The government-approved proposal for the so-called EET 2.0 plans for the return of the Electronic Registration of Sales (EET) as of January 2027, albeit in a different format than the one abolished in 2023. While the new version maintains the principle of a centralized sales registration system, it alters the scope of monitored transactions. Specifically, transactions will have to be registered if they involve payments in cash, by card, via QR code, or using "any other future technology," provided the transaction takes place through personal contact.
The blanket obligation to print receipts will be eliminated. A segment of the smallest entrepreneurs will be allowed to utilize a special "EET OFF" regime. The government expects the proposal to increase public budget revenues by CZK 14 to 15 billion annually. Concurrently, the proposal (re)opens a debate on how this new scope of registration will impact the business environment, administrative obligations, and the nature of tax audits.
Beyond the registration system itself, the amendment is part of a broader tax package that includes changes to income tax, VAT, and other levies. In the text below, we would like to introduce these key updates and their potential impacts in greater detail.
Value Added Tax (VAT)
Abolition of the VAT Deduction Limit on Luxury Cars
The input tax restriction exemption—negotiated by the Czech Republic for the years 2024 to 2026, which caps the eligible VAT deduction on the acquisition or subsequent technical improvement of a vehicle at CZK 420,000—is set to be abolished effective January 1, 2027. Under the new rules, taxpayers will be entitled to claim a full VAT deduction regardless of the purchase price of the vehicle or the value of the technical improvement, provided, of course, that the automobile is used for economic (taxable) activities.
According to the proposed transitional provisions, if a car was acquired (or a technical improvement was performed) before the end of 2026, but the vehicle is registered in the Registry of Motor Vehicles after January 1, 2027, the taxpayer will be entitled to claim the full VAT deduction. The government proposal also permits taxpayers to increase their deduction claim for vehicles registered in 2027 where the deduction had previously been claimed at the limited amount, via an amended tax return filed by the end of January 2027. However, it is currently unclear from the draft whether a full deduction will also apply to advance payments (deposits) received before the end of 2026.
Application of the 12% VAT Rate to Non-Alcoholic Beverages in Restaurant Services
Currently, the reduced VAT rate applies only to tap drinking water and milk-based beverages (including their alternatives, such as plant-based milks) served as part of restaurant services. Effective January 1, 2027, the 12% VAT rate should apply to all non-alcoholic beverages.
However, the sale of non-alcoholic beverages outside of restaurant services—with the exception of drinking water and milk-based beverages (including their alternatives)—will continue to be subject to the standard VAT rate of 21%.
Changes to Low-Value Bad Debts
Effective January 1, 2027, the conditions for adjusting the tax base for bad debts that are not being recovered through debt enforcement (distraint) or insolvency proceedings against the debtor are set to change.
A creditor will newly be authorized to perform a tax base adjustment if:
- The debt does not exceed CZK 20,000 (up from the current CZK 10,000) including tax;
- The debt is at least 3 months overdue (down from the current 6 months);
- The aggregate amount of debts against a single debtor does not exceed CZK 100,000 (up from the current CZK 20,000) including tax per calendar year.
If these conditions are met, the creditor can report the adjustment in the tax return for any tax period. The new conditions will also apply to bad debts arising from taxable supplies executed after January 1, 2025, provided the creditor proceeds with the adjustment after January 1, 2027.
In connection with the aforementioned changes, the period after which a debtor (a taxpayer who received a taxable supply and claimed an input tax deduction) is obliged to reduce their claimed deduction if the debt has not been fully or partially paid is being shortened from 6 to 3 months, regardless of the total amount of the debt.
Personal Income Tax (PIT)
In addition to sales registration itself, the proposal introduces several significant changes to personal income tax. While some measures are directly tied to the new EET regime, others represent independent updates to employee benefits, tax credits, or the taxation of tips—which the government presents, in part, as an effort to offset the impacts of the revived registration system.
The Flat-Rate Tax Regime and the New "EET Surcharge"
One of the most heavily discussed novelties is the introduction of the EET OFF regime, under which entrepreneurs can opt out of the obligation to register sales in exchange for a monthly surcharge to their flat-rate tax amounting to CZK 1,400. This regime is available to entrepreneurs in the first band of the flat-rate tax scheme whose income from independent activity does not exceed CZK 1 million annually. Registration must generally be notified to the tax administrator by the 10th day of the relevant tax period. If a taxpayer exceeds the CZK 1 million threshold during the year after opting into the surcharge, the registration obligation will apply to them starting only from the following tax period.
From a practical perspective, however, several questions remain open. For instance, the Chamber of Tax Advisers of the Czech Republic points out that the proposal does not sufficiently clarify what exactly constitutes "income from independent activity" for the purpose of assessing the CZK 1 million limit. It is not entirely clear whether this refers to all income under Section 7 of the Income Tax Act, or only income relevant for entry into the flat-rate tax regime.
Sales Registration Tax Credit
The proposal also introduces a one-time tax credit for the registration of sales of up to CZK 5,000. This credit can be claimed starting in the 2027 tax period at the earliest. Its calculation is based on the positive difference between 15% of the partial tax base from independent activity and the basic personal tax credit. The credit is intended to partially offset the initial costs associated with implementing the registration system, such as purchasing a point-of-sale (POS) system or hardware. However, its actual economic benefit will depend on the specific business model and the scope of the taxpayer's overall tax liabilities.
The Return of Certain Tax Credits and Adjustments to Benefit Exemptions
The proposal includes the reinstatement of certain previously abolished tax reliefs. The student tax credit returns at an amount of CZK 4,020 annually, alongside the childcare tax credit (the so-called "školkovné"), which will be capped at the minimum wage. For the childcare tax credit, the proposal introduces detailed conditions for eligibility, including a new reporting obligation for preschool facilities. These facilities will be required to electronically report data on children and the amounts paid to the Financial Administration. Here too, the Chamber of Tax Advisers highlights potential practical issues, such as compliance with reporting obligations for foreign preschools or similar facilities located outside the Czech Republic.
Significant changes will also affect employee benefits. The proposal plans a return to the framework in place prior to 2024—meaning that leisure-time benefits can be provided tax-free in any amount, with the exemption for recreational and holiday contributions being capped once again at CZK 20,000 per calendar year. Simultaneously, the scope of exempt benefits is expanding to include contributions to selected social services, such as personal assistance or home care. The tax exemption for employer-organized corporate or social events of a reasonable scope will remain intact, though its statutory placement will shift to the same provision regulating leisure-time benefits. Conversely, for health-related benefits, an annual limit tied to the amount of one average wage will continue to apply.
Tips in a New Tax-Exempt Regime
A major change for the gastronomy and hospitality sector is the new tax treatment of tips, aimed among other things at incentivizing the official reporting of tips and boosting the legal income of hospitality employees. The proposal introduces an income tax exemption for tips from catering/restaurant services under employment income, up to a limit tied to the employer's monthly revenue from catering services. Despite detailed statutory definitions and conditions, this area raises numerous interpretation questions—particularly regarding the ambiguous calculation of the exemption limit, lack of clarity on how tips are to be distributed among staff, and whether the regime applies to self-service or fast-food concepts. Another open question is how tips will be treated on the employer's side as business expenses from a Corporate Income Tax perspective.
Given that the proposal is currently moving through the legislative process, further adjustments to the phrasing and subsequent methodological interpretations can be expected. It will therefore be crucial for businesses to monitor not only the final text of the law but also the subsequent application practices adopted by the Financial Administration.
This text was translated by AI.
