Amendment to electronic reporting of sales and 10% VAT on food services and e-books

At the end of September, the president signed an amendment to the Act on the Electronic Reporting of Sales (ERS), based on which the remaining businesses and entrepreneurs so far omitted from the obligation will be subject to the mandatory electronic reporting of sales. The last waves of the mandatory electronic reporting of sales are expected to commence in May 2020. At the same time, catering services, selected services with a high share of human labour, and e-books should transfer to the group of services and goods liable to 10% VAT.

The amendment unifies the launch of the third and fourth ERS waves. Entrepreneurs falling into these phases will begin reporting their sales from the seventh month after the date of the amendment’s promulgation in the Collection of Laws. The law explicitly embodies the conclusions of the Constitutional Court, which excluded payments made by debit and credit cards from the obligation to report such sales electronically.

Another area the amendment refers to is the activity of small entrepreneurs (individuals not registered for Czech VAT) whose cash income for the year does not exceed CZK 600 thousand and who have a maximum of two employees.  According to the amendment, these entrepreneurs may apply special-regime reporting of sales instead of on-line reporting, which means that they may report their sales using paper receipts they obtain from the financial administration free of charge while sending their reports of sales to the tax authority on a quarterly basis, within twenty days of the end of the appropriate calendar quarter. 

Based on a motion filed by one deputy to alter the amendment during its reading in the chamber, pre-Christmas sales of carp from 18 December to 24 December and the provision of social services were included in the group of services not subject to electronic reporting. Czech entities generating revenue both in the Czech Republic and abroad will definitely welcome the limitation of the reporting solely to revenues generated in the territory of the Czech Republic.

Act on Value Added Tax

Simultaneously with the amendment to the ERS Act, selected services will be transferred to the second reduced VAT rate (10%) via an amendment to the VAT Act. These involve, for example, catering services, excluding tobacco and alcoholic beverages. Draft beer, however, will remain liable to 10% VAT as proposed in the original draft amendment. The lower rate will also apply to specific trade and professional services, and water and sewer rates.

The amendment also reflects changes in EU legislation relating to electronic books, magazines and other periodicals. If in paper form they qualify for the 10% VAT rate, the reduced rate will also apply to their electronic versions. A similar approach will be adopted once they are made accessible within public library and information services. The effectiveness of the amendment to the VAT Act is dependent on the commencement of the last phase of the electronic reporting of sales.