Being tax compliant is always an issue when selling online. Of course, there are several reasons that might require a proper VAT registration. The annual threshold limit for distance selling is one of them. This article gives a brief overview on the VAT Threshold Limit in the Czech Republic and recent changes.
Antonia KlattLast Updated on 22 October 2021
VAT Threshold Limit: Czech Republic
Besides founding a company or storing goods abroad, an EU VAT registration for an EU-company is required when this company is selling goods across EU borders directly to consumers via Distance Selling. When selling online to other EU countries, a high annual turnover can lead to VAT duties in the country of import.
For example, up until July 2021 selling goods from Germany to customers in the Czech Republic, being registered for VAT only in Germany is sufficient if the annual turnover did not exceed the VAT registration threshold of the Czech Republic (1.140 000 CZK). The VAT registration was not enough if the annual turnover exceeded this limit. Once it was reached, the seller registered in Germany also had to register for VAT in the Czech Republic and submit VAT returns, file VAT reports, etc.
Since July 2021 a VAT registration becomes mandatory once a new EU-wide threshold for distance selling of € 10,000 has been exceeded Country-specific VAT thresholds were abolished. Sals of goods and services valued below this threshold are still taxed at the local VAT and paid in the home country. The first € 10,000 are therefore taxed with the german VAT rate and VAT needs to be paid in Germany. But as soon as distance sales exceed the new, lower EU-wide threshold of € 10,000, VAT is due in each country in which the goods are sold. The 10,001st and each additional Euro must therefore be taxed with the czech VAT rate and VAT is due in the Czech Republic. Then the registration for VAT and filing of VAT returns in the Czech Republuc is necessary.
Threshold Limit Czech Republic in CZK, USD & EUR
If a foreign company is selling below the threshold, it does not need to be registered for a VAT number. Once over these limits within the same calendar year, it must apply for a VAT number. In case of reaching the threshold in different countries you needed to register in these additional countries as well.
This regulation also changed in July 2021. Te new VAT threshold of € 10,000 applies across the EU, meaning in sum across all countries a distance seller is selling too. As soon as this threshold is reached for example through sales to Poland, France and the Czech Republic, VAT registration is due in all three of these countries. It is no longer necessary to reach individual thresholds.
|previous VAT treshhold Limit Czech Republic||1 140 000 CZK||~ $46 000||~ 44 300€|
|new EU-wide VAT treshhold||~ 258 000 CZK||~ $ 11 900||10 000€|
Register for VAT in Czech Republik
Submit VAT Return in Czech Republik
In case that a seller is distance selling to several european countries, the one-stop shop or “OSS” process might also be useful. Once registered for OSS, a seller can no longer apply the the EU-wide VAT threshold. On the plus side though, the VAT registration, filings of returns, and payment of VAT in several countries are significantly simplified. Hellotax can also help sellers registrate and manage OSS.