News on tax obligations of transport service providers
The General Financial Directorate (GFD) has published Information summarising tax obligations in terms of VAT, personal income tax, and road tax for entities providing passenger transport through mobile applications (e.g. Uber, Bolt or Liftago). It is effective from 1 January 2023.
The new information replaces the GFD's information from 2017, introducing no conceptual changes but only responding to current legislative developments. Below we summarise the obligations from the perspective of individual taxes in their latest wording:
Value added tax
The provision of passenger transport arranged through a mobile application is considered an economic activity. The passenger transport provider is therefore a taxable person even if they do not have the relevant trade license. If the turnover from this activity reaches CZK 2 million in 12 calendar months, the provider must register for VAT.
In practice, the service consisting of access to a mobile application is most often provided by a person established outside the Czech Republic. If the service recipient (i.e., the passenger transport provider) is a VAT payer, they are obligated to declare output VAT on the services received from the EU or from a third country and at the same time may exercise their right to deduct input VAT if the statutory conditions have been met. However, if the provider is not registered for VAT as a payer, they are obligated to register as a person identified for tax; in this case, they will pay output VAT on the service received but will not be entitled to deduct input VAT.
Foreign operators of mobile applications should take this into account when issuing invoices for fees for the use of applications and invoice the service excluding VAT, as the place of supply of the service is in the Czech Republic and VAT shall be paid by the customer.
Personal income tax
For providers – natural persons, income from transport services represents income from a business activity. The provider may decide whether to claim expenses in their actual amount or as a fixed percentage. If they hold the relevant trade license, the lump sum expenses amount to 60% of their income. If they do not have a trade licence even though obliged to do so, they may claim lump-sum expenses of only up to 40% of their income. And if the provider fulfils the statutory conditions, they may opt for the lump-sum tax regime.
Road tax
From the 2022 taxable period, passenger cars and their trailers are not subject to road tax. Accordingly, entities providing passenger transport via mobile apps do not incur any road tax liability. We recommend that all providers follow the new GFD Information and that mobile app operators check whether they apply the correct VAT regime to app usage fees.