A study by the consultancy firm Forvis Mazars shows that the Czech Republic has a basic rate of VAT similar to its neighbours, but its reduced rate is higher than that of the others. <\/p>\n\n\n\n
VAT (Value Added Tax) is the main source of tax revenue for the state, accounting for almost half of all taxes collected, excluding compulsory insurance premiums. Last year, taxpayers paid CZK 567.2 billion in VAT and CZK 230 billion was collected in the first five months of this year. VAT is a shared tax, the revenue from which is divided between the state budget, regions and municipalities.<\/p>\n\n\n\n
Entrepreneurs in the Czech Republic must register to pay VAT if their turnover exceeds CZK 2 million in a period of 12 consecutive months. This means that they must continuously monitor their turnover month by month. As soon as their total turnover in the previous 12 months exceeds CZK 2 million, they must register for VAT. However, entrepreneurs with a turnover below the threshold may also choose to voluntarily register to pay VAT.<\/p>\n\n\n\n
The government introduced a consolidation package to simplify the tax system. This package reduces the number of reduced VAT rates and increases tax revenues by moving some goods and services to the standard rate of 21%. This change means higher taxes for consumers of these goods and services.<\/p>\n\n\n\n
The basic VAT rate in the Czech Republic is 21%, while the reduced rate is 12% as of this year. Until last year, the Czech Republic had two reduced rates of 10% and 15%. However, the government introduced a consolidation package that combined these rates into a single reduced rate of 12% and moved some goods and services from the reduced rate to the basic rate. Among these goods and services are hairdressing services, cleaning services, and beer on tap.<\/p>\n\n\n\n
Germany has the lowest basic VAT rate among the neighbouring countries, at 19%. Austria and Slovakia follow with 20 %, while Poland has the highest rate at 23%. Among the countries of the Visegrad group (V4 – Czech Republic, Slovakia, Poland, Hungary), Hungary has the highest standard VAT rate of 27%, which is also the highest in the entire EU.<\/p>\n\n\n\n
EU legislation allows countries to have one or two reduced VAT rates in addition to the standard rate. The reduced rate of 12% in the Czech Republic is higher than average compared to neighbouring countries. In Germany, the reduced rate is 7%, while Poland applies two reduced rates of 5% and 8%. Slovakia has reduced rates of 5% and 10%, while Austria uses two reduced rates of 10% and 13%. Hungary applies reduced VAT rates of 5% and 18%.<\/p>\n\n\n\n
However, the study points out that different countries have a different distribution of items between standard and reduced VAT rates. Pavel Klein, managing partner of the tax department of Forvis Mazars in the Czech Republic, noted that the tax systems of different countries and the amount and number of VAT rates are only one of the criteria for assessing a country’s VAT system. To get a complete picture, it is necessary to further investigate the tax rate to which individual types of goods and services are subject. Indeed, the study shows that when comparing the burden of VAT on consumers, it is necessary to consider not only the percentages of the various rates, but also which goods and services are taxed at each rate.<\/p>\n\n\n\n
In conclusion, the Czech Republic has a higher reduced VAT rate than its neighbouring countries, but the recent simplification of the tax system may increase the burden on consumers.<\/p>\n\n\n\n