An amendment to the VAT Act in e-commerce is expected to come into effect in the coming days as part of the ongoing law-making process. The amendment implements the EU Council’s tax package into the Czech system of laws. It also introduces significant changes to imports, cross-border trade within the EU and extends the possibilities for the use of the special one-stop-shops.
Once effective, the amendment will lift the VAT exemption for imports of goods with a value of up to EUR 22. At the same time, to prevent a significant increase in the administrative burden, a new special regime is introduced for low-value imports under which the post office or the carrier, for instance, can assess the VAT on behalf of the recipient of the goods.
In addition, VAT can also be assessed via an extended special one-stop-shop. This change will have a direct impact on the imports of low-value goods especially from e-shops in the US and China, which are very popular in the Czech Republic.
DISTANCE SALES OF GOODS FORMERLY CALLED FORWARDING OF GOODS
With the amendment, the limits for sending goods in individual members states will be lifted. As for the distance supply of goods, the country of the recipient of the goods is automatically considered the place of supply.
The amendment, however, introduces an exception from this rule under which the country of the supplier can be considered the place of supply. To benefit from this exception, the supplier must be established in a single member state and may not exceed an annual limit of EUR 10,000 throughout the EU in respect to the distance sales of goods and provision of telecommunication services, radio and television broadcasting services and electronic services to the end customer.
ELECTRONIC INTERFACES AS DEEMED SUPPLIERS OF GOODS
Legal fiction will start to apply to electronic platforms: the electronic interface facilitating the sale of goods will be considered to have supplied the goods to the end customer. Therefore, the supply is divided into two transactions:
- Supply of goods to the electronic interface by the supplier;
- Supply of goods to the end customer by the electronic interface.
The shipment is assigned to the supply from the electronic interface to the end customer. The supply of goods from the supplier to the electronic interface is therefore considered the supply of goods without shipment.
These rules only apply to the distance sales of imported goods worth up to EUR 150, i.e. the supply of goods to the end customer from a non-EU member state, and also to the distance sales of goods from a supplier not established in the EU when the goods are already physically present in the EU at the time of sale.
Another major change is the extension of the special one-stop-shop regime to other types of transactions. Until now, the regime has applied to the supplies of telecommunication services, radio and television broadcasting services and electronic services provided to end customers.
The regime will from now on also include low-value imports consisting of the distance sales of imported goods worth up to EUR 150 and the distance sales of goods. For reasons of simplification, electronic interfaces acting as deemed suppliers of goods can also apply this regime to the above transactions.
By David Krch, Partner, and Kristyna Slehoferova, Tax Adviser, Havel & Partners