In March, we informed you about the termination of the VAT refund scheme in respect of VAT paid by Czech payers as part of goods and services exported to United Kingdom, which represents one of the consequences of Brexit. The last period for which the Czech VAT payers could request a VAT refund using the procedure known from EU was the 2020 calendar year.

As of January 2021, commercial transactions with place of supply in United Kingdom are considered as transactions carried out in third countries, which are not impacted by intra-EU rules. VAT refund paid as part of goods and services into the budget of United Kingdom is subject to the latter’s laws.

At the same time, the Czech Republic applies the so-called reciprocity principle with respect to refunds of Czech VAT to entities from third countries. This means that VAT is only refunded in cases where the counterparty reciprocates.

Reciprocity principle confirmed

Those of you who have paid UK VAT as part of good and services in 2021 will surely be pleased by the information published by the General Financial Directorate. GFD confirms the reciprocity principle and also states conditions and manner of refunding VAT to UK-based entities.

Czech VAT payers can therefore benefit from the same treatment by UK and reciprocally request refund of the local VAT. More detailed information on how to apply for a UK VAT refund can be found on HM Revenue & Customs website here.

The exception from the rule above is where VAT was paid as part of goods purchased from an entity based in Northern Ireland that has a VAT number with XI prefix. Northern Ireland benefits from an exception with respect to supplies of goods where VAT payers based in Northern Ireland continue to be treated as if they are part of EU i.e. under the legacy rules.

How will entities from United Kingdom request VAT in Czech Republic?

It will not be easy. The application has to be completed in Czech language. In addition, the application has to be filed in paper form and cannot be filed digitally. Apart from a confirmation on VAT registration, it is necessary to enclose tax documents in the original language. The application can be obtained here.

In case of any questions to the above, please do not hesitate to contact us.