The exemption from paying VAT only applies to businesses whose domestic turnover did not exceed CZK 2,000,000 in the previous calendar year or CZK 2,536,500 in the current calendar year, or who carry out only supplies exempt from VAT without the right to deduct VAT.
When a business is exempt from paying VAT
The exemption from paying VAT only applies to businesses whose domestic turnover did not exceed CZK 2,000,000 in the previous calendar year or CZK 2,536,500 in the current calendar year, or who carry out only supplies exempt from VAT without the right to deduct VAT. The turnover shall mean the total of considerations without tax that pertain to the taxable person for carried out supplies that include supply of goods and provision of service with the place of supply in the Czech Republic, if these are considerations for: taxable supplies, supplies that would be taxable if they were not exempted in the Czech Republic under the special scheme for small enterprises (SME), supplies exempt from VAT with the right to deduct VAT, or certain supplies exempt from VAT without the right to deduct VAT (financial, pension-related , insurance activities, supply of land, supply of selected immovable things and lease of immovable things), unless they are a supplementary activity. The turnover shall not include the considerations for sale or provision of fixed assets, unless a part of the business’s common economic activity.
In the domestic territory, the supply carried out by a person registered for the special scheme for small enterprises (SME), who may use this regime, or by a person liable for tax with its seat in the domestic territory who is not a taxable person, which would be a taxable supply if carried out by a taxable person, is exempt from VAT.
VAT exemption applies also to businesses who only perform supplies exempt from VAT without the right to deduct VAT.
What products/services are exempt from VAT
The exemption from VAT applies to selected transactions in the public interest and transactions where no added value arises. Transactions that are not consumed in the Czech Republic are also exempt from VAT.
Description: There are three main categories that are exempt from VAT:
- The exemption without the right to deduct VAT
- The exemption with the right to deduct VAT
- Other exemption.
For example, the following transactions are exempt without the right to deduct:
- basic postal services and supply of post stamps,
- radio and television broadcasting,
- financial activities,
- pension-related activities,
- insurance activities,
- supply of land (except for building land), with a possibility to choose a non-exemption treatment,
- supply of selected immovable things, namely a structure fixed to the ground, a unit, land that forms a functional unit with a structure fixed to the ground, and superficiary right of building (except for the first supply within 24 months from their completion or substantial modification), with a possibility to choose a non-exemption treatment,
- lease of immovable thing (except for a short-term lease of the immovable thing, accommodation services, lease of vehicle parking premises and areas, lease of safe deposit boxes, lease of machines or other fixed equipment), with a possibility to choose a non-exemption treatment between payers, except for e.g. lease of a family house, residential premises, a unit that includes residential premises and possibly a garage or a cellar, a building in which at least 60% of the floor area are residential premises, land or a superficiary right of building that includes a family house, residential premises or the above defined building,
- training and education,
- health care services and supply of health care goods,
- social assistance services,
- operation of lotteries and other similar games,
- other transactions exempted without the right to deduct VAT.
For example, the following transactions are exempt with the right to deduct:
- supply of goods to another Member State,
- exports of goods,
- provision of services to a third country,
- transportation and services directly linked to the imports and exports of
goods,
- passenger transport,
- imports of goods transported from a third country, where their dispatch or transport ends in another Member State, and the delivery of such goods to another Member State is exempt from tax,
- supply of books, picture books, drawing books, colouring books, booklets, music books or cartographic products, including a sound recording of a presentation of their contents and the provision of services similar to delivery of a book.
Selected transactions that would normally be subject to VAT are exempt from VAT under certain conditions:
- intra-Community acquisition of goods, if the supply of such goods would be exempted from VAT, the import of such goods would be exempted from VAT or the person making the acquisition has the right to the input VAT refund,
- import of goods (e.g. in personal luggage, for EU entities, for NATO forces, for diplomatic missions, etc.).
Whether VAT exemptions exist for small companies and, if so, what the thresholds are
Businesses (taxable person carries economic activities) established in Czech Republic are exempt from paying VAT if their domestic turnover for the calendar year does not exceed CZK 2.000.000. After exceeding the domestic turnover business becomes a VAT payer and should register for VAT purpose.
Businesses, whose carries only exempt supplies without right of deduct VAT (e.g. financial, insurance, pension transactions or social services) are exempt completely from paying of VAT.