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					VAT




VAT ISSUES IN THE CZECH REPUBLIC
   Requirements for liability VAT:
   - Entrepreneur
   - Sustainable
   - Economic environment
VAT
      • A resident entity must register for VAT if
      its taxable turnover exceeds
      CZK 1,000,000 within any 12 consecutive
      calendar months. The
      application must be made to the local
      Financial Office within 15 days
      of the following month. Registration takes
      effect from the first day of the
      third following month. Registration may
      also be imposed due to
      Intra-Community Trade.
VAT
      • A resident entity must register for VAT if
      its taxable turnover exceeds
      CZK 1,000,000 within any 12 consecutive
      calendar months. The
      application must be made to the local
      Financial Office within 15 days
      of the following month. Registration takes
      effect from the first day of the
      third following month. Registration may
      also be imposed due to
      Intra-Community Trade.
VAT • A non-established entity must register and
          account for VAT on its first
          taxable supply in the Czech Republic. A
          non-resident entity making
          distance sales into the Czech Republic
          must register when the value
          exceeds EUR 35,000 in a calendar year.
          The application is made to the
          Financial Office for Prague 1. Use of a tax
          representative is optional.
          • Group companies cannot register as a
          single VAT entity, but it is possible
          for two or more companies to conclude an
          “association agreement” under
          which certain supplies between them are
          not subject to VAT.
VAT
      DE-REGISTRATION
      • An entity registered for VAT can be de-
      registered immediately if it
      permanently ceases to carry out its
      business activity. Otherwise, an entity
      can ask to be de-registered only after one
      year of registration and on the
      condition that its taxable turnover in the
      last 12 consecutive calendar
      months did not reach CZK 1,000,000.
      • A non-established entity can be de-
      registered by the Financial Office
      if it did not carry out any taxable supplies in
      the previous 12 consecutive
      months.
VAT
      RATES
      • Supplies of goods and services are
      generally subject to 19% VAT, but
      certain supplies are subject to 9% VAT,
      including the following:
      - foodstuffs (with some exceptions)
      - pharmaceuticals
      - children's diapers
      - printed materials in which advertisements
      do not exceed 50%
      - medical goods
      - aids for the disabled
      - buildings for residential living
      - work on medical goods
      - supplies of water
      - regular land mass transport
      - medical care, social care, care for
      children, elderly, sick and disabled
      persons
      - cultural activities
      - funeral services
VAT
      EXEMPT SUPPLIES
      • Generally, an entity cannot reclaim VAT
      incurred in connection with the
      provision of most VAT-exempt supplies.
      This applies to the following:
      - financial services
      - postal services
      - insurance services
      - radio and television broadcasting
      - lotteries and other games of chance
      - health care services
      - social welfare and educational services
      - the leasing of land and/or buildings,
      unless the supplier elects to charge
VAT
      • A lesser can choose to charge VAT at the
      rate of 19% on a lease
      of a building to another VAT-registered
      entity.
      • The following supplies are also exempt
      from VAT but the supplier can
      reclaim VAT on the related costs:
      - exports of goods
      - intra-community supplies of goods to
      another EU country
      - international and intra-Community
      passenger transport
      - services connected to import and export
      of goods
      - a range of services provided intra-
      Community or to third countries
      (although technically not exempt, treated in
      a similar manner)
VAT

      VAT RECOVERY
      • Generally, VAT incurred by a VAT-
      registered entity for the purpose of its
      own economic activities can be recovered.
      VAT incurred in relation to
      exempt-without-credit supplies cannot be
      recovered.
      • A VAT-registered entity must allocate its
      purchases to one of the following
      three groups of taxable supplies:
VAT
      Group 1 - full reclaim of VAT is possible
      for:
      - purchases used for economic activities
      subject to VAT
      - purchases related to specific supplies
      outside the scope of VAT
      - purchases related to certain exempt-with-
      credit supplies
      Group 2 - no reclaim of VAT is possible for:
      - purchases used to provide the majority of
      VAT-exempt supplies
VAT
      Group 3 - a partial reclaim of VAT is
      possible for:
      - purchases used for both Group 1 and
      Group 2 supplies
      - purchases where usage is unclear
      The taxpayer is obliged to reduce its
      reclaim of VAT by a coefficient
      determined by reconciling the amount of
      taxable supplies (Group 1)
      against the total amount of all supplies
      (less some VAT-exempt supplies).
      • This process is done in each VAT return
      using the coefficient from the
      December return of the previous year. Any
      final adjustments based on the
      year's results are made in the December
      return of that year.
VAT   • Subsidies are excluded from the
      calculation of the coefficient.
      The coefficient is rounded up to two
      decimal places, which means that any
      level of taxable activity should entitle an
      otherwise fully exempt taxable
      entity to recover 1% of its VAT in Group 3.
      • An entity must adjust its VAT recovery on
      certain goods where the purpose
      of the use changes from “with credit” to
      “partial credit” or “without credit”; or
      from “partial credit” to “without credit”. An
      adjustment must be made for:
      - tangible assets costing more than CZK
      40,000
      (approximately EUR 1,200), and
      - intangible assets costing more than CZK
      60,000
      (approximately EUR 1,800).
      In both cases complex rules apply to the
      adjustment process over
      a five-year period.
      Non-recoverable VAT
      • VAT incurred on the following is always
      non-recoverable and is therefore
      always an actual cost to a business:
      - passenger cars other than those
      purchased for resale (including cars

VAT
      under a finance lease)
      - technical improvements to passenger
      cars
      - items used for hospitality or entertainment
      purposes
      - fuel used for private purposes when using
      a company car
VAT
      Branches of foreign companies
      • Services provided by a Czech branch for
      the benefit of headquarters
      of another branch of the same entity are
      not subject to VAT.
      33
      Services subject to reverse charge
      • Transfer or assignment of copyrights,
      patents, licenses, trademarks, and
      similar rights.
      • Advertising services.
      • Services of advisors, engineers,
      consultants, lawyers, accountants, data
      processing and supply of information.
      • Banking, financial and insurance
      services.
VAT
      • Supply of staff.
      • Lease of movable tangible property,
      except all means of transport.
      • Telecommunications services.
      • Operation of radio and television
      broadcasting.
      • Electronic services.
      • Obligation to refrain from pursuing or
      exercising, in whole or in part,
      a business activity or a right referred to in
      this list.
      • Supply of services by disclosed agents
      for services referred to in this
      paragraph.
      Under certain conditions also:
      • Supply of goods with installation.
      • Transport of goods.
      • Work on movable property
VAT
      VAT COMPLIANCE
      • VAT is administered by the Financial
      Office, however, import VAT is
      generally collected by the Customs Office
      from non-registered entities.
      A VAT-registered entity can opt to declare
      import VAT in its VAT return.
      • A valid VAT document must be issued for
      every taxable supply rendered to
      a VAT-registered entity.
      • The VAT document must, generally, be
      issued within 15 days of effecting
      the supply.
      • Complete and accurate VAT records and
      documents must be kept for ten
      years.
VAT
      • An entity with a Czech establishment
      must file VAT returns on a monthly
      basis if annual turnover exceeds CZK 10
      million or on a calendar quarterly
      basis if annual turnover is less than CZK 2
      million; if turnover is between
      these two amounts, the entity can choose
      between filing quarterly or
      monthly VAT returns.
      • A non-established entity must file VAT
      returns on a calendar quarterly
      basis, irrespective of turnover.
      • VAT returns must be filed and any VAT
      liability must be paid within 25 days
      of the end of the taxable period.
VAT
      • An entity with a Czech establishment
      must file VAT returns on a monthly
      basis if annual turnover exceeds CZK 10
      million or on a calendar quarterly
      basis if annual turnover is less than CZK 2
      million; if turnover is between
      these two amounts, the entity can choose
      between filing quarterly or
      monthly VAT returns.
      • A non-established entity must file VAT
      returns on a calendar quarterly
      basis, irrespective of turnover.
      • VAT returns must be filed and any VAT
      liability must be paid within 25 days
      of the end of the taxable period.
VAT   • Excess VAT deductions are refunded
      automatically by the Financial Office
      within 30 days of being assessed.
      • Within 25 days of the end of the relevant
      calendar quarter, an entity
      must file an EC Sales List with the
      Financial Office giving details of sales
      of goods to VAT payers in other EU
      countries.
      • An entity must also file a monthly Intrastat
      return giving details of goods
      sold/relocated to and from other EU
      countries. The threshold for filing is
      CZK 2 million for arrivals and CZK 4 million
      for dispatches. Large traders
      must file a more detailed return. The
      Intrastat returns must be filed within
      the Customs Office on a monthly basis
      within 12 working days of the end
      of the month.
VAT
      VAT REFUNDS
      • EU businesses can be refunded Czech
      VAT under the same conditions as
      Czech VAT payers.
      • Non-EU businesses can, in certain
      circumstances, obtain a refund of
      Czech VAT incurred on goods and services
      except for:
      - goods and services provided for personal
      use
      - travel services, accommodation and
      catering provided to a foreign person
      - goods and services related to
      representation of a foreign person
      - telecommunication services
      - purchase, lease and repair of motor
      vehicles dedicated to transport
      of less than nine persons
VAT
      - hydrocarbon fuels and lubricants except
      diesel and bio-diesel taxis
      • The application for a refund must be filed
      by 30 July of the following year.
      • In certain circumstances, non-EU tourists
      can obtain a refund of Czech VAT
      incurred on goods. The goods must cost
      more than CZK 2,500 and must
      be taken out of the country within 60 days
      of purchase. Recovery of VAT
      on fuel, tobacco, alcohol and food products
      is not allowed.

				
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posted:8/11/2011
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