Update on 15% and 10% reduced rates replacement with new 12% rate
The Czech government has agreed to amendments to its proposed reduced VAT rate simplifications. This includes shifting newspapers from 21% standard rate to the new, proposed 12% rate.
The Bill now requires re-approval in the lower house, and then by the upper, Senate House. 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:
- Draft beer; and
- Services such as hairdressing;
Supplies moving down to the new 12% VAT include:
- Basic foods;
- Printed magazines and journals
- Medicine; and
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.