Updated 5 April 2023

Compulsory registration

Compulsory VAT registration is triggered by turnover exceeding CZK 2 million over 12 consecutive months (be careful: this is a rolling period, not a calendar year). Turnover does not include services supplied abroad (EU and worldwide). You do not need to do anything in the month you exceed the threshold, but you must apply for VAT registration by the 15th of the following month. Regardless of how quickly the tax office processes the registration, you become a VAT payer in the month following the month of registration.

CZK 2 million threshold exceeded: 12 January 2022

VAT registration deadline: 15 February 2022

VAT payer from: 1 March 2022

First VAT return due by: 26 April 2022 (the 25th falls on a Sunday)

If you wish to claim input VAT in your first return on business assets acquired in the 12 months before 1 March 2022, resulting in an excess input VAT credit, the state will pay it to you on 25 May 2022.

Voluntary registration

Fortunately, the days when tax offices were reluctant to register voluntary VAT payers are over. I register clients voluntarily several times a year without problems. Nevertheless, you still need to prove your business is active. The tax office takes preventive action against possible VAT fraud and will not register a dormant or newly established company with no invoices or contracts!

So what should you provide? 
  • sales invoices (the first ones for a newly established entity, or the last 5 invoices for an operating entity)
  • the supposedly optional attachment – a comprehensive questionnaire several pages long; although not compulsory, it greatly improves the chances of registration
  • supplier and customer contracts

The tax office has 30 days to process the application. It may request additional information, extending the time limit, but if you supply the documents above, you should succeed within 30 days. You become a VAT payer the day after you collect the registration decision from your data mailbox. In a way, you can therefore influence the date yourself.

Voluntary registration application submitted: 12 January 2022

Tax office processing deadline: 12 February 2022 (30 days)

Decision received in data mailbox: 31 January 2022

Message opened on: 3 February 2022

VAT payer from: 4 February 2021

First VAT return due by: 25 March 2022

If you wish to claim input VAT in your first return on business assets acquired in the 12 months before 4 February 2022, resulting in an excess input VAT credit, the state will pay it to you on 26 April 2022.

Generally, voluntary registration is therefore about a month faster. You can also influence and plan its timing yourself. Nevertheless, everything has its limits. A data message is deemed delivered on the 15th day after receipt. 🙂

Which is better for you?

I am often asked whether to register voluntarily, and my answer is always the same – it depends on your situation:

  1. Who do you invoice? I view invoicing abroad differently from invoicing Czech VAT payers or Czech non-VAT payers and private individuals.
  2. How much total VAT is included in a normal month’s purchases for your business? More technically, how much input VAT do you have? 🙂
  3. When did you acquire particular business assets, and until when can the VAT be claimed retrospectively?
  4. And last but not least, how much will monthly VAT administration cost you?

These are the points that interest me. I do not want to go into invoicing different types of customers in detail here—that deserves an article of its own. Of course, you probably realise that invoicing a VAT payer as a VAT payer is fine, whereas invoicing non-VAT payers or private individuals as a VAT payer will probably not make them happy when your services become more expensive … 🙂 Business owners who invoice their services only abroad are in an entirely different category and have the most advantageous position here. They invoice at 0% VAT and are entitled to all input VAT on purchases.

What is probably the best approach:

Think of a typical month and the purchases you make for your business. Calculate how much VAT you could reclaim from the tax office, then subtract the difference in your accountant’s fees for handling your accounts as a non-VAT payer versus a VAT payer. For example, my fee difference is around CZK 2,000. This means you should have at least CZK 10,000 in monthly expenses for VAT registration to be worthwhile. And all of this assumes that invoicing with VAT does not affect your customers.

There are also situations where a client considers voluntary VAT registration because they are buying an expensive asset (most often a car). It is useful to know that, in your first VAT return, you can claim input VAT on tangible items acquired up to 12 months earlier. For depreciable assets over CZK 80,000, the entitlement is reduced by ⅕ if the purchase took place in another year—for example, buying a car in 2020 and becoming a VAT payer in 2021. For low-value assets up to CZK 80,000, the entitlement is in full. This means you do not need to register for VAT right at the start of your business. And there is another side to the story: if you sell the car, you sell it with VAT again. So it does not mean you save all the VAT on the purchase. 🙂

What follows from all this? Mainly that everyone’s situation is different. Work out what is better for you and proceed accordingly – if you would like to register for VAT or get advice, write to me. Personally, I recommend waiting and not rushing into it at any cost. In practice, voluntary registration often turns out to have been somewhat unnecessary.