On the basis of the Czech Value Added Tax Act, VAT payers are entrepreneurs who have had a turnover of more than one million crowns for 12 or less consecutive calendar months. VAT payers are also so-called identified persons who do business with foreign countries. There are other exceptions where payership is mandatory. However, becoming a VAT payer may in some cases be advantageous for the entrepreneur, and although the entrepreneur does not meet the conditions for entering VAT, the law allows him to become a VAT payer voluntarily.
This is usually advantageous because most of the suppliers and customers of the entity will be VAT payers. For suppliers, it is possible to claim VAT on received services or purchase of materials or goods, for customers it means that the invoice is higher in the amount of VAT but they claim it back in their VAT return and the amount is refunded to them. If a company trades abroad, the VAT number represents within the EU a certain check on the reliability of the business partner. Even for Czech suppliers or customers, VAT payership with a partner represents a certain guarantee. Voluntary VAT registration is always worth it if we sell services or products to the EU or abroad. If the company trades with foreign countries (so-called third countries), it purchases without tax and only states goods/services in the VAT return (both input and output). If the company trades with VAT payers within the EU, it deducts input VAT, in the case of invoicing to the EU it does not pay any tax. If the company is not a VAT payer, it will pay the tax on the purchased goods or services, but cannot deduct it.
However, the disadvantage of VAT payership is that the payer must submit a VAT return and so called "control report" every month (or quarter). The control report represents a certain recording obligation, when for transactions over CZK 10,000 are cross-checks by the state to make sure that the same VAT on the part of the customer was not only applied, but above all on the part of the supplier shown in his VAT return. The VAT Act is also quite complicated, it contains a number of rules and exceptions, and orientation in it can be a significant problem without long-term experience.
You can register for VAT payership via the form from the mfcr.cz website. If there is a newly established company or one that does not have a "history" with the Tax Office, e.g. it has not yet filed an income tax return including the financial statements and its annexes, it is necessary to count on the fact that the tax administrator will thoroughly check the applicant in question when registering for VAT. Here is a list of circumstances that the Tax Office will take into account:
- Whether the taxpayer is registered for personal income tax from dependent activity
- Whether the taxpayer has substantiated the data in the registration form with sufficient supporting documents
- Whether it is clear from publicly available sources that the taxpayer carries out an economic activity, e.g. it has a website or other presentation of the outputs of its economic activity
Together with the registration, it is therefore necessary to prove the specific economic activity of the new voluntary taxpayer, i.e. to specify the field of trade, business plan, how and where the economic activity is carried out, what specific economic activity it is (e.g. type of goods and services, including information on what preparatory activities are performed), how this activity is secured from the personnel point of view (employees, or subcontracts, including concluded contracts), technical (premises, warehouses, means of production and other technological equipment, including concluded contracts), or submit business contracts concluded with customers, suppliers, or other documentary documents (e.g. contracts on future contracts, preliminary offers, demands and orders, advertising campaigns and their scope, etc.). It is also possible to state where the accounting or tax records of the taxpayer are located and who keeps them. It is also possible to specify the website on which the taxpayer's activity is presented and where the Tax Office finds out how and where the taxpayer's activity is offered to potential customers. If the Tax Office is not satisfied with the information provided, it will send you a Call to complete these facts via in your so called Datová schránka (data box).
As we have already mentioned, the area of VAT is complex, but it has its advantages, another of which is the application of VAT when filing the first VAT return to deduct this tax on documents before vat registration, subject to certain conditions. We will be happy to advise you and if you want to focus primarily on the business itself, contact us about bookkeeping and the related tax area.
Hello, wasn't the threshold for VAT registration increased from CZK 1,000,000 to CZK 2,000,000?
Hello, it has been considered and probably will happen, but so far it has remained at 1 million...