We last spoke about electronic records of sales (Czech abbreviation “EET”) in our April issue last year and now, after more than one year, the time has come for us to refresh the information on e-sales, or to say, what has changed compared to the original draft bill.

The entire process of adopting the bill was accompanied by a sharp discussion between the representatives and opponents of the bill, not only in the Chamber of Deputies but also in various discussion programmes. While its supporters used the argument of settling the competitive environment, its opponents objected the administrative demandingness of this tool and to transferring further duties on taxpayers. It needs to be said that the endeavours of opponents of the bill did not subside after its adoption and further attempts to changing, moderate or cancel e-sales can be expected.

The time frame of e-sales commencement

The draft bill was adopted and signed by the president in the course of March 2016 and published with the number 112/2016 Sb. When this act would come into force derived from its signing by the president (or the date of its promulgation), and experts as well as the entrepreneurial public waited in suspense to see, if the legislative process is concluded early enough for e-sales to start this year already. In the end, it was so, and e-sales will affect cash revenues from accommodation and catering services in this year already.

Unlike the original draft bill, e-sales will be implemented in four stages (the original draft included only three stages) and with a considerably wider time span:

• The 1^st stage from December 1, 2016 will include the already mentioned revenues from catering and accommodation services,
• The 2^nd stage will begin on March 1, 2017 and will include revenues from retail and wholesale,
• The 3^rd stage from March 1, 2018 will extend e-sales to revenues from all activities, excepting those, for which longer delay is permitted (for example the production of textile, clothing, soaps, detergents, perfumes, toilet articles, repair and installation of machines and machinery, computer repairs, the manufacturing of furniture etc.).
• The 4^th stage will come from June 1, 2018 and will already include all activities in e-sales, including those, for which an exception was enabled in the 3^rd

The object of the record and liable subjects

The information appeared through various channels that e-sales will affect all revenues carried out in cash. Such generalisation is not fully in place, however. Only revenues that will fulfil defined conditions will be subject to e-sales, and they can be divided into two groups.

First, it needs to be determined if the revenues represent threshold income. It needs to be income from business (defined in stipulation of article 420 of the Civil Code), which is also subject to the tax, is not sporadic and is not taxed by retention tax or in a separate tax base.

It is also necessary to determine, if the proceeds were received in one of the forms, for which the law lays down a duty of record. E-sales will apply to proceeds received in cash, proceeds received by card payment, cheque, a promissory note or other forms, the character of which is similar to the above (for example gift vouchers, tokens substituting currency, bitcoins, etc.).

Only proceeds, that will fulfil the conditions of threshold income and will be carried out in the set form, will be subject to e-sales.

The law offers as an escape option for evading e-sales in the form of exemption of selected services from e-sales, introducing several different groups of exemption:

• The revenues of selected subjects are broadly exempted from e-sales. This exemption focuses rather on the proceeds of subjects, the activity of which is already regulated in some way (for example the activity of commercial banks, insurance companies and pension funds, etc.),
• Revenues from selected activities are also exempted, for example from small businesses of public benefit purpose entities, from sale of goods via vending machines, travel fares, etc.,
• Proceeds received prior to the assignment of a VAT number and within 10 days after its assignment will not be subject to e-sales,
• And nor will the proceeds, the recording of which would disable fluent pursuit of business. These proceeds will be defined in a special decree.

Taxpayers, that is those, who are subject to corporate income taxes and personal income taxes, will be subject to e-sales. Here, though, too, the law mentions exceptions from the duty to record sales, but the exceptions again do not aim at “common” entrepreneurs, but rather at state authorities, territorial administrative units, the Czech National Bank and holders of the postal licence.

The original draft bill considered so-called liberation from e-sales, for the cases, when the revenues, which are to be recorded, only represent a small percentage of the total revenues of the taxpayer. Within the amendment proceeding, this liberation was excluded from the final working of the act, upon a suggestion from the Budget Committee.

The forms of recording sales

It will be possible to record sales in two ways. It will, nonetheless, not be up to the will of a subject to choose the way that suits him most.

The basic way will be “common” and will primarily relate to all subjects and proceeds. Only in exceptional cases will it be possible to use the “simplified” way. In the case of the simplified way, the subject will not be obliged to report proceeds to the tax administrator immediately upon reception, but within 5 subsequent days.

The simplified way will be used for sales of goods and services on board of means of transport within regular public transportation, and also proceeds, the recording of which in the common way would disable pursuit of business or make it more difficult. These proceeds will be specified by a special government decree.

The taxpayer will also be able to request electronic record of sales in a simplified way himself, if he supposes that recording them in the common way is not compatible with the pursuit of his activity and is able to duly justify this to the tax administrator. It is left to the discretion of the tax administrator, if the reasons are found to be relevant and the simplified form of records is permitted to the subject.

The information, which subjects will obligatorily report along with the sum received, are also defined by law. They include for example identification of the taxpayer (the VAT number and shop name), designation of the cash register, receipt number, date, time, etc.

Sanctions

The sanctions are divided into two groups, for offences, where sanctions will be imposed for obstructing or complicating the recording of sales (up to CZK 500,000) and administrative delicts in the form of a failure to fulfil non-monetary duties (for example non-issue of receipt, failure to report revenues etc.), for which a fine from CZK 50,000 to CZK 500,000 can be imposed.

A special group of sanctions are the arrangements for enforcement of rectification, which will be imposed for a serious violation of the duty to send data on revenues or issue receipts. In these cases, recourse from the tax administrator may lead to closing down the business premises or suspension of business activities.

In case you are interested in e-sales and would like to find out more, do not hesitate to turn to us. In the autumn, do not miss our seminar on this interesting topic, which we are preparing. We will keep you informed about further development in this area and about the date, on which the seminar will take place.

Ing. Michal Scholtz