Trade License.cz / VAT Registration

When to register for VAT for a Trade License:

VAT regulations are becoming more complex by the year. Surprisingly, it is not the Czech government but the EU that is responsible for most changes, which means that for the average freelancer it has become complicated to prepare and file VAT Reports on a monthly basis.

Therefore, it is clever to determine if one really needs to be VAT registered, and if so, in what way.
There are a couple of indicators that point to an obligation to register for VAT (EU-directive of 1.1.2013):
  • You are selling goods and/or services to companies in the EU -> VAT-Light registration
  • Your revenue from Czech sources is more than 1 M CZK / year -> Full VAT registration
  • You have large expenses in Czech Republic (and you want to claim back the VAT) -> Full VAT Registration
  • You are buying goods and/or services to EU clients (the seller requires your VAT number) -> special case
  • You import from the EU: cars, tabacco, alcohol, fuel or goods exceeding a value of 326.000 CZK. -> special case

VAT Registration: obligatory vs.voluntary

You will have an obligation to register for Full VAT if your revenue from CZ sources exceeds or will exceed 1.000.000 CZK within 12 months (not per calendar year, but per 12 months).

If sell to EU-based companies goods or services, you have to register for VAT-Light - even if your revenue is below 1 M CZK.

It is also possible to register voluntarily for VAT, for example if you have large expenses with VAT but you did not reach the 1 M CZK revenue limit yet. It moust be said that most of the time a request for voluntary registration for Full VAT is denied, and a registration for VAT-light, obligatory or not, is usually granted.

VAT Registration: Full registration vs. "VAT-light"

A Full VAT registration means that you will have to file a VAT Report and Kontrolni Hlaseni every month, for a period of 2 years, even in the months that you did not conduct any business. In addition, in case you sell into the EU, you will have to file EC Sales Lists (see below).

If you have a revenue from CZ sources under 1 M CZK and little expenses (which are no indicators to register for VAT), but invoice to EU clients (with a foreign VAT number) you must register for VAT-light, you would invoice with 0% under the 'reversed charges scheme' (an EU directive).

Benefits are that you only need to file in the months a transaction with an EU client took place (so not every month, as with a Full VAT registration), but the downside is that you cannot claim any VAT back for expenses. In simple words: outside CZ, it behaves like a regular VAT Registration, but inside CZ, it is like not having a VAT number at all.

EU Sales List - EU VAT reporting for sales outside CZ

In case you are VAT-registered (any kind) and your VAT-registered customer is based in the EU, electronic EU Sales Lists need to be filed.

Filing - electronic only

VAT Return and EU Sales Lists cannot be filed in paper form anymore, but only sent as electronic files, which need to be generated by accounting software or manually entered though the online portal of the Czech Tax Office (in Czech, of course).

 

It seems overkill to hire an accountant for processing one (consultancy) invoice per month - but wrong / late filing though the online portal is subject to penalties that can be 10.000s of CZK. So one really has to know precisely how to create invoices and use the portal (!)

For more information on VAT regulations and invoicing abroad
we recommend booking a consultation, by ZOOM / Skype / Whatsapp / Phone or by email.