Changes in the rules for calculating turnover for VAT payers in the Czech Republic
20.06.2024
20.06.2024
On June 12, the Czech government approved an amendment to the VAT Law that simplifies the turnover calculation and determines the need to register for VAT.
The key changes include the calculation of the turnover limit for mandatory registration as a VAT payer for the calendar year, instead of the previous 12 consecutive months. A special cross-border regime for small businesses is also being introduced.
Entrepreneurs can simplify their calculations when determining the need to register as VAT payers, as these calculations will be based on the calendar year. A cross-border regime can provide additional benefits for smaller companies operating internationally.
Currently, an entrepreneur becomes a VAT payer if his turnover for 12 consecutive months exceeds 2 million Czech crowns. Once an entrepreneur exceeds the limit, he must register on the first day of the second month, which follows the month of the exceedance.
Major changes in VAT registration
The government approved amendments to the VAT law this week that will alter the calculation of turnover. Now the limit will be calculated on the basis of the calendar year, which is also associated with the establishment of a new tax status.
| A new limit: small businesses with a turnover of more than 2 million CZK per year will become VAT payers from January 1 next year. Increased limit: if the turnover exceeds CZK 2,536,500 (EUR 100,000), they will be required to register for VAT the very next day. Application deadline: 10 working days from the moment the limit is exceeded (instead of 15 days). |
Additional features
Entrepreneurs can voluntarily register for VAT before January 1 if their turnover exceeds CZK 2 million.
Those who are interested can indicate in the registration application that they wish to become VAT payers the day after their domestic turnover exceeds CZK 2 million.
This application will only be considered if the registration application is submitted on time in accordance with § 94 (1) of the Value Added Tax Act, i.e., within 10 working days from the date when the company’s internal turnover exceeds 2 million CZK.
The provision will continue to apply that an entrepreneur can become a VAT payer voluntarily, without exceeding the required turnover. However, the new law will include a provision that unreliable persons will not be able to become voluntary VAT payers.
Extended Benefits for Small Businesses from the EU
The amendment to the VAT Act expands opportunities for small businesses operating in the cross-border market. They will now be able to advantage of the European Directive on schemes for small businesses.
What this means:
Czech businesses are exempt from paying VAT until their turnover reaches 2 million Czech crowns.
Foreign entrepreneurs from the EU previously became VAT payers for the very first taxable supply in the Czech Republic.
New opportunities: thanks to the amendment, foreign entrepreneurs will be able to advantage of benefits similar to those provided to Czech small businesses.
A new cross-border regime for small businesses
This scheme will be voluntary, and the taxpayer from another EU Member State will decide whether to use it or follow existing legislation.
The explanatory note clarifies: that if an entrepreneur chooses a new cross-border regime, he will not be considered a VAT payer when making taxable supplies in the Czech Republic. This means that he will not need to register with the tax authorities, submit returns and reports, or fulfill other tax obligations.
Anyone wishing to benefit from the scheme will be required to register with the tax authorities and subsequently file quarterly returns detailing the value of transactions carried out in all Member States during a calendar quarter, regardless of whether they use the scheme in a given Member State or not.
The cross-border regime is available to entrepreneurs whose total turnover within the EU does not exceed 100,000 euros per year. If an entrepreneur exceeds this limit in one EU country, it will not impact their ability to use the regime in other countries. For example, if an entrepreneur has exceeded the limit in Germany, he will still be able to use the regime in the Czech Republic as long as his turnover there does not exceed 2 million CZK.
The same rule will apply to Czech small businesses wishing to take advantage of this exemption in other EU member states.
What else does the amendment provide?
The amendment makes several changes to tax legislation:
– clarifies the conditions for applying tax rates in the construction sector;
– expands tax incentives for the sale of buildings and land;
– expands opportunities for working with debt;
– introduces a new mechanism for VAT refund in cases of unjust enrichment.
The Chamber of Deputies has received the bill on VAT amendments. If Parliament passes the amendment to the law in the fall, it will come into force at the beginning of 2025.
Stay in touch with us to stay updated on all changes.
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