The obligation to register a company for value added tax (VAT) is not the most attractive part of doing business for entrepreneurs. Most of them associate it with filling out forms, endless communication with authorities and the complexity of the whole process. However, it is necessary for tax compliance and is also a basic legal obligation.
When do I have to register for VAT as a company?
There is no need to register a company for VAT immediately after establishment. Entrepreneurs must register for VAT when their turnover for 12 consecutive calendar months exceeds a certain threshold. Until December 2022, this threshold was set at 1,000,000 CZK or 40,000 EUR.
However, from 1 January 2023, the threshold for VAT registration has increased to 2,000,000 CZK or 80,000 EUR. This means that if your turnover exceeds this threshold within 12 months, you will have to apply for VAT registration. You can also register voluntarily, even if you do not meet the turnover threshold.
What is a voluntary VAT payer?
A voluntary VAT payer is an entrepreneur or company that has decided to voluntarily register for value added tax (VAT), even if it does not exceed the mandatory registration threshold. Voluntary VAT registration is an option that entrepreneurs and companies can use if they consider VAT to be beneficial for their business.
What are the benefits of voluntary VAT registration and when will it pay off for you?
- Obtaining a tax deduction - voluntary VAT payers can claim a tax deduction for expenses that are related to business and are related to VAT.
- Greater credibility - being a VAT payer can increase the credibility of your business and bring in more customers.
- The ability to issue VAT invoices - being a VAT payer means that you can issue VAT invoices, which can be advantageous for business relationships and for fulfilling tax obligations.
- Access to international trade - being a VAT payer allows you to do business internationally, where VAT is a regular part of the tax system.
In international trade, VAT is only relevant within the Schengen area. Outside this area, VAT plays no role. If a Czech company purchases goods or services from a supplier within the Schengen area, it is not obliged to pay VAT under the reverse charge mechanism. However, a non-VAT payer will have to pay VAT to the supplier.
What does voluntary VAT registration entail and what complications may arise during registration?
When voluntarily registering for VAT, an application is not enough, but several documents must be submitted, which must be approved by the tax administrator. However, there is no guarantee that registration will be allowed or approved immediately only based on the submission of all required documents.
When registering newly established companies, the tax administrator does not have any data on the nature of their business or their compliance with tax obligations. Therefore, it is necessary to add other necessary information to the registration application, including, for example, a business plan, an overview of business partners, etc.
However, the chances of successful registration can be increased by providing quality documents and complete information about your business activities.
We will help you with the entire process
If you want to register your company for value added tax and do not want to go through a lengthy round of offices, we have a solution for you. Thanks to our experience and knowledge of procedures, we can provide you with professional support throughout the entire process.
We will help you with the preparation of the necessary documents, such as the VAT application, the completion of documents and attachments, we will describe your activities, provide instructions for submitting the application and also resolve any objections from the tax office.
This way you will save time that you can devote to more important activities.