Understanding "Identifikovaná osoba" (Identified Person) vs. Regular VAT Payer in the Czech Republic

In the Czech Republic, VAT (Value Added Tax) is a fundamental component of the tax system, impacting businesses, freelancers, and professionals across sectors. Within this framework, the concept of “identifikovaná osoba” (identified person) represents a specific legal status under Czech VAT law, distinct from the status of a regular VAT payer (plátce DPH). Understanding the differences between these two statuses is essential for entrepreneurs, service providers, and artists who operate in the domestic and international markets.

What is a Regular VAT Payer?

A regular VAT payer in the Czech Republic is a business or individual that is registered for VAT because their turnover exceeds the mandatory threshold of CZK 2 million over the previous 12 months. VAT registration can also be voluntary if the taxpayer wants to deduct input VAT or deal with VAT-registered clients.

Once registered, the regular VAT payer must:

• Charge VAT on their taxable supplies (goods or services) to customers.

• Issue proper VAT invoices.

• File periodic VAT returns (usually monthly or quarterly).

• Pay VAT collected to the tax authorities and deduct input VAT paid on business expenses.

• Comply with Czech VAT law, including special provisions for cross-border transactions.

This status obliges the business to fully apply VAT rules, including accounting, invoicing, and reporting obligations.

Who is an “Identifikovaná osoba” (Identified Person)?

An “identifikovaná osoba” is a unique VAT status created primarily to regulate cross-border transactions within the European Union, especially under the concept of reverse charge VAT and simplification measures for non-resident taxpayers.

According to Czech VAT law, an identified person is someone who:

• Is not required to register as a regular VAT payer because their turnover does not exceed the threshold or they are not carrying out fully taxable activities.

• However, they make acquisitions of goods or services from other EU member states that exceed CZK 326,000 annually (the threshold for intra-EU acquisitions).

• Or they voluntarily identify for VAT purposes to comply with EU rules on intra-community acquisitions.

This means an identified person is registered only for the purposes of VAT on intra-community acquisitions, not for all VAT obligations.

Practical Implications for Businesses and Freelancers

For most Czech businesses, being a regular VAT payer is straightforward—once their turnover exceeds the CZK 2 million limit, they must register, charge VAT, and file full VAT returns. This gives them the right to reclaim input VAT on all qualifying purchases, including software licenses, equipment, or services from Czech suppliers.

In contrast, an identified person is usually a smaller entity or individual who does not meet the full registration threshold but still engages in intra-EU trade, such as acquiring digital services or goods from other EU countries. For example, a Czech freelancer buying software subscriptions from an EU-based provider exceeding CZK 326,000 annually must become an identified person. They do not charge VAT on their own sales but must self-account for VAT on these acquisitions and report them in their VAT returns.

This status simplifies VAT obligations by limiting registration to intra-community acquisitions, reducing administrative burden. However, it also means the identified person cannot charge VAT on their own supplies in the Czech Republic, which may affect their pricing or business competitiveness if most clients are domestic VAT payers expecting VAT invoices.

Cross-Border Considerations and EU Law

The concept of the identified person originates from the EU VAT Directive, designed to balance VAT obligations and simplify compliance for small entities engaging in intra-community acquisitions. It helps prevent tax evasion while ensuring smaller taxpayers do not face disproportionate administrative burdens.

Within the EU single market, reverse charge mechanisms transfer the VAT payment obligation from the supplier (in another member state) to the recipient. Identified persons must apply this when acquiring goods or services from other EU countries, effectively "self-invoicing" the VAT and reporting it in their tax returns.

This differs from a regular VAT payer, who charges VAT on sales and can reclaim input VAT in a more traditional manner.

Conclusion

Understanding the difference between being a regular VAT payer and an identified person is crucial for businesses and freelancers operating in the Czech Republic. The regular VAT payer status involves full VAT compliance with broad obligations but also more extensive rights to recover input VAT. The identified person status is a more limited form of VAT registration designed primarily to manage intra-community acquisitions and simplify cross-border VAT compliance for smaller operators.

Choosing the correct status, or recognizing when an identified person must register, can save time, avoid penalties, and optimize tax planning. Entrepreneurs and artists who operate internationally should consult with tax professionals to ensure they meet all Czech and EU VAT obligations appropriately.