Amendment to the VAT Act relating to e-commerce rules

As of 1 July 2021, an amendment to the European VAT Directive, which relates to electronic commerce (so-called e-commerce), is in effect.

As of 1 July 2021, an amendment to the European VAT Directive, which relates to electronic commerce (so-called e-commerce), is in effect. Because the Czech Republic was not able to implement it in time, the General Financial Directorate (GFD) has issued Information in which we can find an answer on how to proceed from July onwards.

In this Information, the Financial Administration points out that from 1 July, tax entities will be able to take advantage of the direct effect of the VAT Directive. As a reminder, this Directive introduces new rules in the following areas:

  • the remote sales of goods (sending goods),
  • the special One-Stop-Shop regime for a single administrative location (OSS),
  • trading in goods using an electronic interface,
  • import of low-value goods.

Before the date of entry into force of the amendment to the VAT Act, the Information also allows a tax entity to proceed in the “old manner”, i.e. following the VAT Act as previously in force. The question thus remains of which areas will be affected by the fact that the Czech amendment to the Act has not yet been approved and is not therefore in effect.

One of the amendments introduced by the amendment is abolishing the thresholds for determining the place of supply for the dispatch of goods, which Member States could set at EUR 35 000, or EUR 100 000. A common threshold of EUR 10,000 is now introduced, both for the distance selling of goods and for so-called TBE services, which include telecommunications services, radio, and television broadcasting services and services supplied electronically to a person who is tax-exempt in the EU. Once the limit for goods dispatch is exceeded, the place of supply can no longer be the State from which the goods are dispatched, and the trader thus incurs tax obligations in the State where the transport of the goods terminates. The delay in the legislative process in the Czech Republic does not affect the obligation to tax shipped goods in another EU Member State.

The Information also admits the possibility of using the special One-Stop-Shop regime (OSS) regardless of the effectiveness of the amendment to the VAT Act. Registration in the OSS has been possible from April 2021. A tax entity registered in the OSS will report all transactions from which it pays tax under this regime on line 26 of the VAT return until the amendment to the VAT Act enters into force.

Concerning the import of small-value consignments, the current VAT exemption for consignments up to EUR 22 will remain in force until the Czech amendment takes effect.

The GFR also allows for the direct application of the Directive to the remote selling of goods and the remote selling of imported goods which are facilitated by an electronic interface (platform).

We will continue to monitor the situation and keep you informed of further developments.

Do not hesitate to contact us for more detailed information.

Petra Holečková
Junior Accountant

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