Reverse charge VAT in Czechia — when it applies

In an ordinary sale, VAT is paid by whoever makes the supply: the supplier adds the tax to the price, collects it from the customer and remits it to the tax authority. The reverse charge — přenesená daňová povinnost in Czech — turns this around. The obligation to account for and pay the tax shifts from the supplier to the customer: the supplier issues an invoice without VAT, and the recipient of the supply works out and declares the tax themselves.

This is not an optional way of invoicing that a company picks on a whim. The regime is governed by the VAT Act (Act No. 235/2004 Coll.) in Section 92a and following, and it applies only to precisely listed supplies and only under precisely defined conditions. That is exactly why it pays to know when reverse charge applies — because if the supplier and the customer fail to use it where they should have, both end up correcting their returns and facing a possible penalty.

When the regime applies at all

Domestic reverse charge has two basic conditions: both the supplier and the customer must be VAT payers, and the place of supply must be in the Czech Republic. If the customer is not a VAT payer, the regime does not apply and the supplier invoices with tax in the standard way. It likewise does not apply when the supply is not among those the Act lists for the regime.

The principle is simple. The supplier invoices without tax, and the customer declares the output tax on the date the supply takes place — while at the same time claiming the same tax as input, if entitled to a deduction. Example: a customer with full right to deduct pays nothing extra in real terms, because the same amount is both added and removed in the return. The state has merely removed the intermediate step through which unpaid VAT used to leak away — that is the whole point of the regime.

The most common domestic cases

By far the most common reason a company runs into reverse charge is construction and assembly work under Section 92e. The regime covers work corresponding to production classification CZ-CPA 41 to 43 — that is, building construction, civil engineering works and specialised construction and assembly work. Example: when a construction company (a VAT payer) invoices a subcontract to another company (a VAT payer), it issues the document without VAT and the customer declares the tax.

The Act also lists further supplies: the supply of gold (Section 92b), the supply of waste and scrap under Annex No. 5 (Section 92c), the supply of immovable property where taxation is voluntarily chosen (Section 92d), the transfer of emission allowances and so-called selected goods. It is with selected goods that many companies slip up, because they overlook one important condition — a value threshold.

Selected goods and the CZK 100,000 threshold

The list of selected goods is set out in Government Decree No. 361/2014 Coll. It mainly covers mobile phones, integrated circuits, laptops and tablets, games consoles, as well as cereals and technical crops and raw metals. For these goods, however, the regime applies only if the tax base for all selected goods on a single tax document exceeds CZK 100,000. Below that threshold, the standard VAT invoice applies.

Example: a delivery of 60 mobile phones for CZK 180,000 between two VAT payers falls under reverse charge, because it exceeds the limit. The sale of a single phone for CZK 20,000, by contrast, is invoiced with tax in the standard way. That is why, with these items, it pays to watch the amount on the document — it decides which regime is the right one.

What the invoice must contain and where the supply is reported

An invoice under the reverse charge has one key difference: the supplier does not state the rate or the calculated tax, but must add the mandatory wording “daň odvede zákazník” — the customer will account for the tax (Section 29 of the VAT Act). The other particulars of the tax document stay the same — we covered those in our article on invoice requirements.

The supply must also appear in the VAT control statement on both sides — the supplier reports it in part A.1, the customer in part B.1 — and it feeds into the VAT return. If one side omits the line or states a different amount, the tax authority sees the mismatch and asks for an explanation; we go into the detail in our piece on the VAT control statement.

Reverse charge when buying from abroad

A separate but related situation is buying from abroad. When a Czech company receives a service from a supplier in another EU country (or from a third country), the place of supply is usually in the Czech Republic and the Czech recipient declares the tax — again the reverse charge principle, just on a cross-border basis. This affects smaller companies too, ones that are not yet VAT payers: buying such a service can turn an entrepreneur into a VAT-identified person, with an obligation to declare the tax.

Conclusion

The reverse charge is not an exception for a chosen few, but a firm rule: domestically it applies between two VAT payers for listed supplies — above all construction work and selected goods over CZK 100,000 — and in its cross-border form when buying services from abroad. Anyone who can tell when the regime applies issues the correct invoice with the “daň odvede zákazník” note, and both lines in the statement match. Keeping documents in order is, after all, a matter of course for the companies in a carefully run house for just thirty companies — with VAT it always pays off.

Frequently asked questions

What does the reverse charge mean?

It is a VAT regime in which the tax is not paid by the supplier but by the customer. The supplier issues an invoice without tax and with the note “daň odvede zákazník” (the customer will account for the tax), while the recipient declares the output tax on the date the supply takes place and can at the same time claim the right to deduct. It is governed by the VAT Act (No. 235/2004 Coll.) in Section 92a and following, and applies only to listed supplies between VAT payers.

When does reverse charge apply to construction work?

For construction and assembly work under Section 92e of the VAT Act, the regime applies when both the supplier and the customer are VAT payers and the work corresponds to production classification CZ-CPA 41 to 43 with the place of supply in the Czech Republic. The supplier invoices without VAT and the customer declares the tax. If the customer is not a VAT payer, the regime does not apply and invoicing is standard, with tax.

Does reverse charge also apply to selling phones and laptops?

Yes, mobile phones, laptops, tablets, integrated circuits and games consoles are selected goods under Government Decree No. 361/2014 Coll. The regime applies, however, only if the tax base for the selected goods on a single tax document exceeds CZK 100,000. Below that amount, invoicing is standard, with VAT.