The beginning of last year’s last month saw the start of a new system, which has been talked about a lot for more than a year both by politicians and by the public. Electronic record of sales (e-sales) is, after the control statement, the second novelty for Czech entrepreneurs that came in 2016. Many people who have since the beginning of December visited restaurants or accommodation establishments have already had their first experience with e-sales. And gradually entrepreneurs and restaurant and hotel operators are getting used to e-sales. It is not surprising that operators of businesses affected by e-sales are more criticizing than praising the new system, while the Ministry of Finance of the Czech Republic (MF CR) is happy with the functionality of the system and the IT.

After the first twelve days since the launch of e-sales, the financial administration has received approx. 31 million receipts from 40 thousand registered subjects. Average reaction to a received message in data boxes was around 0,082 seconds, which must be a surprise for those who, after experiencing issues with the register of vehicles or the system for social payments, had serious doubts. Those doubts were supported by the older IT system of the financial administration which will have to, after e-sales widens its range, process around tens of millions of receipts daily. Only time can show how will it all play out in a few years, for now we can say that regarding the technical part of e-sales, its fate was not the same as other previous state projects, although there has been a slight technical issue on the side of the financial administration.

Stronger and stronger voices have been heard from operators of affected businesses that e-sales will mean liquidation to them, especially because of the higher number of administrative processes. According to Pilsner Urquell Brewery and the Czech Association of Hotels and Restaurants we should see a decrease of the number of hotels and restaurants soon. The administrative processes and paperwork related to setting up e-sales is truly difficult. After the beginning of last year, when entrepreneurs had to get used to the control report and adjust their systems and payroll software accordingly, this is yet another tool which brings worries and difficulties. The introduction of e-sales may be useful for the public if it raises more money which will then be used where most needed, however, for now entrepreneurs are helping to reach this goal mainly by investing their free time into studying e-sales and learning how to introduce it in their businesses. Nevertheless, just as the politicians are divided into two groups, those supporting and those not supporting e-sales, even among entrepreneurs can we find those, who welcome e-sales and hope that it will help making the conditions for running a business fairer.

Shortly before the introduction of e-sales, two exceptions have been suggested which was not met with a pleasant reception from all coalition partners, but on the other hand many entrepreneurs welcomed it. E-sales should not concern (i) some sales made by payment cards and (ii) sales of taxpayers with flat-rate taxes and yearly income less than 250 thousand CZK. Both of these exceptions are for the time being only suggestions and cannot yet be applied.

The exception for payment cards is presented by the MF CR rather as a more precise interpretation of the law than an exception from e-sales. After the publishing of the draft law a discussion erupted as to why will payments done with cards be included as well, when the goal of the law is to register mainly cash payments which are difficult to trace back. The financial administration argued saying that payment card sales can be directed to “tax havens”, which would make them very difficult to trace back, or that applying e-sales to cash payments only would lead customers to choose cash payments (with the hopes of getting a receipt for the receipt lottery). Whatever the initial intention, the end of November brought a proposition for excluding sales that (i) are done with a payment card on the internet (ii) without a personal encounter between the customer and the seller (most e-shops).

The second exception excludes from e-sales payers of income tax for natural persons who have a flat-rate tax and their yearly income is not higher than 250 thousand CZK. This exception is for “small entrepreneurs” who will have the option on arranging a flat-rate tax with the financial administration and rid themselves of the e-sales duties. The amount of tax for taxpayers with a flat-rate tax is not assessed based on the income. The exception will be possible to apply only after the legislative package with tax law changes comes into force, which is expected to happen in April 2017. Taxpayers who will have the duty to keep an e-sales record before that will continue with the record and only after the package comes into force will they be allowed to ask for a set tax rate and get the exception.

E-sales are also connected to the receipt lottery which is supposed to get the customers to take the receipts and check their validity in the web portal of the financial administration by verifying if the receipt is in the record. The MF CR says that there will be both money and thing prizes of total worth of almost 65 million CZK, 20 to 30 thousand prizes should be handed out each month. The lottery is expected to start halfway through 2017 and for now the selection process for management of the lottery is underway.

E-sales will surely stay a hot topic in 2017, as well as it will be a reason for disputes and a tool for gaining votes. The interest will rise with the nearing date of introduction of e-sales for retail trade and wholesale but also with first controls and associated sanctions. We will stay on the lookout for any news in this area and will keep you informed in our newsletter and on our website. Feel free to contact our firm if you require any consultation in this area.