On 1 January 2023, the annual turnover threshold for an entrepreneur to be required to register for VAT purposes in the Czech Republic will double, increasing from CZK 1 million to CZK 2 million (about EUR 80,000+). The current threshold was introduced in 2004 when the Czech Republic became an EU member state and has never been updated despite increases in the amount over the past 18 years. A higher threshold of EUR 85,000 will be permitted throughout the EU as from 1 January 2025, although the Czech Republic was granted a derogation to apply the higher threshold as from 2023.
The increased threshold should alleviate the administrative burden on small entrepreneurs, as well as the threshold relevant to personal income taxation. The Czech Republic operates an optional flat taxation system for small entrepreneurs with annual income not exceeding the threshold for VAT registration. As a result, as from 2023 the flat taxation option will be accessible to a broader pool of individual entrepreneurs.
Individual entrepreneurs that are already registered for VAT and whose annual income will not exceed CZK 2 million in 12 consecutive months will be allowed to request cancellation of the VAT registration.
Denisa Krocová
denisa.krocova@bdo.cz
Petr Linx
petr.linx@bdo.cz