Amendments to the Tax Code came into force in 2013, which stipulate how VAT is applied when Czech entities perform contracts in EU countries. Non-payers of VAT are no longer required to register for payment, but may use the special payment system. The amendment introduced the status of an identified person, i.e., a natural or legal person who registers for the so-called transfer tax.
When issuing invoices to EU member states, it is necessary to distinguish between several types of entities depending on whether they meet the conditions for value added tax (VAT) in the Czech Republic. If a natural or legal person is a VAT payer, different invoicing conditions apply than for non-payers; for VAT payers, exempt supplies that are exempt from the obligation to pay VAT abroad and supplies that are subject to reverse charge are identified
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VAT non-payers are identified individuals if they receive or issue cross-border invoices. Generally, this occurs when:
–purchasing goods from another EU member state for business purposes;
–from entities liable for tax in another EU member state
–receiving services performed in the Czech Republic,
–selling goods to such entities,
–Cessation of business and transition from taxpayer status to non-taxpayer status – The entity becomes a specified individual for one year.
Under the above conditions, the non-taxpayer immediately becomes a specified individual and is obligated to register for cross-border tax payments. Registration must be made within 15 days from the date of incorporation and may be done in person using a form available at the tax office or electronically. At the same time, the invoices issued or received must be documented as a summary report and filed electronically within 25 days of the last day of the month for each month in which the filing obligation arose.
The invoice itself must contain elements specific to the application of the reverse charge, i.e., the VAT on all items must be set at 0%, and it must contain the following notice Customer pays tax.
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