Value-added tax (DPH – Daň z přidané hodnoty in Czech) is one of the most important taxes in the taxing system. It is deducted from every item or a service merchandized in the country. This type of tax can be compared with a bearing wall during the construction of the state budget. All companies registered in the Czech Republic are either payers or non-payers of VAT.
Why?
Are your clients or providers VAT payers?
Do you plan to widen the horizons for your company beyond the borders of just one country?
Would you like to look more serious from the perspective of your business partners?
In this case, you should learn a few facts about VAT in the Czech Republic.
How?
You can become a VAT payer on the in the following basis: obligatory or voluntary. If you are not included in the obligatory VAT payers category, you can pay this tax voluntary.
To register as a VAT payer, it is necessary:
- to fill in the form «Přihláška k registraci k dani z přidane hodnoty»;
- to submit the form to the Tax Institution (it is possible to file only a digital form, as a rule it is done by sending it using email address of the company (datová schranká);
- to submit additional information with the form (by the Tax Institution requirement);
- to receive the decision made by the Tax Institution;
The next day after receiving a positive decision from the Tax Institution one becomes a VAT payer.
“Potential pitfalls”
In case of a voluntary registration, one of the main points in the form is the reason of the registration.
The desire to return the spent money is not a sufficient reason. Most likely, you will be invited to the Tax Institution and asked to provide the additional information about the subject and the way of realization of your entrepreneurial activity. The Tax Institution may require a business plan or an explanation of the model you are going to build the business upon.
This is extremely important when talking about a new company. If the intention to become a VAT payer is related to the company interests, there are no reasons for avoiding answering questions.
We recommend preparing to the following questions in advance:
- describing a subject of the entrepreneurial activity (submission of a business plan);
- indicating a place where the activity will be performed (please keep in mind that by the ‘place’ here is implied that one should provide a contract for renting an office building and not a proof of a legal address. A residential property can also be an office if it is properly registered);
- providing information about industrial (stock) buildings, if it is relevant for your type of entrepreneurial activity;
- supplying information about partners (customers, providers);
- providing information about the staff and the proof of hiring staff;
- providing information about company property.
If you are an owner of a functional company, it will be easy to submit the following documents:
- office renting contract;
- employment contract;
- documents that prove first orders made by customers;
- bank statements used for the entrepreneurial activity;
- copies of the contracts on planned cooperation;
- completed orders (invoices/receipts);
It will be also necessary to inform the Institution about the expected annual turnover.
Even correspondence where your intentions to make a deal are obvious can be useful.
The presence of a website or an internet shop will be a ponderable bonus.
It is desirable that the real or expected customers are not only foreign ones but also the Czech partners. If one cannot prove his/her work in the realization of goods or services in the Czech Republic, the Tax authorities will treat such a company with skepticism.
If above mentioned questions caused issues when composing answers to them, it will be complicated to register a company as a voluntary VAT payer.
The process of voluntary registration is held on a case-to-case basis since there is no universal obligatory list of documents an applicant is to provide. First, you should decide what is the reason why it is important for you to become a VAT payer, and then prove this decision with the corresponding documents.
If there are questions when filling in the application form or any other issues regarding VAT arise, feel free to contact us. We will be glad to help!
