Amendment to VAT for 2021: e-commerce
From 2021, a special mini-one-stop-shop regime will also apply to the sale of goods by mail order. Under the new amendment, such sales will be taxed in the recipient’s country, potentially excepting small businesses. For harmonisation purposes, the exemption from VAT on the import of low-value shipments will be cancelled. Moreover, new VAT duties will also arise for internet platforms.
A draft amendment to the Czech VAT Act concerning cross-border e-commerce derives from a tax package adopted by the Council of the EU entering into effect in the entire EU on 1 January 2021 and aiming to harmonise rules, fight tax fraud and restore fair competition between suppliers from the EU and third countries. The applicability of the mini-one-stop-shop (MOSS) regime will be significantly extended, involving not only digital services but also distance sales of goods and imports of low value goods (max. EUR 150) including sales via internet interfaces and platforms.
Changes to the sale of goods by mail order
New terms such as distance sales of goods and distance sales of imported goods have been introduced for sales of goods by mail order.
Generally, distance sales of goods to customers (not performing any business activity) will be taxed in the country of consumption. The turnover for each individual state will no longer be monitored. It will also be possible to apply an exception by small businesses registered only in one of the EU member states and not exceeding the annual threshold of EUR 10,000 for distance intra-EU sales of goods and provision of services. Up to this threshold, suppliers may tax the sales in the country from which goods are supplied.
New VAT duties for internet platforms
The operators of electronic interfaces and platforms facilitating distance sales of goods will have new duties relating to value added tax. The amendment introduces the legal fiction according to which distance sales of goods shall involve the sale of goods to a platform, and the subsequent sale of the goods by the platform to the end customer. For VAT purposes, a single supply is thus fictively divided into two supplies, while assigning transport to the delivery of goods to the end customer.
The new rules apply to the distance sale of imported goods of EUR 150 or less and to the delivery of goods by a foreign person to a person not liable to tax in the EU. Internet platform operators will be allowed to use the special mini-one-stop-shop scheme under the new rules.
In connection with the above legal fiction, platform operators will also have other duties such as keeping records of all supplies effected on the platform.
Cancellation of exemption of imports of low value goods from tax
In connection with the ever-growing number of imports of low value shipments (of up to EUR 22), these shipments’ exemption from VAT will be cancelled, as this is discriminatory towards the European market. For imported goods of EUR 150 or less, it will be possible to apply two regimes: that for the imports of goods under the special mini-one-stop-shop regime or an entirely new regime for the import of goods of low value. The latter will allow holders of a special permit, such as post offices, to declare customs and assess VAT on an aggregate basis per calendar month within a supplementary customs declaration.