Nine months have passed since the publication of the judgement of the Constitutional Court reasserting that the Act on electronic record of sales is not unconstitutional and yet the Court abolished some of its parts. During these months, the Ministry of Finance had to process the changes made by the Constitutional Court to the e-sales system and had to prepare an amendment which would, at the same time, respect the demands of the Court and enabled the e-sales system to expand.

In June 2018, the government proposed an amendment to the Act on electronic record of sales (sněmovní tisk no. 205) which takes into account the judgment of the Constitutional Court. Besides this amendment, there are two other smaller amendments currently in the legislative process. One of them restricts the scope of persons obliged to electronic record of sales to VAT payers only, and the other one suggests that the Act on electronic record of sales be abolished. Considering the current political climate, it is highly unlikely that theses two amendments should be adopted.

In this article, we would like to focus on the amendment in relation to the judgement of the Constitutional Court and clarify how the Ministry of Finance processed it.

Abolishment of e-sales upon card payments

The Constitutional Court has abolished electronic record of sales for payments done by card with regard to a proportionality test, in which the negatives resulting from the electronic record outweighed the positives concerning card payments for the taxpayers. Card payments are trackable and thus, the financial administration has other legal tools for acquisition of information available (e.g. they can ask the provider of payment services).

The amendment to the Act on electronic record of sales does not expect a return of records of card payments and the government respects the Constitutional Court in this regard. Section 5 (b) which was abolished in connection to this will be replaced with a new text which will only specify that electronic record of sales concerns also transactions done by chip cards, electronic wallets, coupons, vouchers, and other similar means.

Abolishment of obligation to state VAT ID number on receipts

The obligation to state the VAT ID number on receipts was also abolished to a degree in connection to the conducted three-step proportionality test during which the Constitutional Court has not found stating the number on receipts to be necessary. The reason for this being that there are other existing data which can be used for identification of the taxpayer and which do not encroach on the taxpayer’s autonomous sphere.

The amendment reiterates the obligation to state the VAT ID number on receipts but only for entities whose VAT ID numbers are not composed of their birth certificate number. This obligation shall therefore concern mainly corporations.

Government regulations for adjustment of the scope of e-sales

The Constitutional Court found the possibility for the government to adjust the scope of e-sales by means of regulations, which could be issued without statutory authority, not appropriate and pronounced that the government does not have the right to such rulemaking. That is why the Court abolished all provisions which authorized the government to exclude selected sales from the record.

The government processed this by extending provision 12 which deals with sales excluded from e-sales. Thus, some sales were added to those exceptions, including sales from gambling, commercial air transport, or sales of blind or deafblind persons who are taxpayers of the natural persons income tax (this last exclusion has been introduced by the government earlier but then ceased to apply due to the Constitutional Court’s judgement).

Cancelled dates of start of phases 3 and 4 of e-sales

Because it was only after the record of sales was introduced across-the-board that its scope became adjusted by government regulations and thus there was no proper ad hoc evaluation of all the possible effects it could have on the entities obliged, the Constitutional Court has reached the decision that it is necessary to postpone the start of other phases of e-sales and to assess the necessity of such across-the-board regulation.

The amendment abolishes the entirety of Section 37 which provided for individual phases of e-sales, and, starting with the first day of the seventh month following the publication of the amendment in the Collection of Laws, all payments will be subject to e-sales regardless of the activity that’s being paid for. In connection to this, the government has attempted to soften the effects of the record of sales system (following the suggestions of the Constitutional Court), and has prepared the so called special mode for selected taxpayers.

Other modifications

Besides the above mentioned changes initiated by the Constitutional Court, the amendment will bring these changes, too:

• Electronic record of sales will concern only payments happening in Czech territory.
• Besides the normal and simplified mode of e-sales there will be a new special mode for taxpayers of corporate income tax (only health service providers having contracts with insurance companies), and for taxpayers of personal income tax (VAT non-payers, cash transactions of less than 200 000 CZK in the span of 12 months, having no more than 2 employees).

The special mode will consist of previously printed paper receipts which the taxpayers will receive from the tax administration and manually fill in before giving them to the customer. Once every calendar quartal the taxpayer will submit a report of sales to the tax administration.

• The amount paid on the receipt and in the data message for the tax administration must be stated in Czech crowns.
• Breaches of obligations which could lead to a closure of the business or suspension of production activity, include failure to submit the report of sales recorded in the special mode.

We hope that this article has brought you a clear report of the changes to e-sales which are currently under consideration. It is not yet known when they might come into force. The amendment is going through the first reading at the moment; how long the legislative process is going to take remains unknown. Should the new legislation be adopted and published in the Collection this December already, the changes to the electronic record of sales would come into force on July 1, 2019. We are going to continue monitoring the legislative process, and if you would like to keep up with it as well, you can follow our website for regular updates.

http://www.fucik.cz/en/topics/electronic-records-of-sales/