Value added tax

An extensive amendment to the Value Added Tax Act came into effect at the start of January 2025. The main new changes are:

• The date of becoming a taxpayer and the calculation of turnover changes. From now on, this will be based on the calendar-year turnover. If the turnover is over CZK 2,000,000, the taxpayer shall be liable from 1 January of the following year - assuming the second limit of CZK 2,536,500 will not be exceeded in that year. If the second limit is exceeded, the taxpayer shall immediately be liable from the next day.
• If the turnover of CZK 15 million was not exceeded in 2024, the taxpayer may indicate in its December 2024 tax return that it wishes to be a quarterly VAT payer. But beware: VAT statements ("kontrolní hlášení") should be submitted monthly - regardless of the tax period that is applicable to the payer.
• There is a new obligation to return any granted VAT deduction in the event of an unpaid liability arising (after 1 January 2025) six months after the due date. Moreover, if the customer pays the invoice in question, the supplier can claim the deduction in the tax period during which the liability was paid.
• A new regime for small enterprises is introduced. This offers a choice to entities from other EU in respect of whether or not to pay the Czech VAT and act as a VAT non-payer in the Czech Republic. However, this option is possible only if the turnover of such an entity in the whole EU does not exceed EUR 100,000.
• The range of entities that can form a group for VAT purposes has been expanded. From now on, municipalities (and their contributory-based organisations) may from a VAT group.
• The deadline for issuing a corrective tax document has been extended until the end of the seventh year after the year in which the original supply took place. This applies to taxable supplies carried out from 1 January 2025.
• The deadline for claiming deductions has been shortened to the end of the second calendar year after the year in which the deduction claim originated.
• The possibility to correct a tax base has been extended to former VAT payers.
• A VAT non-payer may become an identified persona upon receiving or making an advance payment - namely, in relation to cross-border services.
• VAT on real estate will change from 1 July 2025. The changes include the clarification of definitions of terms, clarifications of controversial cases and the implementation of the new concept of exemption of the first supply of completed real estate or real estate after a substantial alteration of the given real estate. The tax rates on building constructions have changed and the tax exemption of the supply of land and other kinds of real estate and the rent in respect thereof has also changed.
• The range of financial services exempted from tax has also been narrowed.
• Other changes relate to events in the fields of culture, art, sport, science, education and entertainment, which may be provided online. These changes also have an influence on the following: advisory and similar activities invoiced by non-entrepreneurs; the determination of the tax base of non-monetary gifts and contributions; the determination of the tax base of an exchange with a surcharge; the determination of the tax base in respect of the supply of real estate to an employee; corrections to the tax base of bad debts; corrections to the tax base; corrections to tax deductions applied to a person who ceased to be a taxpayer or to another identified person; extension of exemptions applied to educational activities; and the exemption of handout supplies.