More changes to ERS and VAT rates?
The Ministry of Finance released for external comments a draft amendment to the Act on Electronic Reporting of Sales and the VAT Act. The proposed effective date is 1 January 2019, excepting the provisions concerning the launch of the last phases of ERS and the amendment to the VAT Act.
Act on Electronic Reporting of Sales
The Ministry of Finance is mainly responding to the Constitutional Court judgement which has excluded payments by debit or credit cards from the electronic reporting of sales (ERS). However, the rationale of the judgment does not indicate that the Constitutional Court also meant to abolish the reporting of similar payments; this means that while payments by credit or debit cards shall no longer be subject to electronic reporting, payments by electronic purses, chip cards, coupons, vouchers or similar instruments will remain subject to reporting.
Another change ensuing from the Constitutional Court judgement is the unification of the start of the third and fourth phase of ERS. Businesses falling under these two phases shall start electronic reporting of sales from the third month after the effective date of the proposed amendment. According to estimates, the last phases of ERS will thus be launched on 1 March 2019.
The amendment also extends the range of sales that shall not be subject to electronic reporting. Generally these are sales whose reporting has proved unfeasible or unsubstantiated, such as sales of telecommunication and other services effected through a public mobile network by charging against credit on a prepaid card. Sales from gambling, air transport or sales generated by severely visually impaired persons are also to be excluded.
Another area affected by the amendment is the business activity of ‘small entrepreneurs’ with a maximum of one employee. For these individuals who are non-VAT payers and whose sales subject to reporting did not exceed CZK 200 000 in the last 12 calendar months and who did not effect more than 1 000 sales transactions (and do not expect any of these figures to increase in the upcoming 12 months), the proposed amendment introduces off-line reporting in paper form.
Czech entities generating sales abroad as well as at home will perhaps welcome the proposal to limit reporting solely to sales effected in the territory of the Czech Republic. Finally but importantly, the amendment to a certain extent clarifies indirect representation and reinstates the duty to state one’s tax ID No. on issued payment receipts, provided that it does not contain the individual’s birth number.
The ministry has proposed transferring selected services and goods to the second reduced VAT rate (10%). These include catering services, except for the sales of tobacco products and alcoholic beverages (though draught beer is proposed to be transferred to the 10% rate). Specific crafts and professional services, water and sewerage fees and cut flowers should also be subject to the lower tax rate. The effective date of the proposed amendment to the VAT Act is linked to the launch of the last phase of ERS.