Mandatory registration as a value added tax (VAT) payer usually occurs where turnover exceeds 1 million Czech crowns within 12 consecutive calendar months. An exception does include entrepreneurs who only make non-refundable transactions, which are exempt from tax.
From January 2023, a large package of tax changes will come into effect. The most anticipated new measure is the increase in the mandatory VAT registration limit, from 1,000,000 to 2,000,000 crowns.
This increase has already been approved by the Senate and signed by the President of the Czech Republic. Publication of the law is planned for December 2, 2022.
Although the change of the limit itself comes into force in January 2023, some transitional provisions have already come into effect. The purpose of these transitional provisions is to exclude entrepreneurs who are not yet VAT payers, as well as those whose turnover – according to § 4a of the VAT Law – does not exceed 2 million crowns by the end of the year, if they do not wish to register voluntarily. Existing VAT payers can also leave the VAT system (via cancellation of registration) if their turnover does not exceed 2 million crowns by the end of the year. Transitional provisions apply to the period from November to December 2022.
What if my turnover exceeded 1 million Czech crowns in October?
Where turnover exceeds 1 million crowns in October 2022, the taxpayer must apply for registration as a VAT payer. From December 1, 2022, he or she will become a VAT payer according to law.
What if my turnover exceeded 1 million Czech crowns in November?
Here, transitional provisions apply. Where turnover exceeds 1 million crowns in November or December 2022, but does not exceed 2 million crowns, the taxpayer has no obligation to register for VAT.
What should I do if my turnover exceeds 1 million Czech crowns in November or December, and I want to become a VAT payer?
Where turnover exceeds 1 million crowns in November or December 2022, the taxpayer has the opportunity within 5 calendar days from the date of new provisions coming into force to apply for registration as a VAT payer. Consequently, from January 1 or February 1 2023, this person will become a classic VAT payer.
But be careful! This can only be done within a 5-day period from the date of publication of the changes. This period expires on December 8, 2022.
VAT payer’s deregistration.
According to §106b, you can request to cancel your VAT registration if:
• You have been a VAT payer for at least one year;
• Your turnover for the last 12 consecutive calendar months has been less than 1 million Czech crowns (or less than 2 million according to the rules which will come into force from 01.01.2023).
After the taxpayer applies for deregistration, the tax office has some time to make a decision – this could take several months. If you apply in January 2023, you will most likely cease to be a VAT payer from February or March 2023.
Do you already want to jump out of the system in 2022?
It will be important for some private individuals to stop being a VAT payer in 2022 – if you are an entrepreneur (OSVČ) who is considering the possibility of switching to the single tax in 2023, read more about it in our article Flat Tax. An entrepreneur with a legal address (sidlo) in the Czech Republic, who is not a member of collective VAT registration, may submit an application for cancellation of his registration as a VAT payer within 5 calendar days of these changes. This can occur if his turnover, according to § 4a of the VAT Act, exceeded 1 million crowns, but did not exceed 2 million crowns for 12 consecutive calendar months immediately preceding this provision’s introduction. The condition of being a VAT payer for at least one year in this case does not apply, which means that entrepreneurs who became VAT payers in 2022 can also annul their registration as a VAT payer. The entrepreneur will cease to be a VAT payer on the day following his decision to cancel his registration, but no earlier than 01.01.2023.
Our professional team at DoMyTax can take care of your registration or, on the contrary, remove you from VAT registration. You can call us, write to us or just come to our office for a cup of coffee.