GFD Information on changes to VAT payer status and registration procedure
In connection with the amendment to the VAT Act effective from 1 January 2025, the GFD issued Information on the VAT payer status and registration procedure. The information provides more precise guidance on when a taxable person becomes a VAT payer and lists the individual deadlines. In this article, we focus primarily on mandatory VAT registration.
Origin of the obligation to register as a VAT payer
The first change introduced by the amendment is that to become legally obligated to register for VAT, two annual turnover thresholds must be considered: the first one remains CZK 2,000,000 per calendar year, based on which the taxable person becomes a VAT payer on the first day of the year following the year in which the threshold was exceeded (unless they decide to become a VAT payer voluntarily on the date following the date the threshold was exceeded). The second one is a new maximum turnover threshold of CZK 2,536,500, which is an immediate trigger for mandatory VAT registration: the taxable person becomes a VAT payer on the date following the date this threshold was exceeded.
The period over which turnover is monitored has also been changed: under the new rules, turnover is determined on a calendar year basis. This change is effective from 1 January 2025, so all taxable supplies made before 31 December 2024 are not included in the turnover threshold for 2025.
The amendment also brought changes to the origin of the VAT payer status where a taxable person carries out only VAT-exempt supplies without the right to deduct, such as financial activities. It still holds that if a taxable person exceeds one of the above turnover thresholds exclusively with supplies without the right to deduct, they do not become a VAT payer by the operation of law. However, once they perform a supply for which they would be entitled to a VAT deduction, they become a VAT payer on the first day of the following year where the CZK 2,000,000 turnover threshold is exceeded; if the CZK 2,536,500 threshold is exceeded, they become a VAT payer on the following day.
However, in some situations it will also be necessary to monitor the previous year's turnover, but only from 1 January 2026 when the turnover for 2025 is tested. If the turnover exceeds CZK 2,000,000 and the taxable person carried out a supply with the right to deduct, while they at the same time exceeded that turnover threshold also in the previous calendar year (even if only with supplies without the right to deduct), the taxable person will become a VAT payer on the date following the date the turnover threshold is exceeded or the date the supply with the right to deduct is effected.
Registration procedure
The obligation to submit an application for VAT registration is now set uniformly: within 10 working days from the date of having exceeded either turnover threshold or from the date of effecting a taxable supply with the right to deduct where the turnover had been exceeded exclusively by performing supplies without the right to deduct.
If a taxable person’s turnover exceeds CZK 2,000,000, they can register for VAT immediately on the date following the date the turnover threshold was exceeded, without having to wait until the beginning of the following year. They must indicate this fact in their registration application. They can thus avoid having to monitor the second turnover threshold of CZK 2,536,500. Nevertheless, the registration application must be submitted within the statutory deadline, i.e., within 10 working days. If the application is submitted later, the tax administrator will register the taxable person from the first day of the following calendar year.
Subsequently, it may happen that the taxable person exceeds the turnover threshold of CZK 2,536,500 in a given calendar year and is thus obliged to submit a new registration application, even though they have already been informed that they will become a VAT payer from the first day of the following calendar year.
Transitional provisions
The GFD information confirms that if the turnover threshold is exceeded before 31 December 2024, the law in force until 31 December 2024 shall be followed. The registration application will have to be submitted within 15 days after the end of the calendar month in which the turnover threshold was exceeded. Retroactive registrations where the conditions for registration were met in 2024 will also be dealt with in accordance with the wording of the law in effect before 31 December 2024.