Value-added tax (VAT)
VAT is generally charged at 21% on supplies of goods and services within the Czech Republic. Certain supplies (e.g. groceries, construction works related to social housing) are taxed at a rate of 15%, and a second reduced rate of 10% is applicable for specified categories of goods (some medicaments, books, newspapers, and also supply of heat and cold).
From 1 May 2020, the second reduced VAT rate of 10% is applicable also for drinking tap water, catering services, soft drinks and draft beer, shoe and clothing repairs, hairdresser services, e-books, etc.
Further, as of 1 July 2020, the second reduced VAT rate of 10% applies to hotel accommodation and admission to cultural, sport, theatre, or similar facilities.
Exports are generally exempt from VAT with a credit. Some supplies are exempt without a credit, including the lease of real estate (with certain exceptions), financial and insurance services, education, health, and welfare.
Companies seated in the Czech Republic whose turnover exceeds 1 million Czech korun (CZK) in any consecutive 12-month period must register as a VAT payer with the tax authorities.
For non-resident companies, there is no registration threshold, but they must register as a VAT payer if they:
- make any supply subject to Czech VAT (unless the liability to declare and pay VAT is shifted to the recipient of the supply), or
- supply goods from the Czech Republic to another EU member state.
A company can register as a VAT payer voluntarily even if its turnover does not reach the threshold if it renders or is going to render taxable supplies or VAT exempt supplies with credit in the Czech Republic.
Under certain circumstances, companies not registered for VAT to whom VAT liability arises due to acquired goods or services become persons identified for VAT. A person identified for VAT only pays VAT from received supplies without being entitled to recover related input VAT in its VAT return.
VAT returns and payments
The VAT return must be filed and tax paid within 25 days after the end of the taxable period. The taxable period is a calendar month (or calendar quarter under certain circumstances). All VAT payers registered in the Czech Republic have to submit a report, a so-called ‘control statement’. In the control statement, the VAT payers have to give detailed evidence of data from invoices that have been issued and received, so that the Czech Financial Administration can compare and check transactions with business partners. The control statement does not substitute for a VAT return. Legal entities have to file the report every calendar month, and the deadline for submission of the control statement is no later than 25 days after the taxable period. VAT payers have to submit all VAT reports to the Czech tax authorities electronically.
The Czech Republic is an EU member state; consequently, the EU customs code applies.
Excise tax is charged on the production or import of certain products, such as tobacco, and tobacco products and heated tobacco products, wines, semi-products, spirits and pure ethanol, beer, fuel, and mineral oils.
Energy tax is charged on natural gas and certain other gases, solid fuels, and on electricity sold to final customers in the Czech Republic.
Real estate tax
Real estate tax is payable annually by the owner of land or buildings. The amount of the tax is dependent on area, location, and usage of the land or buildings. Paved areas used for business purposes (such as concrete areas in logistics centres) are taxable, with taxpayers obligated to self-assess the tax. However, some areas (e.g. publicly accessible parking lands in shopping malls) are not taxable.
Real estate transfer tax
The real estate transfer tax rate is 4% and applies to the greater of the transaction price or the officially appraised value of the real estate transferred. The taxpayer is the acquirer of the real estate.
There are no stamp duties in the Czech Republic. Certain business operations in which a notary has to be involved by operation of law are subject to notarial fee.
Employers (including economic employers and certain types of PEs) in the Czech Republic are obligated to submit monthly withholdings and an annual reconciliation in respect of their employees. The withholdings include personal income tax (PIT) plus solidarity surcharge and statutory social security and health insurance.
Social security and health insurance contributions
Employers contribute 34% of the employee's gross salary to the state health and social security funds. A cap on only the social security premium is available.
Road tax is payable annually with respect to vehicles (including private vehicles) used for commercial purposes. Rates vary depending on engine capacity and vehicle size.
There is no separate exit tax as such. The exit taxation (implemented in line with the EU ATAD) is part of the CIT. The rate is thus the same as for the standard CIT, i.e. 19%. The tax is imposed upon (i) the relocation of assets without a change of ownership between the Czech company and its foreign PE or (ii) when a Czech tax resident changes its tax residence.
A taxpayer shall be subject to the tax on the amount equal to the market value of the transferred assets, at the time of exit of the assets, less their values for tax purposes. The instalments may further defer the tax payment over the next five years.
The only exceptions are asset transfers related to financing of securities, assets posted as collateral, etc. if the assets are set to revert to the member state of the transferor within 12 months.