Open last month's card statement. Facebook or Google Ads for advertising, Adobe or Canva for design, Notion or Slack for organising the work, AWS or Vercel for hosting, OpenAI for access to a model. Entirely ordinary line items for most businesses. And almost nobody realises that each of those foreign invoices can carry a hidden obligation to pay Czech VAT — even if you are not registered for VAT and have no intention of registering.
The mechanism is called reverse charge; in Czech law it is the transfer of the tax liability. On services bought from abroad it works the opposite way round from what you would expect: the tax is not declared and paid by the supplier but by you, the recipient. This guide explains how it works, exactly who it hits depending on whether you are a non-payer, an identified person or a VAT payer, shows the numbers, and says what to do so it never becomes a problem with the tax office.
The hidden VAT liability on foreign invoices
When you buy something from a Czech supplier as a non-payer, it is simple: you pay the price and that is the end of it. A service from a foreign company follows different rules, and that is the part most sole traders never hear about.
An invoice from Facebook, Google or OpenAI usually carries no VAT, or a zero rate. The supplier sits in another country — typically Ireland or the United States — and under European rules does not charge the tax. That does not mean no tax is due. It means the obligation to declare it moves to you as the recipient in Czechia.
The rule that does the work is the place of supply. For most services supplied to a business, the basic rule in § 9(1) of the Czech VAT Act puts the place of supply where the recipient is established. So when you, a Czech business, buy advertising or software, the place of supply is Czechia, the tax follows Czech rules, and the only thing that changes is who declares it.
Why nobody notices: there is no Czech VAT anywhere on the foreign invoice. The document looks complete, the amount adds up, the money has gone. The obligation is invisible because it arises from the law on your side, not from the text of the invoice.
How reverse charge on foreign services works
The principle is short: the recipient declares and reports the tax, not the supplier. It is also called self-assessment — you assess the tax on yourself.
For a service received from abroad the sequence is:
- The foreign supplier issues an invoice without VAT, either referring to reverse charge or showing a zero rate.
- You calculate Czech VAT at 21 % on the tax base yourself — the standard rate applies to ordinary digital and advertising services.
- You declare that tax in your VAT return and pay it by the same deadline.
Whether you can also deduct it back depends entirely on your status, and that is the fork in the road that decides everything.
One point of frequent confusion. You may have come across the reverse-charge regime in connection with construction work or scrap metal. That is the domestic reverse charge under § 92a and following (§ 92e specifically for construction and assembly work), and it applies only between two Czech VAT payers on selected supplies inside Czechia. This article is about something else: the transfer of the tax liability when you buy a service from abroad. The mechanism looks similar — the recipient declares the tax — but the rules, the sections of the Act and the people it affects are all different.
Three scenarios, depending on your status
What actually happens when you pay a foreign invoice depends on which of three groups you are in:
| Your status | What happens when you buy a service from abroad | Real effect |
|---|---|---|
| Not registered for VAT | You become an identified person, must register and must declare the tax | You pay 21 % and never get it back |
| Identified person | You declare the tax in a VAT return for that month | You pay 21 % and never get it back |
| VAT payer | You declare the tax and at the same time claim it as a deduction | Usually no net effect at all |
1. Non-payer: you become an identified person
This is the most common situation and the least known. You are not registered for VAT and you pay for a Facebook ad for the first time. Under § 6h of the VAT Act — receiving a service from a person not established in Czechia — you become an identified person immediately. There is no financial threshold: it makes no difference whether you spent CZK 50 or CZK 50,000. What counts is the bare fact that you received a service from abroad with the place of supply in Czechia.
As an identified person you have to register within 15 days, file a VAT return for the month in which the purchase happened, and pay 21 % on the service received. You cannot deduct it, so the service genuinely costs you a fifth more. The status, the registration and the ongoing duties are covered in full in the article on the identified person, which is the natural next read after this one.
2. Identified person: you declare the tax
If you are already an identified person, nothing new happens. In every month in which you receive a foreign service you declare the VAT and pay it; in "empty" months with no cross-border supply you file nothing at all. Like a non-payer, you have no right to a deduction: the tax goes out and does not come back.
3. VAT payer: you declare it and deduct it
For a full VAT payer, reverse charge on foreign services is usually paperwork. You calculate the 21 % on the service received and declare it as output tax, and in the same return — provided you use the service for your business — you claim it back as input tax. The two amounts normally cancel out and the effect on your bank balance is zero. You still have to report the transaction correctly in the return and in the control report.
Which leads to the useful conclusion: reverse charge on foreign services hurts non-payers and identified persons, who pay the tax with no deduction. For a VAT payer it is administration with no financial consequence. If you buy a lot of foreign services, that alone can be an argument for registering voluntarily.
The numbers, in three real cases
- A hairdresser who is not VAT registered runs a Facebook ad for CZK 1,000. Meta is established in Ireland and the invoice carries no VAT. With that purchase she becomes an identified person. On the CZK 1,000 she owes CZK 210 of Czech VAT at 21 %, with no deduction. The advertising has really cost her CZK 1,210.
- A freelancer who is an identified person pays CZK 2,000 a month for Adobe and OpenAI. He declares CZK 420 of VAT in the monthly return and pays it. No deduction is available, so his software cost rises by that amount.
- An e-shop that is a VAT payer pays AWS CZK 10,000 a month for hosting. It declares CZK 2,100 of output VAT and claims the same CZK 2,100 as input VAT. Net effect: CZK 0. It simply has to be reported correctly.
The same invoice from the same supplier produces three different tax outcomes for three different businesses. Knowing what reverse charge is therefore is not enough — you need to know how it lands on you.
EU versus third countries
Does it matter whether the service comes from Germany or from the United States? For the obligation to pay the tax, essentially no: in both cases you declare Czech VAT at 21 % under reverse charge, and a non-payer becomes an identified person with no threshold. What differs is the legal basis and the reporting:
| Service from the EU | Service from a third country | |
|---|---|---|
| Typical supplier | Adobe (Ireland), a supplier in Germany | OpenAI, AWS, Notion (USA), a supplier in the UK or Switzerland |
| Legal basis for declaring the tax | place of supply in Czechia (§ 9(1)), recipient declares (§ 108) | place of supply in Czechia (§ 9(1)), recipient declares (§ 108) |
| Does a non-payer become an identified person? | Yes, with no threshold (§ 6h) | Yes, with no threshold (§ 6h) |
| Tax rate | 21 % | 21 % |
| Do you pay Czech VAT? | Yes, declared by the recipient | Yes, declared by the recipient |
In practice it matters far less whether the supplier sits in Ireland or in California. What matters is that this is a foreign service with the place of supply in Czechia. The EU versus third-country distinction does matter for putting the transaction on the right line of the return, because each type has its own box.
What happens if you ignore it
This is not textbook theory but a statutory duty, and the Czech tax authorities can see money flowing to foreign platforms. The area is watched.
If you miss the obligation, what you risk is:
- Backdated registration and assessed tax. If you should have become an identified person and did not, the tax office registers you retroactively from the date the obligation arose and assesses the VAT for every period affected.
- A penalty for filing late. A late return attracts a penalty under the Tax Code, calculated as a percentage of the tax for each day of delay and capped at a ceiling. Even modest delays add up.
- Late payment interest. Interest accrues on the unpaid tax until it is settled.
Careful: not knowing about the rule does not remove the duty, and "I had no idea Facebook invoices worked like that" is not an argument the tax office accepts. The longer it runs, the more penalty and interest accumulate — which is why it is worth dealing with from the very first foreign invoice.
How Taxorio helps
The hard part of reverse charge on foreign services is not the arithmetic. It is not noticing. An invoice from Notion or Google looks like any other and slips in among the domestic ones. That is exactly where the app helps:
- The AI scan recognises reverse charge. Upload an invoice from a foreign supplier and the scan identifies it as a service received from abroad and marks the correct regime. It also distinguishes an EU service from a third-country one and fills in the supplier's country from the address or the VAT ID.
- The records stay in one place. Cross-border transactions do not get lost among ordinary documents, so in the month an obligation arises you already have the basis for the return rather than a search through the archive.
- It carries through into the VAT return. Taxorio prepares the VAT return XML to the tax administration's schema, including the identified person variant, with the right lines for services received from abroad. You download it and upload it to MOJE daně. XML exports are part of the PRO plan.
Two honest limits. The AI scan proposes the reverse-charge treatment and flags the document; the final classification is always yours, and borderline cases deserve a look. And Taxorio does not file anything with the tax office on your behalf — it prepares the file, you submit it.
Checklist before you pay the next foreign invoice
- Is the supplier established abroad? An invoice from an EU or third-country company — Facebook, Google, AWS, Adobe, Notion, OpenAI and the like — is a strong signal that reverse charge applies.
- What is your status? Not registered: careful, the first such purchase makes you an identified person. Identified person: declare the tax. VAT payer: declare it and deduct it.
- If you have become an identified person, register within 15 days. The deadline is fixed and missing it risks a penalty.
- Calculate and declare 21 % VAT for the month in which the purchase happened, and pay it by the same deadline.
- Keep the foreign invoices together so the return is a matter of reading them off, ideally with the cross-border transactions marked automatically at upload.
Careful: classifying a particular service and determining the place of supply can be genuinely ambiguous in harder cases — a mix of goods and services, supplies that fall outside the basic rule in § 9, specific categories of service. In borderline situations check the treatment with a tax adviser; this article is a practical guide, not a substitute for professional advice.
In short
Reverse charge on foreign services is a tax obligation a large share of sole traders never hear about, and it touches almost everyone who pays for advertising, software or cloud from abroad. The principle is simple: for a foreign service with the place of supply in Czechia, the recipient declares and pays the tax, not the supplier. What follows from that depends on your status — a non-payer becomes an identified person with no threshold, an identified person declares the tax, a VAT payer declares it and deducts it.
The thing to remember is that a foreign invoice showing no VAT at all can still oblige you to pay the state 21 %. Ignore it and you risk backdated registration, assessed tax and penalties. To keep the agenda under control without watching for it by hand, let the app flag the reverse-charge documents and prepare the return — and take the harder cases to an adviser.
Taxorio scope: Taxorio provides invoicing and income/expense records for Czech sole traders. It is not full accounting or personalised tax advice. For an unsupported or unusual case, verify the treatment with a Czech accountant or tax adviser before filing.