Czech Republic: VAT amendments regarding cross-border e-commerce; VAT refunds to UK entities post-Brexit

Pending changes to the value added tax (VAT) law; information concerning VAT refunds to UK entities after Brexit

Pending changes to the value added tax (VAT) law

There are pending changes to the value added tax (VAT) law regulating cross-border e-commerce.

Separately, the tax authority provided information concerning VAT refunds to UK entities after Brexit.

VAT law regulating cross-border e-commerce

Changes to VAT legislation regulating cross-border e-commerce—pending a third reading in the Chamber of Deputies—are scheduled to be effective from 1 July 2021 (if enacted).

  • Changes relating to VAT on the cross-border sale of goods via the internet concern both sales within the EU and imports from third countries. The place of taxation would be the country of the recipient (which could necessitate multiple VAT registrations). An alternative would be to use the “one-stop-shop” (OSS) regime, when the seller manages its taxes from one portal (one country).
  • National limits for sending goods would be eliminated. The only exception would be available to small enterprises established in one EU Member State and not exceeding the annual threshold of €10,000. This amount includes not only the remote (distance) sale of goods, but also the provision of services within the EU. Such businesses could use a simplified treatment and tax the sale of goods in the country of dispatch.
  • In response, the OSS application would be significantly extended. Rather than registering for VAT in individual EU countries, the seller could register for the OSS and settle the EU VAT on selected transactions within this special regime. The basic idea would be to manage all EU taxes from one place. The OSS scheme is applicable to the remote sales of goods, selected distance sales of imported goods, and services provided to EU consumers (such as sales of tickets for events held in other EU Member States, real estate services or rental of means of transport). In the case of remote sales of imported goods, OSS (or more precisely IOSS) would be applicable to consignments of actual value of up to €150 that are not subject to excise tax (duty).
  • The one-stop-shop would operate under several different schemes:
    • The Union scheme
    • The non-Union scheme
    • The newly added import scheme (import-one-stop-shop, IOSS)
  • With the elimination of the VAT exemption on imports of small-value consignments (all consignments imported from abroad would now be subject to VAT regardless of their value even if it is minimal), a completely new special regime would be introduced for imports of low-value goods. Holders of the relevant permit could pay VAT on imports of low-value consignments collectively per calendar month, by a supplementary customs declaration.
  • The new responsibilities of internet platforms could become “deemed suppliers” for VAT purposes.
  • Registrations for the OSS are now open and with the help of an intermediary also available to entities established outside the EU. Certain internet platforms may also register for the OSS. 

Read a June 2021 report prepared by the KPMG member firm in Czech Republic

VAT refunds post-Brexit

The General Financial Directorate issued guidance concerning refunds of VAT to taxable persons established in the UK after the end of the transitional period. According to this information, the reciprocity principle has been met, and taxable persons with their registered office or place of residence in the UK may claim tax refunds.

Foreign persons may claim a VAT refund by applying to the tax authority for Prague in the Czech language and using the prescribed printed form.

Read a June 2021 report prepared by the KPMG member firm in Czech Republic

 

 

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