New VAT Requirements and Obligations for Non-Residents in the Czech Republic Starting from 2025
Starting in 2025, non-residents in the Czech Republic will face new requirements and obligations related to Value-Added Tax (VAT). These changes aim to align with updated European Union VAT regulations and ensure compliance with the evolving tax framework.
Here is an overview of the key points:
1. Mandatory VAT Registration
- Non-resident businesses providing goods or services within the Czech Republic will be required to register for VAT, regardless of whether they have a permanent establishment in the country.
- This applies to both B2B (business-to-business) and B2C (business-to-consumer) transactions, including e-commerce and digital services.
2. Digital and E-Commerce Obligations
- Businesses selling digital products or services to Czech consumers must comply with VAT rules under the EU’s One-Stop Shop (OSS) or Import One-Stop Shop (IOSS) systems.
- Reporting and remitting VAT for digital services will now follow stricter guidelines.
3. Changes in Reverse Charge Mechanism
- In certain cases, the reverse charge mechanism may no longer apply for non-residents, requiring direct VAT payment to Czech authorities by the service provider.
4. Filing and Reporting
- Non-resident businesses will need to submit regular VAT returns and ensure all invoices comply with Czech tax standards, including specific language and format requirements.
- The deadline for submitting VAT returns remains monthly or quarterly, depending on the turnover threshold.
5. VAT Threshold Adjustments
- The VAT registration threshold for non-residents may be adjusted, potentially lowering the entry point for mandatory registration.
6. Penalties for Non-Compliance
- Failure to comply with the new regulations may result in fines, penalties, or restrictions on conducting business in the Czech Republic.
Action Steps for Non-Residents:
Update Systems: Adapt invoicing and accounting software to meet new requirements.
Assess Current Obligations: Review existing VAT registration and reporting practices to identify potential gaps.
Seek Local Expertise: Engage a Czech tax advisor to ensure compliance with the updated regulations.
