Although most of the major changes introduced by the extensive amendment to the VAT Act and passed in 2024 came into effect in 2025, some amendments became effective as late as 1 January 2026. Below, we summarise what has changed in the VAT Act from the new year.
Financial activities
Certain financial activities will no longer be considered supplies exempt from tax without the right to deduct VAT. This change brings Czech law into line with the EU VAT Directive and the CJEU’s case law (e.g., judgment C-175/09 AXA UK). These financial activities include, e.g., the collection of payments, the collection of radio or television licence fees, the payment of pension insurance benefits, the collection of recurring payments from citizens, and the keeping of records of investment instruments.
The reason for including the above collection/payment activities under taxable supplies is that from a VAT perspective, these are not payment services but debt collection services. Keeping records of investment instruments, on the other hand, represents the management and safekeeping of assets. Neither debt collection nor the management and safekeeping of assets can be exempt from VAT.
Refund of unduly paid tax
Supply recipients will now be able to ask the tax administrator for a refund unduly paid tax, by submitting a VAT return for a tax refund. The supply recipient will thus be able to apply for a refund of VAT, e.g., in situations where the supplier had incorrectly stated a higher VAT rate in the invoice or where the supply should have been exempt from VAT or subject to the reverse charge mechanism, in which case VAT should not have been stated in the invoice at all. This change responds to the case law of the CJEU (e.g. judgments C-35/05 Reemtsma Cigarettenfabriken GmbH, C-564/15 Tibor Farkas, C-691/17 PORR Epitési Kft., and C-273/18 SIA "Kuršu zeme").
Although at first glance it may seem that this is a change in favour of the supply recipients, in our opinion its application in practice may be quite limited. The refund of unduly (wrongly) paid tax will only be possible in exceptional cases where it is impossible or excessively difficult for the supply recipient to seek the refund from the supplier (e.g. due to the supplier's insolvency). It will also be necessary to meet several conditions strictly laid down by law. In particular, the supply recipient must have demonstrably made effort to obtain the refund of the wrongly paid amounts from the supplier, or there must be a final court decision on the supplier's obligation to reimburse the wrongly paid amounts to the recipient. In such cases, details of the court decision should be included in the VAT return for a tax refund.
The supply recipient is entitled to a VAT refund in the amount of wrongly paid VAT that constitutes the supplier’s unjust enrichment. However, not every case of incorrectly stated VAT rate can be considered an unjust enrichment, and it will always depend on the assessment of the specific situation and the specific contractual arrangement.
Tax refund upon supply of goods for export outside the EU in a passenger's personal luggage
The change has been introduced in connection with digitisation of customs administration and is relevant for VAT payers (e.g. retailers) who refund VAT to tourists from third countries upon sales and subsequent exports of goods outside the EU. Immediately after supplying the goods to the tourist, VAT payers will now have to report the details of the sales document via the Czech Customs Administration's information system. VAT payers will then receive confirmation from the Customs Administration’s system that the goods have been exported from the Czech Republic. We recommend that VAT payers who decide to refund VAT should register in this system right after the beginning of the year.
Tax refund to foreign persons upon purchases of goods from another member state or upon imports of goods
Foreign persons (with their registered office and establishment outside the EU) who have purchased goods from another member state or imported goods from a third country with the place of supply in the Czech Republic (the first supply) will now be able to claim input VAT. The condition is that they have used these goods within their economic activities to carry out a taxable supply with the place of supply in the Czech Republic, for which the person who received the supply is obliged to declare tax (the second supply). This change aims to reduce the burden of the tax administration, as it will allow businesses to claim a VAT deduction without being registered for VAT.
Other changes concern, e.g.:
- tax refund to persons enjoying privileges and immunities,
- tax refund to international organisations based outside the Czech Republic,
- the delivery of documents to a foreign person by e-mail or public notice if that person or their authorised representative for delivery does not have access to a data box.
Adjustment of VAT deduction upon acquisition of fixed assets
The January VAT return (for December 2025) will show for the first time a change in the adjustment of the VAT deduction upon the acquisition of fixed assets used for mixed purposes (this came into effect on 1 January 2025). This may apply, e.g., to vehicles used for both business and private purposes. The change consists in the removal of the 10% tolerance limit. From now on, any difference between the coefficient of the qualified estimate used by the VAT payer during the year and the coefficient of the actual use of fixed assets calculated after the end of the year will have to be adjusted in the first year (i.e. the year of acquisition).