Tax payer person liable to tax person not liable to tax Example for registration: tax payer person identified to tax turnover limit was reached in March 2022 impact on tax liability*: liability to charge output VAT on own output supplies (sales) and right to claim input VAT on input supplies (purchases) "liability to charge output VAT on foreign vendor's output supplies consumed by person (reverse charge), no liability to charge output VAT on own output supplies and no right to claim input VAT on input supplies (purchases)" person is outside the scope of VAT tax registration form needs to be submitted till 15th of April impact on tax return*: "to issue invoices incl. VAT; to file VAT return every reporting period, regardless of the fact whether there is a tax obligation; to file VAT control statement, EC Sales list and Intrastat (the last two if needed=under certain conditions) " "filling in of VAT return is not required, but VAT control statement is required if there is tax obligation in the reporting period." no VAT return should be filed business will become VAT payer from 1st of May conditions*: "economic activity (turnover) is more than CZK 1,000,000 in 12 consecutive months => obligatory registration **. Turnover is defined as total amount of revenues regardless of their payments generated from provided supply of goods or provision of serviceswith place of supply in CZ. It includes revenues from taxable supplies, supplies exempt with entitlement to VAT deduction or transfer or lease of immovable assets or financial and insurance activity only if these are carried out as main or regular activity. Turnover does not include revenue from sale of long-term assets" purchase of products from another state-member of a European Union for more than 326.000 CZK without VAT (except for purchasing a vehicle or a product that are subject to a consumer tax) in one calendar year (trilateral trade does not apply); person doesn't perform any economic activity (turnover) first VAT return covering May 2022 should be submitted until 25th of June purchase of a service provided outside the Czech Republic from an entrepreneur located outside the Czech Republic; economic activity (turnover) is below registration treashold June's VAT return will be submitted until 25th of July "order of goods delivery with installation and assembly, or delivery of goods by systems located in the Czech Republic from an entrepreneur who resides outside the Czech Republic;" provision of a service in another EU state (except for services that are VAT free in the EU). * evidence from CZ ** in some countries registration can be voluntary when turnover limit is not reached. general categorization (by type of transaction) input VAT output VAT net VAT position = output VAT - input VAT inputs purchased from vendors which are registered as VAT payers => invoices issued by such vendors will contain VAT: net amount + VAT = gross amount purchased from vendors which are not registered as VAT payers => invoices issued by such vendors will not contain VAT: net amount outputs taxable with VAT => invoices issued by your business will contain output VAT on them: net amount + output VAT = gross amount exempt from VAT => invoices issued by your business will not contain output VAT on them: net amount exemption with VAT (input) deduction right to full deduction right to proportionate deduction right to partial deduction exemption without VAT (input) deduction outside the scope of VAT categorization by place of supply (in this conetx 'supply' means 'transaction') local supplies goods services cross-boarder supplies (intercommunity supplies; import/export) goods services B2B => place of supply is where seat of customer is B2C => place of supply is where seat of supplier is net amount (=tax base) * output VAT (%) = gross amount net amount includes: invoiced amount (as per invoice issued or contract price) customes duties excise duties energy taxes transportation costs (for imports) VAT rates in CZ Rates Coefficients advance payment received: 7500 it is gross amount i.e. net amount plus VAT of 21% standard rate of 21% 0.1736 1302 VAT 1st reduced rate of 15% 0.1304 6198 net amount 2d reduced rate of 10% 0.0909 Tax base includes: net amount customs duty excise duties energy taxes transportation costs till first destination in the country of destination ##### Sheet/List 2 ##### Scope of VAT Supplies within scope of VAT * Supplies outside scope of VAT Type of deduction or charge "Input supplies (=purchases, acquisitions)" Output supplies (=sales) full VAT deduction (for input) or charge (for output) "VAT payer has right for input VAT deduction if such inputs were used for taxable supplies (local taxable sales of goods and services, intercommunity VAT-exempt sales of goods and services to other EU-member states, VAT-exempt exports of goods and services to outside EU). VAT payer has right for input VAT deduction if he uses input supplies for his economic activity. The right to claim input VAT deduction by the buyer arises firstly at the moment when output VAT is due and only if a valid tax document is available. VAT can be claimed within 3 years from the first day of the month following the tax period in which VAT deduction entitlement arose at the latest. If VAT amount is higher than the one set byt the law he may claim only the amount given by the law. If VAT amount on the document is lower than the one set by the law, VAT payer may claim the amount stated on tax document." sale ** local supply -> sales in CZ "goods: (1) general rule is that VAT payer who within scope of his economic activity supplies goods in CZ is obliged to charge output VAT regardless of the position of his customer; (2) exception: supply of waste, gold, emission allowances, computer games, tablets, mobile phones, gaming consoles (for last four in this list it works as exeption only if value of one supply exceeds CZK 100,000), certain cereals and certain metals => procedure of reverse charge (RC) is applied i.e. output VAT which under normal conditions would be payable by supplier, is paid by customer under RC." "in case of supplies outside scope of VAT, VAT payer has no obligation to charge output VAT, however he may claim input VAT from related input supplies if applicable." "services: (1) general rule is that VAT payer who within scope of his economic activity supplies services in CZ is obliged to charge output VAT regardless of the position of his customer. As such local provision of servcices is also recognized of provision of services to foreigner physical person (B2C service) from another EU-member state => local (CZ in this case)output VAT should be paid by CZ service provider; (2) exception: supply of construction services, assembly services=> procedure of reverse charge (RC) is applied i.e. output VAT which under normal conditions would be payable by supplier, is paid by customer under RC." "Examples: sale of business or its part, provsision of gifts/samples with acquisition costs without VAT below CZK 500 and provsion of commercial samples to customers, both within economic activity of the payer, sanctions, meal vouchers, salaries, taxes, penalties, compensations for damage, insurance settlements etc." purchase *** local supply -> acquisition (=purchase) in CZ goods: see exceptions from local supply (sale) of goods in CZ services: see exceptions from local supply (sale) of services in CZ purchase intercommunity supply -> acquisition (=purchase) from EU "goods: (1) general rule is that VAT payer who within scope of his economic activity acquires goods in other EU-member state is obliged to apply reverse charge procedure on this purchase i.e. he is obliged to charge output VAT which under normal conditions would be payable by his supplier. As such acquisition is also recognized of reallocation of own business assets (goods, office or factory equipment) by CZ VAT payer from another EU-member state to CZ for permanent business use => output VAT should be paid by reallocator; (2) conditions which need to be met: goods must be acquired from person registered for VAT in EU, goods must physically move from other member state to CZ, place of supply (final consumption) must be in CZ." "services (i.e. services which are acquired by CZ VAT payer from another EU-member state VAT payer => B2B services): (1) general rule is that VAT payer who within scope of his economic activity supplies services in CZ is obliged to apply reverse charge procedure on this purchase (unless the service is exempt from VAT) i.e. he is obliged to charge output VAT which under normal conditions would be payable by his supplier. As such acquisition is also recognized of purchase of service provided by foreign supplier which is not VAT payer in his home country i.e. he may be person liable to VAT in his state but without VAT registration yet; (2) conditions which need to be met: recipient of service is enterpeneur or business with seat in CZ, provider of service is person liable to VAT without seat in CZ." 100K purchase "supply from outside EU => import (acquisition, purchase) from outside EU" "goods: (1) general rule is that VAT payer who within scope of his economic activity imports goods from outside EU is obliged to apply reverse charge procedure on this purchase i.e. he is obliged to charge output VAT which under normal conditions would be payable by his supplier. (2) conditions which need to be met: goods must enter the territory of EU from country outside EU, place of release of goods into free circulation (final consumption) must be in CZ." "services (i.e. services which are acquired by CZ VAT payer from outside EU => B2B services): (1) general rule is that VAT payer who within scope of his economic activity imports services in CZ is obliged to apply rule of where business cusomer is located and thus pay local VAT of CZ (unless the service is exempt from VAT) (2) conditions which need to be met: recipient of service is enterpeneur or business with seat in CZ, provider of service is person liable to VAT without seat in EU." sale other cases output VAT must be applied also the following cases: donation of assets or inventory included into business property that VAT deduction was claimed on its acquisition; temporary use of long-term assets for other than business purposes provided that VAT deduction was claimed on its acquisition; provision of services for purposes not linked to economic activites of the VAT payer provided that VAT deduction was claimed on inputs used for provision of such services. proportionate VAT deduction "If input supply is used for activities both related and not related to his economic activity, VAT deduction can be claimed in a proportion corresponding to scope in which supply was used for his economic activity. In such case proportionate coefficient is used." partial VAT deduction "If input supply is used for activities both taxable and exempt, VAT deduction can be claimed partially i.e. corresponding to scope in which supply was used for taxable sale. In such case partial coefficient is used." no VAT deduction (for input) or charge (for output) see exempted supplies (sales) without VAT deduction with entitlement to input VAT deduction - sale intercommunity supply -> sales to another EU-member states "goods: (1) general rule is that VAT payer who within scope of his economic activity supplies goods to other EU-mamebr states is entitled to exemption from output VAT with entitlement to input VAT deduction i.e. output VAT is not charged by seller but it is reversed on buyer however buyer keeps right to deduct VAT paid on inputs used for supply of exempted sale; (2) conditions: EU buyer of goods should be person registered for VAT in another member state (otherwise such supply is treated as normal local supply of goods, that is, CZ output VAT is charged by seller), such goods must be physically dispatched or transported from CZ." "services: (1) general rule is that VAT payer who within scope of his economic activity supplies services to businesses from other EU-member states (private enterpeneurs or legal entities) is entitled to exemption from output VAT with entitlement to input VAT deduction. (2) conditions: EU buyer of services should be person registered for VAT in another member state (otherwise such supply is treated as normal local supply of services, that is, CZ output VAT is charged by seller). (3) exeption: some B2C services provided to 3d countries allow input VAT deduction (e.g. electronically supplied services like web hosting, download of software, computer games, music, moves, access to databases; telecommunication services like phone charges, internet access; radio and broadcasting). (3) exceptions: conferences, cattering, accomodation, education, health care services => taxed with local VAT in place of event." supply to outside EU => export (sale) to outside EU goods: (1) general rule is that VAT payer who within scope of his economic activity supplies goods outside EU is entitled to exemption from output VAT with entitlement to input VAT deduction i.e. output VAT is not charged by seller but it is reversed on buyer however buyer keeps right to deduct VAT paid on inputs used for supply of exempted sale; (2) conditions: exit of goods from territory of the EU must be confirmed by customs authorities or proved otherwise. "services: (1) general rule is that VAT payer who within scope of his economic activity supplies services to businesses from outside EU (private enterpeneurs or legal entities) is entitled to exemption from output VAT with entitlement to input VAT deduction. (2) conditions: non-EU buyer of services should be person registered as legal person outside EU (otherwise such supply is treated as normal local supply of services, that is, CZ output VAT is charged by seller). (3) exeption: some B2C services provided to 3d countries and UE member states allow input VAT deduction (e.g. electronically supplied services like web hosting, download of software, computer games, music, moves, access to databases; telecommunication services like phone charges, internet access; radio and broadcasting) - taxed with output VAT where recipeint is located. (3) exceptions: conferences, cattering, accomodation, education, health care services => taxed with local VAT in place of event." without entitlement to input VAT deduction - sale local supply -> sales in CZ "postal services and supply of postal stamps by Czech postal office, radio and broadcasting (local), financial services (credits and loans, deposites, bank guarantees, foreign currency transactions etc.), pensin services, insurance services, supply of immovable assets and thier rent, education and training services (accredited by relevant authorities), health care services and goods consumed during provision of such services, social welfare, operation of lotteries and similar games of chance. Note: rent of immovable assets is VAT-exempt without entitlement to VAT deduction. It means that landloard doesn't charge output VAT but also cannot claim input VAT on acquired supplies (goods and services) related to rented assets. However, rent is taxable supply in the following cases: short-term rent (up to 48 hours), rental of parking places, safes and deposit boxes, rental of machinery tightly built-in to a building. A landloar VAT-payer may decide that he will charge output VAT on retnal fee but only if the tenate is also VAT payer and the tenate uses rented immovable assets for his taxable business. Sales of immovable assets is VAT exempt after 5 years from the first putting of asset into operation (use) or from first usage, whichever occurs earlier. If buyer is VAT-payer in such case procedure of reverse charge will applied (i.e. buyer will self-charge output VAT on acquired immovable asset)." NOTES: * term 'supply' is used for both purchases and sales "** if group 'output supplies' includes 'sale' type of supply, then it is taxed under normal rules for output" "*** if group 'output supplies' includes 'purchase' type of supply, then it is taxed under procedure of reverse charge i.e. output VAT payable by vendor of input purchased is self-charged by buyer of input" INCOTERMS 2010 ##### Sheet/List 3 ##### country A with destination model country B with origination model supply No. 1 from A to B in A there will be no output VAT charged on such sale in B there will be no input VAT charged on such purchase => such supply will not be charge with VAT at all => selling price for supply No. 1 will not contain any VAT in itself thus will be in advantage position compared to similar local supplies in country B supply No. 2 to A from B in A there will be input VAT charged on such purchase in B there will be output VAT charged on such sale => such supply will be charged with VAT twice => selling price for supply No. 2 will contain dopuble VAT in itself thus will be in disadvantage position compared to similar local supplies in country A country A with destination model country B with destination model supply No. 1 from A to B in A there will be no output VAT charged on such sale in B there will be input VAT charged on such purchase (exempt from output VAT in A) (reverse charge of output VAT of vendor from A by customer in B) supply No. 2 to A from B in A there will be input VAT charged on such purchase in B there will be no output VAT charged on such sale (reverse charge of output VAT of vendor from B by customer in A) (exempt from output VAT in B)