Taxes
17 January 2018

ERS changed and its further fate questioned

Those of you getting ready to join the ERS regime should pay attention: in the middle of last December, the Constitutional Court cancelled some provisions of the Act on the Electronic Reporting of Sales. This judgement will also affect some who are already subject to the electronic reporting of sales.

Filip Horák
Pavel Martiník

What’s more, five of the fifteen constitutional judges concluded that the Act on the Electronic Reporting of Sales should be abolished as a whole. They argued, among other things, that ERS constituted additional financial costs for every entrepreneur, and that the state had failed to make use of all opportunities already at its disposal to collect taxes more efficiently. Yet, the majority of judges eventually voted to cancel just some provisions of the act.

Effective from 28 February 2018, the Constitutional Court’s judgement cancels the duty to state tax ID numbers (which for the self-employed is also their personal ID number – “birth number”) on the payment receipts. This change will apply to all entities subject to ERS, regardless of whether they joined the ERS in the first or in the second wave. Another significant change, effective the same date, is the cancellation of the duty to report payment card transactions. Both these changes will have a significant effect on the scope of personal data processed by entrepreneurs.

Changes will also be made to Účtenkovka, a state-organised payment receipt lottery in which any holder of a payment receipt issued in the ERS regime may participate. The reason for the changes is that the seller’s tax ID is currently one of the identifiers that the participant must upload to the system to register the receipt as a lottery ticket. As tax IDs will no longer be an obligatory component of the payment receipt, the Ministry of Finance will have to adjust the lottery system accordingly.

Probably the biggest intervention into the entire ERS concept is the indefinite postponement of the third and fourth wave. The Constitutional Court held that the government had not sufficiently evaluated the first two waves, and that without a detailed analysis of their impacts it would not be possible to include further businesses into the system. It is thus uncertain whether and in what manner the remaining entities will be joining the ERS. The finance ministry is currently preparing an amendment to the ERS Act that should answer these questions.

The Constitutional Court’s judgment comes more than one year after the act’s effective date. It does not strengthen legal certainty and significantly affects business processes. Obviously, it will cause considerable problems mainly to cash teller system vendors. Other businesses may also get in trouble, for instance in connection with the General Data Protection Regulation soon to become effective.

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