Amendment to the VAT Act and Excise Duty Act: changes effective from 2025

 

Indirect taxes on purchases made on and after 1 January 2025 (including tax-free purchases within the EU) will be refunded under the principle of reciprocity to the extent shown below. Purchases made until the end of 2024 remain subject to the previous rules.

For the sake of simplicity, the following text refers only to “diplomatic missions”, it being understood that this includes also consular posts. The rules apply equally to diplomatic missions and consular posts.

7.1.      Diplomatic mission

7. 1. 1   VAT

The maximum annual limit for VAT refunds (based on the average number of the diplomatic mission's staff in the previous calendar year) is as follows:

• up to 15 staff members (registered with the Ministry of Foreign Affairs, including private servants):

CZK 2,000,000

• 16 or more staff members (registered with the Ministry of Foreign Affairs, including private servants):

CZK 3,000,000

In cases where a diplomatic mission purchases a new vehicle not falling within the  VAT limit-free category (see below), the amount of VAT to be counted towards the year's  maximum VAT refund limit is the amount that would have been chargeable on the purchase of that new vehicle from another EU Member State, if the purchase had not been exempt from VAT under the VAT Act. The same applies to excise goods purchased from another EU Member State.

The following goods and services are not counted against the maximum annual VAT refund limit (VAT limit-free category): 

1. Passenger cars registered in the name of a diplomatic mission (not applicable to maintenance and repair) and fuel for such passenger cars.
2. Telecommunication services.
3. Household waste collection and removal services.
4. Electricity, water and gas, and related services.
5. Heating oils.
6. Security services.
7. Accommodation for high-level visits.

The term “high-level visit” refers to a visit at ministerial or higher level in cases where the visitors' accommodation is paid for by a diplomatic mission.

This may also include accommodation for the head of a diplomatic mission arriving to take up his/her post if, for technical reasons, it is necessary to arrange temporary accommodation at a hotel; provided, however, that such accommodation is paid for by the diplomatic mission.

1. Rental and maintenance services for the premises of a diplomatic mission; provided, however, that the premises are recognised as such by the Diplomatic Protocol of the Ministry of Foreign Affairs.

For instance: plumbing services, masonry services, electrical services, cleaning services, gardening services, painting services, as well as goods related to such services; provided, however, that these goods are supplied as part of such services.

The above does not apply to interior furnishings and equipment for the premises of a diplomatic mission (movables), their maintenance and repairs.

Purchases of material necessary for repairs and maintenance of movable and immovable property fall within the VAT limit category.  However, if the purchase of material necessary for such repairs and maintenance is part of a service provided by the same supplier, the purchase will be included in the VAT limit-free category together with the service – provided, however, that these goods and services are all listed on one document issued by one supplier and confirming the purchase.

Services for private residences of the staff of missions do not fall within this category.

9.    Purchases, construction and reconstruction of properties owned by the sending State in cases where the total price exceeds CZK 100,000 (including VAT); provided, however, that the property is recognised as such by the Diplomatic Protocol of the Ministry of Foreign Affairs.

In cases where a diplomatic mission pays any VAT on goods or services for a property before having the property recognised by the Diplomatic Protocol, the VAT will be counted against the year's maximum VAT refund limit.

The competent authorities of the sending State will be required to confirm that the Czech diplomatic mission in the sending State is entitled to recover taxes to the same extent. For more information on the procedure to be followed in these situations, see 4.2 below.

 

Passenger cars:

The number of passenger cars eligible for VAT refunds is roughly proportionate to the size of the diplomatic mission (based on the number of registered diplomatic staff). To be eligible, the car must have a diplomatic registration plate assigned in accordance with Road Traffic Act No. 56/2000, as amended.

Inalienability of passenger cars – obligation to pay the VAT to the Tax Office:

In cases where a passenger car is purchased in the Czech Republic on a VAT refund basis (or in another EU Member State on a VAT exempt basis) and then sold, leased, lent, destroyed or taken out of service within 24 months from the date on which it was assigned a diplomatic registration plate, the owner is obliged to pay the whole amount or a portion of the VAT.    

In cases where a diplomatic mission purchases a passenger car on a VAT refund basis (or VAT exempt basis) and takes it out of the Czech Republic upon the expiry of 6 months from the date on which the car was assigned a diplomatic registration plate, the diplomatic mission is not obliged to pay the VAT. 

7. 1. 2   Excise duty and energy taxes

The maximum annual limit for excise duty refunds is CZK 400,000 (irrespective of the average number of staff). The limit applies to purchases of alcoholic beverages and tobacco products (including heated tobacco products, other tobacco products and products relating to tobacco products, such as chewing tobacco, nasal tobacco, e-cigarettes, and nicotine pouches).

In cases where these products are purchased in the EU on an excise duty-free basis, the excise duty that would have otherwise been chargeable on such products is counted against the maximum annual limit for excise duty refunds (there is no excise duty to be refunded because the products were purchased on a duty-free basis); provided, however, that the claimant presents an electronic accompanying document, excise duty exemption certificate, and confirmation of receipt.

The excise duty paid on mineral oils used as engine fuel or heating fuel is not counted against the maximum annual excise duty refund limit (excise duty limit-free category).

Energy taxes (taxes on natural gas, solid fuels and electricity) are refunded without any limitation (no minimum or maximum limits).

7. 1. 3.  Limit for refunds of VAT, excise duty    

Minimum qualifying limit for refunds of VAT, excise duty:

VAT and excise duty are refunded if the price of goods and services (including VAT) paid to one seller on one calendar day and shown on one document confirming he purchase is more than CZK 4,000. To be eligible for an excise duty refund, excise goods (alcoholic beverages and tobacco products) can constitute only a portion of the purchase in question.

VAT paid on the following goods and services is not subject to this minimum qualifying limit:

1. Fuel for passenger cars registered in the name of a diplomatic mission.
2. Telecommunication services.
3. Household waste collection and removal services.
4. Electricity, water and gas, and related services.
5. Heating oils.

Excise duty paid on mineral oils used as engine fuel or heating fuel is not subject to this minimum qualifying limit.

Reciprocity in VAT and excise duty refunds:

In cases where the maximum annual VAT or excise duty refund limit applicable to the Czech diplomatic mission in the sending State is lower that the limit in force in the Czech Republic, the maximum annual refund limit applicable to the diplomatic mission of that sending State in the Czech Republic will be lowered to match the limit applicable to the Czech diplomatic mission.

7. 1.4.  Limits for refunds of VAT, excise duty, energy taxes

In cases where the tax refunds available to the Czech diplomatic mission in the sending State are limited to certain goods and services, the same limitation will be applied to tax refunds available to the diplomatic mission of the sending State in the Czech Republic. Each of the diplomatic missions concerned will be duly informed in a separate verbal note.

7. 2.            MEMBERS OF THE DIPLOMATIC OR ADMINISTRATIVE AND TECHNICAL STAFF

7. 2.1. VAT

Maximum annual VAT refund limit:

• The calendar year in which the staff member takes up his/her duties in the Czech Republic: CZK 200,000;
• The remainder of the staff member's posting to the Czech Republic: CZK 100,000.

In cases where a staff member purchases a new vehicle not falling within the  VAT limit-free category (see below), the amount of VAT to be counted towards the year's  maximum VAT refund limit is the amount that would have been chargeable on the purchase of that new vehicle from another EU Member State, if the purchase had not been exempt from VAT under the VAT Act. The same applies to excise goods  purchased from another EU Member State.

The following goods and services are not counted against the maximum annual VAT refund limit (VAT limit-free category): 

1. Passenger cars, subject to the conditions set out below (not applicable to maintenance and repairs) and fuel for such passenger cars.
2. Telecommunication services.
3. Household waste collection and removal services.
4. Electricity, water and gas, and related services.
5. Heating oils.
6. School fees.

Passenger cars – within the period of the staff member's accreditation to the Czech Republic:

Passenger cars purchased by staff members during their posting to the Czech Republic are exempted from taxation (that is, eligible for VAT refunds), subject to the following quotas:

1.    Ambassador, nuncio or head of mission having an equivalent rank:

• 2 passenger cars plus 1 passenger car if accompanied by a spouse or partner registered with the Diplomatic Protocol of the Ministry of Foreign Affairs,

2.    Diplomatic staff and consular officers:

• 1 passenger car plus 1 passenger car if accompanied by a spouse or partner registered with the Diplomatic Protocol of the Ministry of Foreign Affairs,

3.    Administrative and technical staff and consular employees:

• 1 passenger car.

Passenger cars imported from third countries on a VAT-free and import duty-free basis or purchased in another EU Member State on a VAT-free basis are counted against the above quotas.

The above quotas represent the maximum number of purchased passenger cars in respect of which an eligible staff member can claim tax refunds during his/her posting to the Czech Republic. The Ministry of Foreign Affairs will not endorse the registration of any passenger car in excess of the quota applicable to the staff category in question. 

Passenger cars purchased by members of the service staff are not exempted from taxation (that is, eligible for tax refunds); however, the Ministry of Foreign Affairs may endorse requests for the registration of such passenger cars.

The Diplomatic Protocol will not endorse requests for the registration of motor vehicles other than passenger cars.

The number of passenger cars registered in the name of an individual member of the staff of a diplomatic mission (or an individual member of the staff of a consular post, representation of a public institution established under the laws of a foreign State or representation of an entity not recognised as a State under international law) may not at any moment exceed the applicable quota. A staff member who replaces a car with another one during his/her posting (while staying within the applicable limit) is not eligible for an exemption from VAT charged on the new car; in this case, the inalienability period is not be applied (see below).

Inalienability of passenger cars – obligation to pay VAT to the Tax Office:

In cases where a passenger car is purchased in the Czech Republic on a VAT refund basis (or in another EU Member State on a VAT exempt basis) and then sold, leased, lent, destroyed or taken out of service within 24 months from the date on which it was assigned a diplomatic registration plate, the owner is obliged to pay the whole amount or a portion of the VAT.    

In cases where a member of the diplomatic staff or administrative and technical staff purchases a passenger car on a VAT refund basis and takes it out of the Czech Republic at the end of his/her posting but no earlier than upon the expiry of 6 months from the date on which the car was assigned a diplomatic registration plate, the staff member is not obliged to pay the VAT; provided, however, that he/she is the owner of the car at the moment when he/she takes the car out of the Czech Republic.  

7. 2. 2 Excise duty and energy taxes

The maximum annual limit for excise duty refunds is CZK 60,000. The limit applies to purchases of alcoholic beverages and tobacco products (including heated tobacco products, other tobacco products and products relating to tobacco products, such as chewing tobacco, nasal tobacco, e-cigarettes, and nicotine pouches).

In cases where these products are purchased in the EU on an excise duty-free basis, the excise duty that would have otherwise been chargeable on such products is counted against the maximum annual limit for excise duty refunds (there is no excise duty to be refunded because the products were purchased on a duty-free basis). 

The excise duty paid on mineral oils used as engine fuel (however, this includes only fuel for passenger cars with diplomatic number plates) or heating fuel is not counted against the maximum annual excise duty refund limit (excise duty limit-free category).

Energy taxes (taxes on natural gas, solid fuels and electricity) are refunded without any limitation (no minimum or maximum limits).

7.2.3.   Limits for refunds of VAT, excise duty    

Maximum annual refund limit in cases where a staff member's posting to the Czech Republic begins or ends during a running calendar year

The maximum limit is not lowered. However, if a staff member departs from the Czech Republic during a running year, his/her purchases may be scrutinised more closely to make sure that they are consistent with the preambles to the Vienna Convention on Diplomatic Relations and the Vienna Convention on Consular Relations which say that the purpose of privileges is not to benefit individuals but to ensure the efficient performance of the functions of the mission.    

Minimum qualifying limit for refunds of VAT, excise duty:

VAT and excise duty are refunded if the price of goods and services (including VAT) paid to one seller on one calendar day and shown on one document confirming the purchase is more than CZK 4,000. To be eligible for an excise duty refund, excise goods (alcoholic beverages and tobacco products) can constitute only a portion of the purchase in question.

VAT paid on the following goods and services is not subject to this minimum qualifying limit:

1. Fuel for passenger cars.
2. Telecommunication services.
3. Household waste collection and removal services.
4. Electricity, water and gas, and related services.
5. Heating oils.

Excise duty paid on mineral oils used as engine fuel or heating fuel is not subject to this minimum qualifying limit.

Reciprocity in VAT and excise duty refunds:

In cases where the maximum annual VAT or excise duty refund limit applicable to the staff of the Czech diplomatic mission in the sending State is lower that the limit in force in the Czech Republic, the maximum annual refund limit applicable to the staff of the diplomatic mission of that sending State in the Czech Republic will be lowered to match the limit applicable to the staff of the Czech diplomatic mission.

7.2.4.   Limits for refunds of VAT plus excise duty plus energy taxes

In cases where the tax refunds available to the staff of the Czech diplomatic mission in the sending State are limited to certain goods and services, the same limitation will be applied to tax refunds available to the staff of the diplomatic mission of the sending State in the Czech Republic. Each of the diplomatic missions concerned will be duly informed in a separate verbal note.

7.3.      HOW TO CLAIM A TAX REFUND

Refunds of the VAT, excise duty and energy taxes are claimed separately.

 7. 3. 1    VAT refund claims

VAT refunds must be claimed by 31 January of the calendar year following the year in which the claimant purchased the goods or received the service. If the refund is not claimed within this time limit, the claimant's refund entitlement lapses in its entirety.

The VAT refund claim is not acceptable unless presented on the prescribed form issued by the Ministry of Finance of the Czech Republic (“Přiznání k uplatnění nároku na vrácení daně z přidané hodnoty podle § 80 zákona č. 235/204 Sb., o dani z přidané hodnoty, ve znění pozdějších předpisů”).   

The claim can be filed only once in each tax period. The tax period is a calendar month for diplomatic missions and a calendar quarter for the diplomatic or administrative and technical staff. The claim must not be filed before the end of the tax period in question. One claim may include multiple purchases.  If the claimant cannot file a claim after the end of the respective tax period, it is acceptable to include the purchases in the claim  for the next tax period; provided, however, that all refunds for the given year are  claimed within the annual time limit (see above). The claim cannot be filed electronically.

Before filing the claim with the tax administrator (Tax Office), the claimant must present it to the Ministry of Foreign Affairs. The claim presented to the Ministry of Foreign Affairs must include lists of the goods and services in respect of which the refunds are claimed, and a list of the claimant's family members, if they are named as customers on any document confirming the purchase of any of the goods and services. The goods and services must be divided into two separate lists: a list of goods and services counted against the annual VAT refund limit, and a list of goods and services not counted against this limit (see 4.6 below).

Diplomatic missions as well as their staff members must file their claims only with the Tax Office appointed to deal with the respective diplomatic mission on the basis of the address of the premises of the diplomatic mission in the Czech Republic.

The claim filed with the Tax Office must include the following:

• A copy of a document confirming the purchase (invoice, receipt or proof of delivery),
• A copy of vehicle registration certificate (if the claim is for VAT paid on a passenger car),
• Lists of goods and services (the same as those presented to the Ministry of Foreign Affairs),
•  A note confirming reciprocal treatment recognised as such by the Czech Republic (Ministry of Foreign Affairs) if the claim concerns a property qualifying for the VAT limit-free category (see 4.2 below),
• A list of family members forming part of the claimant's household, if they are named as customers on a document confirming the supply of any of the goods or services (see 4.4 below).

The document confirming the purchase must contain the following information:

• Information on the seller or service provider:

• Business or company name, including any additions to the business or company name, registered office address, taxpayer identification number (DIČ),

• Name of the person purchasing the goods or services,

• Name of the person eligible to recover VAT or, where appropriate, such person's family member (see 4.4 below),

• Description and amount of the goods or services purchased,
• Registration number of the document confirming the purchase,
• Date of purchase,
• VAT rate and VAT base,
• Amount of VAT,
• Total price including VAT.

Claimants should note that there will be some minor changes to the VAT refund procedure starting from 2026. The revised procedure will be more or less similar to the procedure for excise duty refunds (see below).

7. 3. 2       Excise duty and energy taxes

Excise duty and energy tax refunds must be claimed by 31 January of the calendar year following the year in which the claimant made the eligible payment. If the refund is not claimed within this time limit, the claimant's refund entitlement lapses in its entirety.

The refund claim is not acceptable unless presented on the prescribed form issued by the Ministry of Finance of the Czech Republic: “Přiznání k uplatnění nároku na vrácení spotřební daně osobě požívající výsad a imunit podle § 15 zákona č. 353/2003 Sb. o spotřebních daních, ve znění pzdějíších předpisů” (for excise duty) and  “Přiznání k uplatnění nároku na vrácení daně z/ze ….. [specify the tax] podle zákona č. 261/2007 Sb., o stabilizaci veřejných rozpočtů, ve znění pozdějích předpisů, část čtyřicátá pátá až čtyřicátá sedmá” (for energy taxes).     

The claim can be filed only once in each tax period. The tax period is a calendar month for diplomatic missions and a calendar quarter for the diplomatic or administrative and technical staff. One claim may include multiple payments.  If the claimant cannot file a claim after the end of the respective tax period (month/quarter), it is acceptable to include the payments in the claim for the next tax period; provided, however, that all refunds for the given year are claimed within the annual time limit (see above). The claim cannot be filed electronically.

Before filing the claim with the tax administrator (Customs Office), the claimant must present it to the Ministry of Foreign Affairs. An excise duty refund claim (NOT an energy tax refund claim) presented to the Ministry of Foreign Affairs must include lists of the purchased products in respect of which the refunds are claimed, and a list of the claimant's family members, if they are named as customers in any document supporting the claim. The goods and services must be divided into two separate lists: a list of goods and services counted against the annual refund limit, and a list of goods and services not counted against this limit (see 4.6 below).

Diplomatic missions as well as their staff members must file their claims only with the Customs Office appointed to deal with the respective diplomatic mission on the basis of the address of the premises of the diplomatic mission in the Czech Republic.

The claim filed with the Customs Office must include the following:

• A copy of a document confirming the purchase,  
• Lists of purchased products (the same as those presented to the Ministry of Foreign Affairs),
•  A list of family members forming part of the claimant's household, if they are named as customers on a document confirming the supply of goods or services (see 4.4 below).

The document confirming the purchase must contain the following information:

• Information on the seller of the products:

• Business or company name, including any additions to the business or company name, registered office address, taxpayer identification number (DIČ),

• Name of the person purchasing the products,

• Name of the person eligible to recover taxes or, where appropriate, such person's family member (see 4.4 below),

• Description (trade name, where appropriate) and amount of the products purchased,
• Date of purchase,
• Tax rate,
• Total price including the excise duty,
• Date of issuing the document confirming the purchase,
• Registration number of the document confirming the purchase. 

 

7.4. APPLICATION OF THE NEW RULES: FORMAL REQUIREMENTS AND ADDITIONAL INFORMATION

7. 4.1. Verbal note

The verbal note from a diplomatic mission must state, separately, the total amount of tax paid on goods and services not counted against the maximum annual limit and, separately, the total amount of tax paid on goods and services counted against the maximum annual limit. The tax payments of individual staff members must be listed in a separate annex – these lists must have the same structure as the diplomatic mission's lists.

7. 4. 2.   Confirming the reciprocity of treatment in the case of purchases, construction or reconstruction of properties owned by the sending State, where the price of goods or services (limit-free category) is more than CZK 100,000 including VAT

The diplomatic mission must notify the Diplomatic Protocol of the Ministry of Foreign Affairs ˗ well in advance ˗ that it will request a refund of VAT paid on such goods and services falling within the VAT limit-free category.  

If the request is deemed acceptable, the Diplomatic Protocol notifies the diplomatic mission that the VAT would be refundable, on the understanding that the Diplomatic Protocol receives a verbal note from the Ministry of Foreign Affairs of the sending State, confirming that the sending State is willing to accord reciprocal treatment to the respective Czech diplomatic mission. 

The Diplomatic Protocol accepts the offer of reciprocal treatment and confirms the acceptance in a verbal note presented to the Ministry of Foreign Affairs of the sending State. The date of this Diplomatic Protocol's verbal note will be the material date for the purposes of acceptability of the documents confirming the sale of the eligible goods and services. The tax will be refunded only if these documents were issued after the date of the Diplomatic Protocol's verbal note confirming the acceptance of reciprocal treatment.

The Diplomatic Protocol's verbal note confirming the acceptance of reciprocal treatment must be enclosed with the refund claim. It is not allowed to attach the note to the claim at a later date, when the claim has already been presented to the Ministry of Foreign Affairs. 

7.4.3. Refunds of taxes paid on services (limit-free category) relating to the premises of diplomatic missions or private residences of the eligible persons

To claim refunds of taxes paid on services (limit-free category) relating to a mission's premises or an eligible person's private residence (if recognised as such by the receiving State – the Czech Republic), it is necessary that the document confirming the service identify the property by its address (including, for example, the number of the flat in question).

7. 4. 4. Refunds of taxes paid by the eligible person's family members

The only natural persons who can recover indirect taxes are members of the staff of diplomatic missions (“eligible persons”). Members of the eligible person's family who form part of his/her household meet their own needs through the eligible person.

In cases where a family member is named as the customer on a document confirming the purchase, the eligible person must enclose with the refund claim a list of his/her family members including the customer. The Ministry of Foreign Affairs will confirm whether the persons on the list are indeed members of the eligible person's family. As the next step, the eligible person must present the list to the tax administrator (Tax Office or Customs Office) together with the tax refund claim and supporting documents.

7.4.5. Tax refund claim

The “Funkce pověřené osoby” (“Position of the eligible person”) section must be duly filled in.

7.4.6. Lists of goods purchased and services received for the purpose of VAT refunds, and lists of products purchased for the purpose of excise duty refunds (“Daňová záznamní povinnost”)

The list of goods purchased and services received for the purpose of VAT refunds, and the list of products purchased for the purpose of excise duty refunds must be presented in Czech.

Sample forms showing the information to be included in each list are enclosed with this circular note. The forms are also available at mzv.cz/protocol → Formuláře/Forms. To speed up the refund process, claimants are recommended to use these forms.  

If the purchases or services itemised in one document fall within both categories (limited and limit-free), the list must show each item in its correct category. Each category must contain only the tax payments that belong to it. The decision whether the purchase meets the minimum tax refund limit will be made on the basis of the total price as shown in the document. If each of the items shown in the document falls within a different category and is listed in its correct category, the tax will be refunded even if the items listed in the limited category are worth less than CZK 4,000, provided, however, that the total price shown in the document meets the minimum tax refund limit.

7.4.7. Role of the Ministry of Foreign Affairs in the tax refund process

The role of the Ministry of Foreign Affairs is limited to confirming whether the claimant is eligible to claim the refund on the basis of reciprocity. The authority to conduct tax proceedings and decide on the tax refund claim is reserved to the tax administrator (the competent Tax Office for the VAT or Customs Office for excise duty and energy taxes). That is why the tax administrator communicates directly with the claimant. The Ministry of Foreign Affairs does not a priori have any information on issues such as the status of processing of individual claims, individual taxpayer accounts, or the reasons why an item was excluded from a tax refund claim.

7.5. CONCLUSION

The Diplomatic Protocol recommends diplomatic missions to inform all potential claimants about the above rules. Incorrect or incomplete claims delay the refund process. For the same reason, the Diplomatic Protocol recommends diplomatic missions, especially the larger ones, to file their tax refund claims on a monthly basis, as soon as possible after the end of the given month.

The Diplomatic Protocol reserves the right to consider whether a claimant is eligible to claim a tax refund according to the Vienna Convention on Diplomatic Relations and the Vienna Convention on Consular Relations.