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Czech Republic: VAT changes proposed for 2020

Czech Republic: VAT changes proposed for 2020

A draft amendment to the value added tax (VAT) law for 2020 would introduce changes with respect to consignment stock arrangements and intra-community transactions with goods. The proposals are aimed at harmonizing the rules for the delivery of goods among the EU Member States.

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The changes would be effective as early as January 2020.

Change to VAT regime applicable to consignment stock arrangements

The transfer of goods to a warehouse in another EU Member State for the purpose of a subsequent sale to a local customer generally requires the registration (or identification) for VAT in the country where the sale is made. To reduce the administrative burden, it is currently possible to use simplification procedures such as “call-off” (consignment) stock arrangements, generally to avoid the redundant registration or identification for VAT of a European supplier in the country of the ultimate sale. However, the rules for these simplification procedures vary materially in individual EU Member States. One of the quick fix measures therefore aims to unify and simplify the procedures in these particular cases.

At present, the consignment stock regime in the Czech Republic functions as follows:

  • The transfer of goods from another EU Member State to the Czech Republic can be regarded as the acquisition of goods by a particular supplier already at the date of transfer.
  • The customer then self-assesses the acquisition of goods as early as goods are received into stock.  

Beginning 1 January 2020, the entire system of taxing consignment stock arrangements would completely change. According to the draft amendment, the customer would neither pay VAT nor declare the acquisition of goods from another EU Member State earlier than at the moment when the goods are actually withdrawn from stock. In connection with this, a new time limit over which goods could be stored would be set at 12 calendar months within which goods would have to be dispatched from the warehouse and taxed. The duty to monitor the time over which goods are stored would represent a significant administrative change to stock records. Another condition would be that goods stored may not be lost or destroyed, since this could be classified as a violation of conditions for the application of simplification procedures. There is a question as to whether shortages within the limit or substantiated thefts and losses that are being recovered in due manner from responsible persons would be allowed. 

Conditions for VAT exemption of supply to another EU Member State

According to the draft amendment, in all EU Member States, an exemption from VAT on the delivery of goods to another EU Member State would only be applicable to sales to customers registered for VAT in that particular country. This condition would have to be duly verified. Under existing case law of the Court of Justice of the European Union, this condition has so far only been a formal one. However, effective 2020, it would be a substantive condition—that is, one that would be essential for claiming a VAT exemption. 


Read a May 2019 report prepared by the KPMG member firm in the Czech Republic

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