As of January 1, 2025, significant changes to the value added tax (VAT) system will come into effect in the Czech Republic. These amendments are introduced by Act No. 461/2024 Sb., which modifies Act No. 235/2004 Sb. on VAT. The changes aim to align Czech legislation with European directives, case law of the Court of Justice of the European Union (CJEU), and to address practical issues encountered in the application of the current VAT framework.
Until 2025, Czech small businesses with an annual turnover of up to CZK 2 million could benefit from VAT exemption only within the Czech Republic. Starting January 1, 2025, a new cross-border VAT scheme will be introduced, based on Council Directive (EU) 2020/285.
Under the new scheme, small businesses with an annual turnover of up to EUR 100,000 for the current and previous calendar years will be able to apply VAT exemption in other EU countries, provided those countries offer a comparable exemption. EU Member States may impose additional restrictions based on the type of business activity or services.
To use the cross-border scheme, a business must register in the selected EU Member State (the “exemption state”) and obtain a special identification number (EX ID). In the Czech Republic, this is referred to as the daňové evidenční číslo (DEČ SME).
As a result, Czech companies that meet the criteria will be able to benefit from VAT exemption in other EU countries. Likewise, businesses from other EU states may register in the Czech Republic and use the same exemption under the same conditions as local non-VAT payers.
Further information will be made available on the official website of the Czech Financial Administration.
Starting January 1, 2025, the rules for mandatory VAT registration in the Czech Republic will change, according to the amended § 6 of the VAT Act (ZDPH).
There will now be two annual turnover thresholds triggering mandatory VAT registration:
For each threshold, the company must file a VAT registration application within 10 working days of exceeding the limit. If the application is submitted on time, the company may choose the effective start date of VAT registration (from the day after the application is submitted). However, if the deadline is missed for the first threshold, registration becomes automatic on January 1 of the following year.
Important: If a company already applied for registration after reaching the first threshold but then also reaches the second threshold, it must submit a new application after crossing the second threshold.
The Czech Financial Administration will publish more detailed information about the new registration procedures on its official website.
From January 1, 2025, businesses in the Czech Republic will have more flexibility in selecting their VAT reporting period. Companies with an annual turnover of up to CZK 15,000,000 will be eligible to switch from monthly to quarterly VAT reporting. Previously, the limit was set at CZK 10,000,000.
To switch to a quarterly tax period, the company must indicate the appropriate tax period code in its final VAT return for 2024, which must be submitted in January 2025. The main condition for this transition is that the company’s turnover in 2024 must not exceed CZK 15 million.
This change is expected to reduce administrative burden and simplify VAT compliance for qualifying businesses.
Starting January 1, 2025, new rules will apply regarding the VAT status of identified persons in connection with advance payments. A business will now acquire the status of an identified person immediately upon receiving an advance payment for a service, provided the place of supply is in another EU member state and the specific service to be rendered is clearly defined at the time of payment.
This rule also applies in cases involving:
Once the advance payment is received under these conditions, the entrepreneur is required to submit a Recapitulative Statement (Souhrnné hlášení) and fulfill VAT obligations before the actual supply of goods or services.
This amendment establishes a clear point in time when VAT obligations arise, which simplifies VAT administration in advance payment situations.
From January 1, 2025, changes will also affect how groups of companies connected by capital or personnel are treated under the VAT Act. Definitions for such groups have now been consolidated under § 4 of the Czech VAT Act (ZDPH):
Further guidance and practical clarifications are expected to be published separately by the Czech Financial Administration.
In addition, the definition of the place of supply for services in the fields of culture, sports, education, and entertainment will be updated. Previously, the place of supply was considered to be where the event physically took place, regardless of whether the event was held in person or virtually.
Starting in 2025, § 10b of the VAT Act will apply only to services provided to taxable persons, such as the sale of event tickets and related services. If the customer physically attends the event, the place of supply will remain the actual location of the event.
These changes clearly distinguish VAT treatment based on the format of service delivery (in-person vs. virtual), improving clarity and aligning Czech legislation with EU VAT directives.
Venera Service Delivery s.r.o. is ready to help your business smoothly adapt to the upcoming VAT changes that will take effect in the Czech Republic on January 1, 2025. Our specialists will assist you in navigating the new cross-border VAT scheme for small businesses, choosing the most appropriate tax period, preparing the necessary documentation, and submitting your reports on time.
We will conduct a thorough audit of your current situation, help minimize tax risks, and ensure you avoid potential penalties. For expert guidance on any VAT-related matters, contact our team for professional support.