Amendment to the VAT Act relating to e-commerce rules

The Chamber of Deputies approved the amendment to the VAT Act which is supposed to change the rules for sales to end consumers in respect of the goods delivered by shipment and partially also in the provision of services starting from 1 July 2021. For example, the possibility of exemption of goods supplied from third countries having the value of less than EUR 22 is supposed to be cancelled; in practice, VAT is supposed to be always collected in the state of the final destination of the goods/services and operators of electronic platforms facilitating business in this sector are supposed to meet entirely new obligations. We believe that further necessary legislative process will result in a certain delay in the anticipated effect of the changes (the amendment is to be discussed by the Senate).

Information of the General Financial Directorate  

In its information on the issue of reciprocal recognition of VAT refunds between the Czech Republic and the United Kingdom, the General Financial Directorate confirmed that the reciprocity principle was fulfilled. A person liable to tax having its registered office or residence address in the United Kingdom of Great Britain and Northern Ireland may exercise its claim for the refund of the tax for received taxable supplies with the place of supply in the Czech Republic (when all conditions under Section 83 of the VAT Act are met) starting from 1 January 2021.

In another piece of information, the General Financial Directorate responds to a new resolution of the finance minister by which the VAT on the supplies/acquisition/import of respirators is remitted until 30 June 2021. In this case, the General Financial Directorate does not allow the use of the claim for the VAT deduction when the supplier proceeded in line with the VAT Act and imposed the tax on the supply of respirators.

Ruling of the Constitutional Court

Due to the contradiction with the constitutional order arising from the VAT Act, version applicable before 31 March 2019, the Constitutional Court deleted the sentence according to which the delivery for the purpose of tax refund under Section 83 of the VAT Act involves mere sending of a data message to an electronic address. A similar rule is contained in the VAT Act, as amended, and tax administrators who will proceed in adherence to it will base their decisions on a potentially unconstitutional piece of legislation.

Judgements of the CJEU

• The ruling of the Court of Justice of the European Union in C-4/20 ALTI relating to the concept of liability introduced in Bulgaria could result in a broader interpretation of liability under the Czech VAT Act. It cannot be ruled out that the recipient of performance could be liable for the VAT not paid by the supplier, including accrued interest, that was assessed for the supplier by the tax administrator.
• In its ruling regarding C-931/19 Titanium the Court of Justice of the European Union describes the concept of an establishment for VAT purposes. It has confirmed that an establishment cannot be created if it has no staff available.
• In respect of the current opinions of the advocates general of the Court of Justice of the European Union, we would like to note primarily the opinion regarding C-90/20 Apcoa Parking Danmark describing the VAT treatment of pre-agreed fines for the failure to meet the obligations and regarding C-182/20 Suceava where the advocate general does not allow an automatic loss of an entitlement to tax deduction when the debtor is in bankruptcy. At the same time, the amendment to the Czech VAT Act with the anticipated effect from 1 July 2021 introduces the treatment of an automatic loss of entitlement to deduction.