Czech Republic: Proposed increase in VAT registration limit, income limit for applying lump-sum tax regime

Proposal to increase annual turnover limit for obligatory VAT registration

Proposal to increase annual turnover limit for obligatory VAT registration

The Ministry of Finance has proposed increasing the annual turnover limit for obligatory value added tax (VAT) registration to CZK 2 million (from CZK 1 million) and increasing the annual income limit for the application of the lump-sum tax regime.  

The Ministry also has proposed modifying the penalties for failure to file a VAT ledger statement.

Increase in limit for VAT registration

The increase in the annual turnover limit for registration as a VAT payer to CZK 2 million aligns with the increased limit in the amended EU VAT Directive of €85,000 from 2025. The Czech Republic's request to increase the limit as early as 2023—i.e., before the amendment to the EU VAT Directive comes into force—has already been approved at the EU level.

Taxpayers with an annual turnover of less than CZK 2 million will be able to apply for the cancellation of their VAT registration on the grounds of the increase of the turnover limit in the law even before 1 January 2023, i.e., before the law comes into force. Thus, they will not be considered VAT payers as of the beginning of 2023 and will be able to apply the lump-sum tax regime on that date if the decision to cancel their registration is delivered to them before 16 January 2023.

Increase in limit for applying lump-sum tax regime

In connection with the increase in the upper limit for obligatory VAT registration, the Ministry also has proposed increasing the income limit for applying the lump-sum tax regime to CZK 2 million a year. However, unlike now, the lump-sum tax amount including social security and health insurance contributions will not be the same for all taxpayers, as several new taxation levels also have been proposed.

Read a June 2022 report prepared by the KPMG member firm in the Czech Republic

 

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