VAT exemptions

The exemption from paying VAT is only for business whose turnover does not exceed CZK 2,000,000 or carries out only supplies exempted from VAT without the right of deduction of VAT.

When a business is exempt from paying VAT

The exemption from paying VAT is only for business whose turnover for up to 12 immediately preceding consecutive calendar months does not exceed CZK 2,000,000, except for a taxable person that carries out only supplies exempted from VAT without the right of deduction of VAT.  The turnover shall mean the total of considerations without tax including price support that pertain to the taxable person for carried out supplies that include supply of goods and provision of service with the place of supply in the Czech Republic, if these are considerations for taxable supply, supply exempted from VAT with the right of deduction of VAT or supply exempted from VAT without the right of deduction of VAT (financial transactions, pension transactions, insurance transactions, supply of selected immovable things, lease of immovable thing), if this supply is not represent a supplementary activity. ) The turnover shall not include the considerations for sale of long-term property.

What products/services are exempt from VAT

The exemption from VAT are for selected transaction in the public interest and for transactions where no added value arises. Transactions that don’t consumed in Czech Republic are exempt from VAT.

There are three main categories that are exempt from VAT:

• The exemption without right of deduct of VAT
• The exemption with right of deduct of VAT
• Any other exemption.

For example, the following transactions are exempt without the right to deduct:

• basic postal services and supply of post stamps,
• radio and television broadcasting,
• financial transactions,
• pension transactions,
• insurance transactions,
• supply of selected immovable things(except for a supply of building site and supply of immovable things after 5 years),
• lease of immovable thing (except for a short-term lease of the immovable thing, accommodation services, lease of premises and vehicle parking areas, lease of security boxes, lease of machines or other fixed systems)
• training and education,
• health care services and supply of health care goods,
• social assistance services,
• the operation of lotteries and other similar games,
• other transactions exempted without deductibility of VAT.

For example, the following transactions are exempt with the right to deduct:

• the supply of goods to another Member State,
• the exportation of goods,
• the supply of services to a third country,
• transportation and services directly linked to the importation and exportation of
• goods,
• the transport of passengers,
• the supply of such goods to another member country is exempted from the tax,
• the supply of books, picture books, drawing books, colouring books, booklets, music books or cartographic products, including a sound recording of a presentation of their contents and the provision of similar services to delivery of a book.

Selected transactions that would normally be subject to VAT are exempt from VAT under certain conditions:

• the intra-Community acquisition of goods, if the supply of such goods would be exempted from VAT, the import of such goods would be exempted from VAT or the person making the acquisition has the right to the input VAT refund,
• import of goods (e.g. in personal luggage, for EU entities, for NATO forces, for diplomatic missions, etc.)

Whether VAT exemptions exist for small companies and, if so, what the thresholds are

Businesses (taxable person carries economic activities) established in Czech Republic are exempt from paying VAT if their turnover for up to 12 immediately preceding consecutive calendar months exceeds CZK 2.000.000, except for a taxable person that carries out only supplies exempted from VAT without the right of deduction of VAT.  After exceeding the turnover business becomes a VAT payer and should register for VAT purpose.

Businesses, whose carries only exempt supplies without right of deduct VAT (e.g. financial, insurance, pension transactions or social services) are exempt completely from paying of VAT.

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