Czech Republic: Information on application of VAT from January 2024

The General Financial Directorate (GFD) published its information on changes to value added tax (VAT) rates from 1 January 2024 and information on the application of VAT on selected passenger cars from 1 January 2024.

The information on changes to VAT rates mainly focuses on the following:  

• Definition of selected beverages and potable (tap) water
• Tax rate for land public passenger transport
• Tax rate for the supply of beverages as part of catering and accommodation services
• Tax rate for medical devices
• Tax rate for the supply of food and beverages (specifically, the supply of baby food, coffee, tea and other dry foods, instant mixes, etc.)
• Tax exemption for the supply of books and the provision of similar services
• Reduced tax rate for the provision of construction and assembly work and for the supply of buildings for social housing

The information on VAT rate changes also mentions the VAT treatment of the settlement of advances paid before the end of 2023 and draws attention to a decree on tax submissions using prescribed forms.

The information on the application of VAT on selected passenger cars focusses on the following: 

• Definition of selected passenger cars
• Calculation of the maximum VAT deduction limit where a proportionate right to deduct VAT or a technical improvement are involved, with practical examples 
• Limitation procedure in the case of the acquisition of selected cars for the purpose of their resale 
• Limitation or non-limitation of VAT deduction for lease companies relating to cars acquired for the purpose of their subsequent provision via operating and finance lease arrangements 
• Transitional provisions for situations when an advance had been paid before the end of 2023 (including the procedure for the subsequent technical improvement to these cars) 
• Reporting of individual cases in VAT returns and VAT ledger statements

The GFD also points out that the sale of such a vehicle does not constitute a change in the scope of use of a fixed asset for VAT purposes and thus does not give rise to the possibility to increase the originally claimed deduction. 

The information does not contain a further explanation of the limitation of the right to deduct VAT on demo cars. 

Read a January 2024 report prepared by the KPMG member firm in the Czech Republic