The 2024 VAT changes in the Czech Republic encompass significant modifications, aiming to simplify the tax system and adjust the taxation of certain goods and services. Here is an overview of these changes:
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Unification of Reduced Tax Rates: The reduced tax rates will be consolidated into a single rate of 12%, simplifying the structure from the previous multiple reduced rates. This leaves the country with two primary VAT rates: the standard 21% and the reduced 12%.
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Reclassification of Goods and Services: Certain goods and services will experience a shift in their tax rate category. Notably, services with less social or health importance, and those reclassified during the COVID-19 pandemic, will revert to the standard VAT rate. This includes hairdressing, shoe and leather product repairs, bicycle repairs, and clothing alterations. Conversely, newspapers and magazines will uniformly fall under the 12% rate, irrespective of their publication frequency.
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Special Treatment for Food Services: For food-related services, specific beverages (excluding drinking water and selected types like milk) will be excluded from the 12% VAT category.
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Books as VAT-Exempt Supplies: The proposal includes making the supply of both printed and electronic books VAT-exempt, with an option for suppliers to request a binding assessment from the General Financial Directorate.
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Medical and Diagnostic Devices: In a detailed specification, medical and diagnostic devices will be included in the reduced VAT rate category. The update removes the previous requirement that these devices must be for exclusive personal use for illness or disability treatment.
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Inclusion of Contact Lenses: Contact lenses have been added to the list of goods eligible for the reduced VAT rate.
- VAT Deduction Cap for Passenger Cars: The VAT deduction for passenger cars is capped at CZK 420 thousand, applicable to cars that are part of the fixed asset category and have a purchase price up to CZK 2 million. This change might affect leasing companies, particularly for higher-priced vehicles, potentially leading to double taxation. However, interpretations of the law and transitional provisions may address these discrepancies, especially regarding advance payments made before the end of 2023.
These changes reflect a shift towards a more streamlined VAT system, potentially impacting various sectors and consumers differently.
