On 30 October 2024, the Chamber of Deputies approved an amendment to the Value Added Tax (VAT) Act, which brings several fundamental changes, especially for small businesses. The main innovation is the introduction of the possibility that small businesses with their registered office in other EU member states can also use the exemption from VAT payment in the Czech Republic, if their turnover per calendar year does not exceed CZK 2 million. Czech businesses in other EU member states will also be able to use the same exemption.
The amendment to the Act also focuses on the implementation of European regulations and technical adjustments that respond to current court decisions and practical experience. In addition, it contains the adaptation of the VAT regime for small businesses according to the European directive. Small businesses with an annual turnover of up to CZK 2 million that are registered in other EU member states will not be obliged to become VAT payers in the Czech Republic. The same applies to Czech companies that want to use this exemption in other EU countries.
Another significant change is the method of calculating turnover. Until now, turnover was calculated for a period of 12 consecutive months, but now it will be calculated for a calendar year. This will also affect the obligation to become a VAT payer. If a small business exceeds CZK 2 million during the year, it will only become a VAT payer from January 1 of the following year, unless it decides to become a payer earlier. If turnover exceeds CZK 2,536,500 (EUR 100,000), the business will become a VAT payer immediately.
The amendment also brings clarification of the rules for VAT in the construction industry, simplifies the conditions for VAT exemption for the supply of buildings and land and expands the possibilities for applying VAT in the case of bad debts. It also introduces a new institute of VAT refund in the case of unjust enrichment.
Another interesting change is the abolition of the possibility of VAT refund when purchasing a car for people with disabilities. However, this change will be offset by an increase in the contribution for the purchase of a motor vehicle by CZK 85,000, which is part of the amendment that falls under the Ministry of Labor and Social Affairs.
The amendment is currently awaiting discussion in the Senate. If passed, it should enter into force on January 1, 2025, with some parts, such as changes related to construction and real estate sales, only taking effect on July 1, 2025. Other changes, such as those related to VAT refunds, will apply from January 1, 2026, and parts related to vehicle subsidies from January 1, 2028.
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