Czech Republic - VAT reduced rates proposed to be consolidated, resulting in some reclassifications

A recovery package announced by the Czech Republic government in May 2023 would consolidate the reduced VAT rates, resulting in some supplies being reclassified for VAT purposes.

The Czech VAT system currently has three rates: a standard rate of 21% and two reduced rates of 15% and 10%. While the standard VAT rate would remain unchanged, the government has proposed to consolidate the two reduced rates into a single reduced rate of 12%. In addition, a new zero VAT rate would be introduced but only for books, including e-books.

These proposals would result in certain goods and services being reclassified and subject to a different VAT rate. The new 12% reduced rate would apply to a range of supplies of essential products (e.g., food, pharmaceuticals and medical devices, heating, etc.). Several supplies that currently are subject to the 10% or 15% rate would be reclassified as supplies subject to the standard rate, including services rendered by artists and authors and newspapers.

The bill is in the early stages of the legislative process and may still be revised, but the final contours of the proposed changes are expected to be known by late summer.

Petr Linx
BDO in Czech Republic

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