Czech Republic: On 1 September 2016, certain provisions of the Sales Records Act have come into effect (with the remainder taking effect as of 1 December 2016)
In March of this year, Act No. 112/2016 Coll., the Sales Records Act, was passed, introducing the electronic (online) reporting of sales (EET). The Association of SMEs, Tradespeople and Craftspeople in the Czech Republic has been trying since 2014 to negotiate conditions with the Ministry of Finance so as to ensure that entrepreneurs who are subject to EET reporting won’t face large-scale restrictions to their core business operations. To some extent, the Association’s efforts have been successful.
EET will be rolled out on a staggered schedule as follows:
• beginning as of 1 December 2016 – accommodation, catering, hospitality,
• as of 1 March 2017 – retail and wholesale trade,
• as of 1 March 2018 – other activities, i.e., what is known as the independent professions (physicians, lawyers, accountants), transportation and agriculture, with the exception of those falling within the fourth stage,
• as of 1 June 2018 – selected crafts and manufacturing activities (selected groups within the CZ-NACE classification).
An important step for the implementation of EET is the registration (“authentication”) of individual entrepreneurs. Before they may accept payments which trigger to-be-reported sales, taxpayers must apply for authentication data, which will be made available to them in person at the relevant finance office or electronically via databox. The finance administration launched this registration process already as of 1 September 2016.
As a part of the concessions obtained from the Ministry of Finance during the negotiations, tax payers may claim a CZK 5,000 tax cut to reflect their need to purchase electronic equipment needed for electronic payments, for the online connection to the tax authorities, for receiving the transmitted ID code and for sending data to the tax authorities in turn). The devices which are brought to market also do double duty as a printer for receipts. These receipts must be made available to the buyer (but buyers are under no obligation to accept or keep them). In addition, businesses will need a data connection for communication with the tax authority, as the latter will generate and transmit the ID code that must appear on the individual receipt.
All payments which generate relevant income and which are made in one of the following ways are subject to EET:
• Cash payments (domestic and foreign coins and notes),
• Card payments,
• Payment by check or bill of exchange,
• Other forms of payment which are recognized as cash equivalents such as meal vouchers or coupons,
• Set-offs against a down payment or similar collateral which was placed in one of the above forms.
If an invoice states “cashless transfer” as the manner of payment but is ultimately paid by the buyer in cash, then the payment is subject to EET reporting. In the reverse case of an invoice which was issued for cash payment, but which was then paid via transfer from a bank account, the taxpayer is not obliged to record the sale under EET. As of 1 September 2016, entrepreneurs who are unsure whether or not a given payment must be recorded and reported may approach the finance office with the request to issue a decision in which a binding assessment is made as to how such turnover is to be categorized. Issuance of this decision is subject to payment of an administrative fee, however, in the amount of CZK 1,000. In closing, we should mention that EET applies to all entrepreneurs, irrespective of whether or not they are registered as VAT payers.
Source: Sales Records Act (Act No. 112/2016 Coll.); http://www.etrzby.cz/; http://www.eltrzby.cz/