Czech Republic plans new reduced VAT rate

Thu 17th Apr 2014

The Czech Republic plans to introduce a second, reduced VAT rate of 10% on key products.  The current Czech VAT rate is 21%, and the only reduced VAT rate is 15%

Lower VAT on books and medicines

The coalition government has discussed many reforms of the Czech VAT rates, including a plan to merge the 21% and 15% rates at 17.5%.  However, it is clear there is limited room for manoeuvrings on the budget as the economy recovers slowly than hoped.  The government did hold out the hope of a 1% cut in the standard rate to 20% in 2016 following the Czech VAT rise to 21% in 2013.

As a compromise, the parties favour introducing  a new reduced rate of 10% on books and medicines.  The EU VAT Directive does permit two reduced rates, the lower of which must be 5% or above.  The probable implementation date will be 2015 subject to the country making progress towards the Euro currency 3% GDP deficit target.