Value added tax affects both international and domestic artists, who perform, sell their work and provide their services abroad. The EU VAT Directive sets forth the minimum standard VAT rate at 15% and permits Member States to apply up to two reduced VAT rates, which may not be less than 5 %. Certain specific goods and services may even be exempt from VAT. To understand how VAT system works, it is important to distinguish between two types of taxable transactions (or chargeable events in EU parlance) – a supply of goods and a supply of services. Their definitions are available in the VAT Directive: “supply of goods” is the transfer of the right to dispose of tangible property as owner, while “supply of services” means any transactions which do not constitute a supply of goods under Article 5. In other words, any transaction that is not a supply of goods constitutes a supply of services.
VAT in the Czech Republic
Example
An artist who is liable to VAT and lives in the Czech Republic sells a painting to a collector in Denmark. In which country should the VAT be paid?
In this instance, the tax is paid in accordance with the tax residence rule, because the buyer is an individual (a natural person). The artist must, therefore, add Czech VAT to his or her invoice and pay the tax to the Czech tax authorities.
If the painting were bought by a Danish gallery for the purpose of its business, the payment of the tax would have to follow the rule of place of supply, which means that the buyer would have to pay the VAT in Denmark.
What happens if an individual lives outside the EU or if an artist performs in such a third country? Different rules apply and must be followed in such situations.
If you want to know more, please continue to the chapter VAT and Foreign Transactions.
If you want to know more about VAT in the Czech Republic, please read the chapter Basic Information.