General rules and VAT rates

Information describes the way how a business calculate VAT taxable turnover, what data a business is obliged to keeping in records for the purposes of value added tax, VAT rates in this country and its application on goods and services

How a business should calculate their VAT taxable turnover?

A business has to monitor a turnover either for the purposes of obligation to register as a VAT payer or in order to fulfil one of conditions for cancelation of VAT registration.

For the purposes of VAT Act, turnover shall mean the total consideration without tax (an amount in funds or a price subsidy), to which a business (the taxable person) is entitled for a transaction that has occurred (delivery of goods or provision of services), with the place of transaction in this country, where such consideration is consideration for:

1. a taxable transaction,
2. a transaction exempted from tax with entitlement to tax deduction, or
3. a transaction exempted from tax without entitlement to tax deduction (financial activities, pension-related and insurance activities, delivery of immovable items and lease of immovable items) if such a transaction is not a supplementary activity pursued occasionally.

On the contrary, turnover shall not include consideration for the delivery or provision of fixed assets, provided that such provided transaction is not an integral part of the ordinary economic activity of the taxable person, or advances.

If a business calculate a turnover for the purposes of obligation to VAT registration, the individual considerations are calculated in amount without VAT (the total consideration reduced by the VAT), if the consideration includes such tax.

The calculation of the amount of VAT taxable turnover includes the transactions that are carried out in 12 immediately preceding consecutive calendar month (for example from 1st February 2020 to 28th February, 2021).

Information on keeping records of VAT transactions

A business that is registered as a VAT payer or an identified person, is obliged to keep all data relating to his tax liabilities in records for value added tax purposes.

Records for value added tax purposes shall be kept in such structure that required for drawing up a tax return, recapitulative statement or control statement.

In the records for value added tax purposes a payer shall usually keep list of:

• purchased goods and services which a business use for the purposes of carrying out a transactions with entitlement to tax deduction,
• VAT identification number of supplier, except for transactions for which a simplified tax document has been issued,  
• carried out transactions that are exempt for tax or are not subject to tax,
• an overview of business property,
• a value of acquired goods from other Member States where acquisition of such goods shall be divided according to individual Member States,
• a value of forwarded goods from domestic to another Member States (in division according to individual Member States), eventually an information about decision for voluntary VAT registration in another Member State for purposes of forwarding of goods from domestic,
• data about delivery and acquisition of goods using relocation of goods in the warehouse regime inside the EU territory.

List of VAT rates including: standard, reduced, super reduced, parking rate (if applicable)

In the Czech Republic are currently used three VAT rates:

• standard rate of 21 %,
• lower rate of 12 %.

All statutory conditions of using of each VAT rate are stated in Section 47 of the VAT Act, including the Annexes according to which VAT rates are applicable for individual goods or services.

The basic tax rate (21 %) shall apply for sale of goods and services, unless otherwise provided by law that the goods or services is came under to any lower rate.

The lower rate (12 %) shall apply:

• for heat and cold,
• for services stated in VAT - Annex No.2 , and
• for sale of goods stated in VAT - Annex No.3 .

The principle for correct determination of VAT rate of goods or services stated in relevant to Annex is that the goods or services must be correspond to the customs tariff nomenclature code (for goods) or code of classification of production CZ-CPA (for services) and at the same time, to the expressly stated verbal description for such code in the textual part of relevant Annex.

If for a business if difficult to determinate a VAT rate for any taxable transaction (goods or services), it is possible to apply for issue decision of binding assessment which stated the correct VAT rate for a relevant taxable transaction in accordance to Section 47 paragraph 1 of the VAT Act. Such application is for an administration fee.

Detailed description of specific types of goods and services to which these VAT rates are applied, you can find in document published by the European Commission.

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