Amendment to VAT Act 2021: EU directive’s direct effect applicable in majority of e-commerce spheres

An e-commerce amendment to the EU VAT Directive has been in effect since 1 July 2021. Unfortunately, the Czech Republic has not yet implemented it: the relevant amendment to the Czech VAT Act is still awaiting approval by the Senate. In its recently published information, the General Financial Directorate (GFD) attempts to provide clues on how to proceed after July, as it should be possible to apply the direct effect of the directive to most areas.

In its information, the GFD confirms that until an amendment to the Czech VAT Act enters into effect, it is possible to proceed in compliance with the current wording of the act or apply the direct effect of the amended EU directive.

The fundamental question is what areas, and to what extent, will be affected by the Czech amendment not having been adopted and effective. An important change to be introduced by the amendment is the cancellation of taxation thresholds for individual member states from 1 July 2021: until now, dispatched goods costing less than the set threshold were taxed in the country of dispatch. If the place of taxation is in another EU member state, the duty to tax the goods in the country of the end recipient in another member state will by no means be affected by a delay in the legislative process in the Czech Republic.  The question is whether it will be possible to use a one-stop-shop (OSS) in the Czech Republic for tax settlement purposes even before the Czech amendment’s effectiveness. The GFD’s information allows for this option, which makes us believe that the one-stop-shop mechanism is already fully operational. It has been possible to register for the OSS from April 2021. 

Since Czech payers sending goods to end customers in the EU must continue to declare the tax bases for their sales in their Czech VAT returns even if they use the OSS, the GFD also clarifies this procedure. The amendment also changes VAT return forms: the sales in question will be declared in line 24. 

For imports of low-value consignments, the current exemption from VAT for consignments costing less than EUR 22 will remain in effect until the Czech amendment’s effectiveness. This shall also apply to imports using the import-one-stop-shop (IOSS) mechanism. 
The GFD also provides information about the direct application of the directive to distance sales of goods and distance sales of imported goods that are facilitated by electronic interfaces (platforms).  

The customs administration has also issued important information about the link between VAT registration and the duty to file Intrastat reports. If an EU or third-country supplier is deregistered from Czech VAT in connection with using the one-stop-shop, the duty to file Intrastat reports ends in the month in which the registration is cancelled. However, it should be noted that this is not a matter of course in other member states. We therefore recommend reviewing the conditions for filing Intrastat reports in the member states in which the supplier is deregistered for VAT. So far it seems that certain member states will require the filing of Intrastat reports even when VAT registration is cancelled and tax is to be settled within the one-stop-shop.

 

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