reported in the VAT return and the VAT amount has been paid to the tax authorities but the whole price has not been collected from the customer. This is often due to the client´s bankruptcy, insolvency or simple missed payments to suppliers. In these cases, most countries allow to recover the VAT initially paid to the authorities, however, the conditions change from one country to another.

Bad debt relief refers to the possibility of recovering the VAT unpaid invoices. Czech Republic allows for bad debt relief under specific conditions:

• Insolvency: the customer was VAT registered at the time of the supply and became insolvent.
• Supplies deemed to be definitely unpaid: i) the supplier actioned a recovery proceeding for more than 2 years, or ii) the debtor ceased activity without a legal successor, or the successor is not covering the debt.

Bad debt relief is done by adjusting the output VAT paid in the periodic VAT return and Control Statement or Ledgers return. Article 46 of the Czech VAT Law regulates this measure.