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VAT Updates in E-commerce

VAT Updates in E-commerce

Czech Republic
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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.

LOW-VALUE IMPORTS 

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:

  1. Supply of goods to the electronic interface by the supplier;
  2. 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.

ONE-STOP-SHOP

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

Czech Republic Knowledge Partner

HAVEL & PARTNERS, attorneys-at-law, with offices in Prague, Brno, Bratislava, Pilsen, Olomouc, and Ostrava, has a team of 250 lawyers, tax advisors and 500 employees in total, is the largest independent law firm in Central Europe.

Our clients include large international companies, leading Czech and Slovak firms, including strategic state-owned companies and public sector authorities, as well as medium-size businesses, individual entrepreneurs, and investors. We advise approximately  150 of the Fortune 500 companies, almost 50 of the Czech Top 100 companies and 20 of the TOP 100 Slovak companies. HAVEL & PARTNERS currently provides its services to a total of 2,500 clients. We have the most comprehensive international support available to both Czech and Slovak law firms. We provide legal and tax advice in 12 languages in more than 110 countries around the globe. Up to 70 % of the transactions we deal with involve an international aspect.

HAVEL & PARTNERS was named the best law firm operating in the Czech Republic by the prestigious global rating agencies Chambers and Partners (2020, 2021) and Who’s Who Legal (2018, 2019). It is also the most successful law firm, providing the most comprehensive legal services in the Czech Republic and Slovakia, based on the total number of all nominations and awards in all years of the Law Firm of the Year awards. The firm became the absolute winner of this competition four times in the last six years, receiving the main award Domestic Law Firm of the Year in the Czech Republic (2015, 2017, 2018, 2020) and ranking as one of the most recommended law firms in all categories of law. Our company is also a four -time winner of the Law Firm of the Year award for Best Client Services (2015, 2016, 2019, 2020). In the field of M&A, HAVEL & PARTNERS is the best law firm in the Czech Republic based on the annual International Advisory Experts awards (2018, 2019). Prestigious international rating agencies EMIS DealWatch and Mergermarket have ranked HAVEL & PARTNERS among the leading law firms by the number of transactions completed in the Czech Republic since 2010. Based on annual awards of the Acquisition International magazine, HAVEL & PARTNERS has become the Law Firm of the Year 2019 in the M&A category in the CEE region.

Firm's website: https://www.havelpartners.cz/en/

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