You automatically become obliged to register for VAT if your annual turnover exceeds the CZK 2,000,000 threshold. But why become a VAT payer voluntarily if your turnover isn't that high?

1. If your suppliers and customers are primarily VAT payers, it is more advantageous for you to register for VAT even if your turnover does not exceed CZK 2,000,000. Without registration it will be harder for you to conclude contracts with suppliers who are VAT payers, and likewise to supply customers registered for VAT, unless you are willing to lower your prices and revenues.


2. Likewise, it pays to be a VAT payer if your business income is lower than your expenditure on purchased goods. This gives rise to what is known as an excess deduction (nadměrný odpočet), whereby you are entitled to a refund from the state of the difference between input and output VAT.


3. Another scenario is where your supplier applies a higher VAT rate to their goods than you do when selling goods or services to your customers.


4. If you are planning to expand abroad, registering for VAT is also worth considering. Goods from so-called third countries are purchased free of tax. Likewise, you can deduct input tax when acquiring goods or services from VAT payers within the EU.


5. Greater prestige can also be a reason for registration. If you are a self-employed professional selling mainly services, it is relatively difficult to reach the registration threshold. In this category it is usually the most successful who become VAT payers. By registering voluntarily, you can therefore place yourself among them. You will come across as a larger company, your credibility will increase, along with your chances of landing bigger contracts and more interesting projects.

VAT registration is particularly not worthwhile for you:

1. If your customers are primarily consumers, i.e. non-payers of VAT. You have to increase your prices by the amount of tax, which can lead to a drop in interest in your goods or services.


2. Where you buy goods from suppliers at the reduced VAT rate and the goods you sell to customers are subject to the standard rate.


3. Increased administration can also be a disadvantage of being a VAT payer. You become obliged to file monthly/quarterly tax returns, supplemented by a VAT control statement. You must archive all documents for a period of 10 years.

When making your decision, it is therefore worth considering above all whom you will sell your products to, who you will buy from and at what rates, whether you will have high input costs and whether you will do business only in the Czech Republic or abroad as well.