Value Added Tax and Indirect Taxes
What the exam tests
VAT registration, place of supply, rates, deduction, reverse charge, and administrative filings (VAT return, control statement, EU sales list). Indirect taxes also cover excise duties and property taxes at a basic level.
Core rules
- The VAT Act is 235/2004 Coll. A person becomes a VAT payer when turnover exceeds the registration threshold in 12 consecutive months, or on voluntary registration. The threshold is currently CZK 2 million; verify the current wording before applying it.
- Standard rate 21%, reduced rate 12% from 2024. Exports and intra-community supplies are zero-rated with the right to deduct; exempt supplies generally carry no output tax but may restrict input deduction.
- For reverse charge, the customer accounts for output VAT and claims input VAT in the same return, subject to conditions. Construction and scrap supplies are classic domestic reverse-charge cases.
- Input VAT is deductible if the supply is used for taxable business activity and the taxpayer holds a valid tax document. Non-business use, entertainment, and passenger cars have restrictions.
- Every VAT payer files a VAT return and a control statement electronically; intra-EU supplies also require the EU sales list. OSS applies to certain B2C cross-border services and goods.
Worked example
A Czech VAT payer sells goods domestically for CZK 100,000 net. Output VAT at 21% is 21,000; the invoice total is 121,000. It buys materials for CZK 60,000 net plus 12,600 VAT. Input VAT is 12,600. Net VAT payable is 21,000 - 12,600 = 8,400. If the customer were a VAT payer in another member state and the goods were transported there, the supply would be zero-rated intra-community supply, not a domestic 21% sale, and the EU sales list would be filed.
Traps
Applying the reduced rate to goods that moved out of it; claiming input VAT on entertainment; forgetting the control statement; treating a deposit as a taxable supply before it becomes a payment; missing reverse-charge self-assessment; using the wrong place-of-supply rule for services. Do not confuse exemption with zero rating: both show no output tax, but exemption can limit deduction.