The Czech VAT law today contains a total of 3 tax rates, the basic rate of 21 %, the first reduced 15 % and the second reduced 10 %. The Czech government wants to introduce a third tax rate, namely 0 % on books.
According to the Ministry of Finance's proposal, the number of VAT rates will be reduced from three to two, namely 21% and 12%. The selected goods and services will be shifted from the reduced to the basic VAT rate. The aim of this change is to simplify the Czech VAT system by merging two reduced rates (15% and 10%) into a common rate of 12%.
Many items that are currently subject to one of the reduced VAT rates (15 or 10%) will therefore be taxed at a new rate of 12%. This includes, for example, groceries with the exception of most beverages, medicines or construction work, child car seats or funeral services.
It is also proposed that those previously included in a reduced tax rate due to the Covid crisis be moved to a basic tax rate of 21%. In particular, it is about:
For other items affected by either of the two reduced rates, the uniform reduced rate of 12 % will continue to apply. The occasional passenger transport in public bus transport changes from the basic tax rate to the reduced VAT rate. On the contrary, the occasional mass transport of people by bus shifts from the basic VAT rate of 21 % to the reduced VAT rate of 12 %.
In addition to changes in the area of corporate income tax, the Czech Ministry of Finance is preparing to adjust VAT rates. VAT rates should change from January 1, 2024.
The Czech Republic is planning extensive changes to its tax system, including changes to corporate income tax rates, effective from the beginning of 2024, which should help reduce the state budget deficit.
Foreign companies are increasingly hiring employees directly in the Czech Republic. We take care of the related obligations regarding payroll tax and social and health insurance.