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Czech consolidating reduced VAT rates 2024; new 12% rate

Czech Parliament approves 15% and 10% reduced rates replacement with new 12% rate from Jan 2024

The Czech Parliament has approved the proposed consolidation of reduced VAT rates from 2024. This includes shifting newspapers from 21% standard rate to the new, proposed 12% rate.

The simplification of VAT rates is part of a host of tax raising measures aimed at controlling the fast-rising Czech deficit. It includes a 2% rise in the Corporation Tax rate to 21%.

The Bill now just requires the President’s signature and gazetting, both a formalitiy.

The implementation date is 1 January 2024.

May 2023: Prime Minister proposes VAT rate consolidation

On 12 May 2023, the Czech Prime Minister, Petr Fiala, confirmed proposals to withdraw the 15% and 10% reduced VAT rates. A new rate would be set at 12%. The standard VAT rate would remain unchanged at 21%.

Supplies rising to the 21% standard rate include:

  • Alcohol;
  • Draft beer; and
  • Services such as hairdressing;

Supplies moving down to the new 12% VAT include:

  • Basic foods;
  • Printed magazines and journals
  • Newspapers
  • Medicine; and
  • Housing.

There will be no VAT on books (currently 10%).

These proposals will be finalised and sent to Parliament in June for review and potential amendment with a January 2024 implementation.

An economic evaluation is now underway. Any implementation date is likely to be 1 January 2024. When considering the change, per Fiala, the government will also assess the examples of other countries that temporarily reduced or abolished VAT on certain products.

Currently, the two reduced rates currently apply to the following supplies:

  • 15%: Foodstuffs; non-alcoholic beverages; take away food; certain medical; certain passenger transport; certain books / electronic; amusement parks; social housing; medical
  • 10%: Foodstuffs (baby and gluten-free); newspapers journals; water treatment; certain pharmaceutical; hotels; restaurants and hospitality; some books and e-books; medical; passenger transport; cultural events; public heating; rail; other

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In April 2022, there was agreement on EU reduced VAT freedoms which give member states the right to increase the number and range of reduced VAT rates. This is now in place, and must be implemented by all member states by 2025.



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