Trade / 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 in CZ exceeds or will exceeds 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 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 in CZ under 1 M CZK and little expenses (which are no indicators to register for VAT), but invoice sporadically to EU clients (which require a VAT number) you might want to consider a "VAT-light" registration.

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 and your customer is based in the EU, electronic EU Sales Lists need to be filed. This Sales Lists cannot be filed in paper form, but only sent as electronic file, which needs to be generated by accounting software.