When is it good to be a VAT payer?

Who is a VAT payer?

A VAT or value added tax payer is a legal or natural person who can purchase goods or services at a "discount" for the purposes of their business. The amount depends on the VAT rates for the year (currently 21% and 12%). After the end of the accounting period, a percentage of the purchase price will be paid back to the entrepreneur by the state - so the entrepreneur buys so-called tax-free.

When do I become liable for VAT?

Do you know how to become a VAT payer? To some extent, you can decide for yourself - it is compulsory by law to become a VAT payer when your turnover in a calendar year exceeds a certain amount:

• CZK 2,000,000, you are obliged to register for VAT from 1 January of the following year (or voluntarily immediately);
• CZK 2 536 000 (this amount corresponds to the conversion of EUR 100 000), you are obliged to register immediately, i.e. with effect from the day after you exceed this threshold.

If your turnover for a given period did not exceed CZK 2 million but you would like to be a taxpayer, you can register for VAT voluntarily. However, it is up to the tax office to decide whether to approve your registration.

How is turnover calculated for VAT?

Turnover for VAT is the sum of all the amounts you have received as a business in the course of your business in the Czech Republic for the supply of goods, transfer of property or provision of services. Annual turnover does not include money you have earned from the sale of fixed assets or income you have earned from occasional additional activities.

Section 4a of the Value Added Tax Act specifies the categories of amounts charged as turnover. According to this law, these are:

• taxable supplies,
• tax-exempt supplies entitled to a tax deduction,
• tax-exempt supplies without the right to deduct tax, as specified in Sections 54, 55, 56 and 56a of the VAT Act (but only if they are not ancillary activities which are carried out occasionally).

VAT registration

When you meet the conditions for compulsory VAT registration, you must register for VAT with the tax office. Use the form: VAT registration application on the website of the tax administration (section Registration => VAT registration application).

Remember also that according to Section 94 of the VAT Act, you have 10 days from the day you exceed the decisive turnover amount to file the application. All communication with the tax office is then done online via data box.

You notify your registration after you have exceeded a turnover of CZK 2,000,000, when you can choose whether you want to become a VAT payer voluntarily immediately or compulsorily from 1 January of the following year. If you decide to wait and in the same year you exceed the turnover of CZK 2,536,000, you have to notify the VAT registration again.

If you have opted for voluntary VAT registration, it does not matter so much when you submit your VAT registration. You can take this step at any time. However, in the case of voluntary VAT registration, you do not automatically become a VAT payer and it may happen that the authorities reject your application for registration.

When does it pay to be VAT registered?

Whether or not it is more profitable to be a VAT payer depends on your position on the business market.

If your customers are VAT payers or you yourself buy from a company that is VAT payer, it is more profitable for you to register for VAT even if your annual turnover does not exceed CZK 2,000,000.

When is it worthwhile to be a VAT non-taxpayer?

If your customers are not liable for VAT or if you are in the role of a customer to a company that does not pay VAT, it is usually more profitable for you not to be liable for VAT.

Disadvantages of VAT payers

Although there are many advantages to being a VAT payer, there are a few things to look out for. The main disadvantage is the relatively heavy administrative burden. As a rule, you cannot do without an accountant.

How does this work in practice? The duties of a VAT payer include, in particular, making tax documents for customers, keeping and filing VAT returns and filing the so-called control report.

The documents are submitted electronically within predefined deadlines. You must then archive the tax documents for at least 10 years.

Take the hassle out of VAT

You already know who is a VAT payer, how to become one and the advantages and disadvantages. Do you want to register as a VAT payer or are you looking for a helping hand for regular VAT reporting and returns? Contact us - we'll be happy to help with voluntary registration and the complete tax agenda.