With effect from 1 January 2020, the European Union amended the VAT Directive and the associated implementing regulation. The Czech Republic has incorporated the changes into the Czech VAT Act effective from 1 September 2020. This resulted into the fact that in the interim period from 1 January 2020 to 1 September 2020, taxpayers in the Czech Republic could choose and proceed either in accordance with the new provisions of the European directive based on its direct effect, or follow the current VAT Act, and respond to the changes only once the amendment has become effective on 1 September 2020. On the other hand, the tax administrator is entitled to require taxpayers to comply with the amended rules no sooner than the amendment to the VAT Act entered into force, i.e. from 1 September 2020.
The amendment to the VAT Act stipulates the following:
Whereas according to the rules valid until 31 August 2020, the customer was obliged to declare goods acquired from another EU Member State to the call-off stock in the VAT tax return at the moment of stocking them up, the goods will now have to be declared once they are released from the stock to the customer. However, they must be declared within the 12 months after being stocked up at the latest.
In addition to the new rules for call-off stock, the EC Sales List form has been extended as well. The taxpayer supplying goods to call-off stock located in another EU Member State has a new obligation now: once the goods are transferred, the value of the goods supplied must be reported in the EC Sales List on a separate sheet (Section C), by which the EC Sales List has been extended.
To summarize it, since 1 September 2020, VAT payers acquiring goods to call-off stock located in the Czech Republic must comply with the following new rules:
- VAT payers do not report the acquisition of goods in the VAT return upon stocking up goods to call-off stock. The obligation to declare VAT upon acquisition of goods to call-off stock no longer exists.
- On the other hand, VAT payers are obliged to report the release of goods from the call-off stock in the VAT return as the acquisition of goods from another EU Member State.
VAT payers supplying goods to the customer’s call-off stock located in another EU Member State will proceed as follows:
- They do not report relocation of goods to the call-off stock in the VAT return, the transfer of goods is only to be recorded in the new Section C of the EC Sales List.
- When the goods are released from call-off stock upon their sale, VAT payers report the transaction as the supply of goods to another EU Member State in the VAT return, as well as in Section B of the EC Sales List.
For chain transactions (i.e. transactions, where the same goods are supplied in a chain: supplier – intermediary – buyer), a new condition is introduced stipulating that if the shipment is provided by an intermediary, the shipment is automatically assigned to the first supply of goods (from the supplier to the intermediary). However, if the intermediary submits to the supplier a VAT identification number assigned to him in the country of commencement of shipment, the shipment will be assigned to the second supply (from the intermediary to the buyer). The first supply will thus be considered a local transaction subject to VAT.
VAT exemptions related to the supply of goods to another EU member state
The supply of goods to another member state can now be exempted from VAT only under the conditions, that the supplier records the transaction correctly in the EC Sales List. At the same time, the buyer is obliged to communicate a valid VAT identification number to the supplier for these purposes.
The amendment also defines means of evidence to be used by the supplier to demonstrate clearly that the goods were transported to another EU member state. If the supplier does so, the tax administrator must accept the VAT exemption unless the tax administrator proves the contrary. The specifications of these documents are based on the implementing regulation to the EU VAT Directive and, in December 2019, the European Commission issued detailed explanatory notes (84 pages) regarding this issue, which are available HERE.
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