Quick fixes: GFD’s information and EC’s amended explanatory notes
The Czech amendment to the VAT Act implementing quick fixes is still waiting for its second reading in the Chamber of Deputies. At the end of January, the General Financial Directorate disclosed information confirming the option of invoking the EU directive’s direct effect. This means that starting from 1 January 2020, Czech entities may proceed in accordance with the amended EU regulations, even if these have not yet been implemented into Czech law.
In its information, the GFD points out that if the option of applying the direct effect of the amended directive is exercised, all other related conditions must also be fulfilled. This mainly concerns deliveries of goods from the Czech Republic to another EU member state via call-off stock arrangements. Individual flows of goods (i.e. the transfer of goods to a call-off warehouse and its subsequent domestic sale) must be correctly declared in EC Sales Lists, now containing a new separate sheet specifically designed for this purpose. According to the GFD’s information, an updated electronic EC Sales List form should be available on the tax portal (https://www.daneelektronicky.cz/) no later than 20 February 2020. The application of the directive is voluntary, which means that it still will also be possible to proceed in accordance with the wording of the VAT Act currently in effect.
EC’s explanatory notes
Explanatory notes published by the European Commission at the end of last year providing certain guidance also for Czech taxpayers have already been discussed here. Today we will focus on another area of the explanatory notes, in particular proving the transport of goods, since proving the physical delivery of goods to another member state is one of the main conditions for entitlement to the exemption of the sale of goods from Czech VAT.
Documents necessary to prove the transport of goods to another member state are newly defined in Article 45a of Council Implementing Regulation No. 282/2011. To prove the transport of goods, it is necessary to be in possession of two or three documents issued by two different parties that are independent from each other and from the vendor and the acquirer. However, in some situations such a requirement is practically unfeasible. How to proceed in such cases?
According to the explanatory notes, if the taxable person does not have the documents required by the regulation in its possession, the exemption from VAT may not be denied to such a taxable entity automatically; it is still possible to prove the exemption from VAT following Article 138 of the directive, i.e. Section 64 of the VAT Act.
The explanatory notes also deal with specific cases, e.g., when suppliers ensure the transport of goods using their own motor vehicles. In such cases, it is admitted that the combination of documents prescribed by Article 45a cannot be obtained. As a result, the conditions set out in the regulation do not apply and the transport of goods must be proven in another manner.
If transport is ensured by the acquirer, the acquirer must furnish the vendor with a written statement of the acceptance of goods by the tenth day of the month following the supply. How to proceed when the acquirer does not provide this statement to the vendor within the set deadline? The EC claims that the ten-day deadline mainly serves to determine the time frame for the statement’s delivery and should not penalise the supplier for the failure to provide the statement within the deadline. Therefore, this on its own cannot lead to a denial of the exemption from VAT.
However, the EC’s explanatory notes are not legally binding. It will therefore be up to the Czech financial administration to resolve these cases.