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Dear readers,

today’s article brings information about and practical examples of applying VAT in the Czech Republic on goods supplied from a non-EU country (the “import”) and to non-EU countries (the “export”). This article only addresses transactions between two entities, taxable persons (entrepreneurs), where the entrepreneur (customer/supplier) seated in the Czech Republic has been registered for VAT purposes in the Czech Republic.

Import of Goods to the Czech Republic from a Non-EU Country

If you import goods released to free circulation in the Czech Republic on your account (i.e. you are the declarant), you are liable to pay VAT in a tax return (row 7 of the tax return, or row 8 for reduced VAT rates, as appropriate). If you are eligible for a tax deduction, you also deduct VAT (row 43 of the tax return, or row 44 for reduced VAT rates, as appropriate). As a result, such transaction can be tax neutral for you.

A tax document is the “decision on the goods’ release into customs procedures” rather than a supplier’s invoice. Hence, the supply is presented in the tax return for the taxation period that includes the date provided as the date of the goods’ release into free circulation in the decision. The import is not presented in the control statement.

Release of goods into free circulation is the most common reason for establishing the duty to declare VAT. The importer is obliged to declare tax (under local regulations) in case of such release. The importer is the person, on whose account goods are released (i.e. usually the declarant presented in the decision).

• Place of Performance in Another EU Member State

Please be advised that if you import goods to other EU member states where the goods’ transportation terminates, you are likely to be obliged to declare tax in compliance with local regulations. If you are considering such transaction, we recommend consulting implications thereof with a tax advisor in advance.

• Purchases of Goods, Including Assembly

This transaction is special as two taxable supplies are performed in a single transaction from the perspective of the Czech VAT Act, i.e. an import of goods from a non-EU country and a supply of goods, including assembly.

The Czech Republic will be the place of performance in both cases as long as the goods are both released into a customs procedure and supplied, including assembly, locally. In the first case, the person liable to declare tax is the person presented as the declarant in the customs decision (supplier/ local customer). In the second case (supply of goods with assembly by the supplier not established in the Czech Republic), it is the local customer.

Export of Goods from the Czech Republic to a Non-EU Country

Export of goods must be seen as a standard supply of goods connected with transport or dispatch under the Czech VAT Act, i.e. a taxable supply with a place of performance located where the transport or dispatch has been initiated. If conditions for the supply’s VAT exemption are met, tax is not paid.

The supply is VAT exempt if the goods are transported/dispatched from the Czech Republic to a non-EU country by the seller (or an authorised third party, as the case may be) or the buyer (or an authorised third party, as the case may be) that is not registered/ does no reside / has no establishment in the Czech Republic.

The tax document is customarily an invoice. The supply is presented in row 22 of the tax return for the taxation period when the goods were released into the export procedure. The supply is not presented in the summary report or the control statement.

Export of goods (and, as a result, eligibility for the VAT exemption) is supported with the customs authority’s decision on the export of goods to a third country or evidence such as a delivery note confirming the goods’ takeover by the customer, transport documentation, etc.

• Initiation of Transport Outside the Czech Republic

Czech VAT only applies to goods, transportation or dispatch of which was initiated locally. For example, if a local entrepreneur supplied goods to Switzerland and the goods were located in the territory of Slovakia at the moment of initiating transportation thereof, the supply involved would not be subject to tax in the Czech Republic, i.e. it is not necessary to analyse the conditions for VAT exemption. On the other hand, it is vital to examine tax implications of such transaction in the country where transportation was initiated.

A local entrepreneur will present the supply in row 26 in the Czech tax return where supplies with a place of performance outside the Czech Republic are presented (among others), in relation to which the taxpayer is entitled to a tax deduction.

While the above-provided summary describes information about VAT application on supplies of goods from/to non-EU countries, it cannot replace a tax advisor’s opinion. The area dealt with herein is rather large and, due to the cross-border element, challenging. This article also brings everyday-life examples that, however, are numerous. If you are interested in additional information or are unsure as to the treatment of a particular transaction, please feel free to contact us. We will be happy to assist you!

Michaela Kozminská
kozminska@edmutilitas.cz