To be or not to be… VAT payer?

Tax illustration

This question is usually asked so we are raising the subject to have a better insight – Is it better to be or not to be VAT payer?



The answer for this question always need to be considered individually. In the Czech Republic there are two possibilities for being paying the value added tax:

  1. you become a VAT payer by law
  2. you become a VAT payer on a voluntary basis


The first option is strictly set by law. After earning high income, there is no doubt that VAT payer is the right choice. But what about the second option? You might upgrade the status of VAT payer on voluntary basis. So in which cases it is better to choose the right path?


In order to answer this question we should always look at your business plan.

  1. The activity of your business.
  2.  Information about your clients.
  3. And information about your suppliers


While most of your clients may be paying VAT or whether you trade within the EU/or other countries. In that case, we are likely to advise our clients to become VAT payer.  By becoming VAT payer, you will also pay taxes from sales. On the other side, you can deduct the VAT on purchased goods or services.  That’s good to help out your economic situation. When you decide to trade with other countries, it is especially a good choice : the trading would be under the reverse-charge system which transfers the tax liability to the buyer.


The advantage of VAT free status.


On the other hand, if the majority of your clients are not VAT payers (especially private end-users) then it is better to be VAT free. Like it, you will not higher your prices even with VAT.  This is just basic overview because there can always be some other individual specifications. So, you will always need to think about other costs and factors which would bring you being VAT payer. For example extended administration.

If you still hesitate, our accountants would be pleased to stand your side!

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