A new VAT refund mechanism for non-EU entities that applies in the Czech Republic as from 1 January 2026 enables these foreign businesses to recover Czech VAT incurred on certain transactions. Previously, foreign businesses importing goods into the Czech Republic or acquiring goods from abroad were required to pay VAT and recovering that VAT was often administratively and financially burdensome. The new procedure broadens access to VAT refunds by eliminating the requirement for reciprocal arrangements between the Czech Republic and the home country of the foreign business.
The provision in the VAT act that facilitates VAT refunds for foreign entities from non-EU countries is section 83a. That section applies exclusively to foreign entities that are neither registered for VAT in the Czech Republic nor established in the EU. It covers situations where:
Under the prior regime, these transactions typically required non-EU entities to pay Czech VAT at the time of the intra-Community acquisition or import, thus incurring a financial cost, which was difficult to recover. Entities established in third countries are in a different position from entities established in other EU member states. Entities from other member states can reclaim Czech VAT via the electronic VAT refund portal in their home country, which then forwards the claim to the Czech Ministry of Finance. Non-EU businesses cannot use that procedure; instead, they were limited to the EU 13th Directive refund procedure, which requires reciprocity. Currently, reciprocal arrangements exist only with Bosnia and Herzegovina, Norway, Switzerland and the UK.
Under the new rules, non-EU entities may recover Czech input VAT without having to register for Czech VAT and without the need for reciprocity. A core condition is that the acquired or imported goods be used in the course of the foreign entity’s economic activity and for purposes of a subsequent taxable supply in the Czech Republic. This represents a more efficient and proportionate approach to VAT compliance, particularly for occasional or project-based transactions.
The refund is available only where the subsequent supply is one for which the customer is obliged to declare and pay the tax (i.e., a B2B supply). In practice, the customer accounts for VAT if a non-established entity supplies:
The VAT refund application must include copies of the relevant tax documents demonstrating that VAT was correctly declared or paid and that the statutory conditions are fulfilled. These include:
The refund claim period begins on the first day of the second calendar month following the calendar quarter in which the subsequent taxable supply occurred and ends on the last day of the calendar year following the year in which the goods were acquired from another EU member state or imported into the Czech Republic. For example, if goods are imported in March 2026 and the subsequent taxable supply is made in May 2026, the refund claim period starts on 1 August 2026 and ends on 31 December 2027. These deadlines are important, as late submissions may be rejected.
Refunds are paid electronically to the bank account specified by the foreign entity.
The new VAT refund mechanism significantly simplifies the VAT refund process, reducing administrative and other burdens, and providing greater predictability for businesses. Its introduction is particularly timely given the tightening of Czech rules in 2025 on the deduction of import VAT where the importer is not the owner of the goods. In line with the Court of Justice of the European Union case law, the right to deduct import VAT is generally denied unless the import costs are directly incorporated into the price of the importer’s subsequent taxable supplies. As a result, more imports are now carried out by the foreign owners themselves.
Overall, section 83a provides a clear and efficient route for non-EU businesses to recover Czech VAT without local VAT registration. To benefit fully, businesses should engage in careful planning, timely filing and have robust supporting documentation.
Petr Linx
BDO in Czech Republic
Scope of the Refund Mechanism
The provision in the VAT act that facilitates VAT refunds for foreign entities from non-EU countries is section 83a. That section applies exclusively to foreign entities that are neither registered for VAT in the Czech Republic nor established in the EU. It covers situations where:
- A foreign entity acquires goods from another EU member state or imports goods from outside the EU;
- The place of supply is in the Czech Republic; and
- The goods are subsequently used for a taxable supply in the Czech Republic for which VAT is declared by the customer under the reverse charge mechanism.
Under the prior regime, these transactions typically required non-EU entities to pay Czech VAT at the time of the intra-Community acquisition or import, thus incurring a financial cost, which was difficult to recover. Entities established in third countries are in a different position from entities established in other EU member states. Entities from other member states can reclaim Czech VAT via the electronic VAT refund portal in their home country, which then forwards the claim to the Czech Ministry of Finance. Non-EU businesses cannot use that procedure; instead, they were limited to the EU 13th Directive refund procedure, which requires reciprocity. Currently, reciprocal arrangements exist only with Bosnia and Herzegovina, Norway, Switzerland and the UK.
Key Features Under the New Mechanism
Under the new rules, non-EU entities may recover Czech input VAT without having to register for Czech VAT and without the need for reciprocity. A core condition is that the acquired or imported goods be used in the course of the foreign entity’s economic activity and for purposes of a subsequent taxable supply in the Czech Republic. This represents a more efficient and proportionate approach to VAT compliance, particularly for occasional or project-based transactions.
Supplies Covered
The refund is available only where the subsequent supply is one for which the customer is obliged to declare and pay the tax (i.e., a B2B supply). In practice, the customer accounts for VAT if a non-established entity supplies:
- Services, e.g., repair of movable assets, services related to immovable property, cultural or sporting events, or catering;
- Goods with installation or assembly;
- Goods through networks or systems (e.g., electrical energy); and
- Goods to a Czech VAT payer.
Documentation Requirements
The VAT refund application must include copies of the relevant tax documents demonstrating that VAT was correctly declared or paid and that the statutory conditions are fulfilled. These include:
- The invoice or import VAT document relating to the acquisition or import of the goods; and
- The tax invoice issued for the subsequent taxable supply in the Czech Republic.
Refund Claim Period
The refund claim period begins on the first day of the second calendar month following the calendar quarter in which the subsequent taxable supply occurred and ends on the last day of the calendar year following the year in which the goods were acquired from another EU member state or imported into the Czech Republic. For example, if goods are imported in March 2026 and the subsequent taxable supply is made in May 2026, the refund claim period starts on 1 August 2026 and ends on 31 December 2027. These deadlines are important, as late submissions may be rejected.Refunds are paid electronically to the bank account specified by the foreign entity.
BDO Perspective
The new VAT refund mechanism significantly simplifies the VAT refund process, reducing administrative and other burdens, and providing greater predictability for businesses. Its introduction is particularly timely given the tightening of Czech rules in 2025 on the deduction of import VAT where the importer is not the owner of the goods. In line with the Court of Justice of the European Union case law, the right to deduct import VAT is generally denied unless the import costs are directly incorporated into the price of the importer’s subsequent taxable supplies. As a result, more imports are now carried out by the foreign owners themselves.Overall, section 83a provides a clear and efficient route for non-EU businesses to recover Czech VAT without local VAT registration. To benefit fully, businesses should engage in careful planning, timely filing and have robust supporting documentation.
Petr Linx
BDO in Czech Republic