When does a VAT non-payer become an identified person and how to do it?

Are you not a VAT payer in the Czech Republic? If so, be careful when doing business with foreign countries. You may be required to register as an identified person.

What Is an Identified Person?

Simply put, an identified person (IP) is a VAT payer only for cross-border transactions —domestically, they remain non-VAT payers. As a tax-registered identified person, you will receive your VAT ID number, but unlike VAT payers, you only report and remit the tax, and you are not entitled to input VAT credits (the tax paid becomes your expense).

This may sound too abstract, so here are a few examples. Typical situations in which you, as a business owner, are required to file an application for registration as an identified person include the following:

• you pay for social media advertising for your business,
• you earn income from Google AdSense banners on your website,
• you’ve purchased an online course from abroad,
• you pay for licenses for graphic design programs (e.g., Canva) and other online applications or services (e.g., Mailchimp),
• and many other similar services.

VAT Obligations of an Identified Person

If you use any of the items listed above for business purposes, you must register as a registered person. However, this obligation applies to you only if you are not a VAT payer. You become a VAT payer only when your annual turnover exceeds 2,000,000 CZK. We always recommend discussing your specific situation with a tax specialist.

Identified Person – Registration and How to Do It

So, how do you become an identified person? The first step is registration, which you must complete within 15 days of receiving or providing a service, or upon exceeding the value of purchased goods.

Use the Moje daně portal. In the “Registration” section, you’ll find the “Application for Value-Added Tax Registration” form; launch the wizard and, in the first step (the “Header” section), select the Registration Type: identified person. Fill out the form, and at the end, you can attach the invoice that triggered your registration obligation.

Tax Return and Summary Report

You must always submit your VAT return to the tax office within 25 days after the end of the calendar month in which the obligation to report the tax arose. Therefore, you do not file it if there is no reason to do so in a given month (you did not provide or receive services from abroad, did not purchase goods, etc.).

You can find the VAT return form on the EPO Tax Portal website in the “Value-Added Tax” section. The return must always be submitted electronically. You can do this via the Mojedane.cz portal or a data box.

Another common obligation is the summary report, which you must file for months in which you provided a service with a place of supply in another EU member state—that is, when you invoiced a business in the EU. Submit it electronically within 25 days after the end of the calendar month.

Non-VAT payers and foreign invoices.
How does this work in practice?

Voluntary VAT Registration

If, as a registered person in the Czech Republic, you pay VAT but cannot claim input tax credits (since you are not a VAT payer under Section 6 of the VAT Act), it may be more advantageous to voluntarily register as a VAT payer right away. You submit the application to the tax office.

However, you will not automatically receive VAT payer status. The tax office will require a number of supporting documents from you; the entire process takes quite some time, and there is no guarantee that you will actually become a VAT payer. We can help you with voluntary VAT registration. We know which documents to prepare, and we speak the language of the authorities. Contact us, and we’ll get started.

Once you become a VAT payer, you’ll find it useful to know how VAT works when doing business internationally.

Cancellation of an Identified Person’s Registration

You can cancel your registration as a VAT-registered person if:

• You have not been required to file a tax return for services received or goods supplied, or to submit a summary report, in the last 6 months.
• You have not purchased goods worth more than 326,000 CZK from another EU member state in this or the previous calendar year.
• Or you have ceased your business activities.

You will cease to be a registered person on the day following the tax administrator’s notification of the decision to cancel your registration. Therefore, it is not enough to simply submit an application; you must wait for the tax administrator’s decision.

Need advice on VAT? Contact us

International trade and value-added tax are not simple matters. In this article, we summarize the basic information, but it is not possible to describe every exception—of which, unfortunately, there are quite a few when it comes to VAT.

Your best course of action is to take advantage of our tax advisory services. We’ll handle matters related to the registration of a VAT-registered entity and the subsequent paperwork for you. If needed, we can also advise you on voluntary VAT registration. Just fill out the contact form, and we can get started!