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 sheer impossible 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):
  • Your revenue from Czech sources is more than 1 M CZK / year
  • You are selling goods and/or services to EU clients
  • You are buying goods and/or services to EU clients (the seller requirs your VAT number)
  • You have large expenses in Czech Republic (and you want to claim back the VAT)
  • You import from another EU country cars, tabacco, alcohol, fuel or goods exceeding a value of 326.000 CZK.

VAT Registration: obligatory vs.voluntary

You will have an obligation to register for 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). Also if you trade with EU-based clients goods or services, you have to register for VAT - 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.

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".

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 by you.

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 (!)