As of 1 July 2021, VAT obligations relating to e-commerce operators shipping goods to other EU member states have changed. We have prepared for you a summary navigating the main features of the new VAT rules.

If you are looking for more detailed information about the special regime of a single administrative place (One-Stop-Shop, OSS), please read this overview.

1.     Do not combine OSS with payment of VAT elsewhere within EU

Before you decide to adopt OSS, consider all pros and cons. OSS cannot be combined with the filing of a tax return (within the context of cross-border shipping of goods) in one of the EU member states. Either you apply OSS to the entirety of your EU shipments or you have to register your e-commerce for VAT in every single EU member state to which you ship goods, and file a tax return there.

2.     One-Stop-Shop only for consignment of goods

OSS is destined exclusively for VAT treatment of consignment of goods. Do you also report other supplies in foreign VAT returns (e.g. transfer of own goods to a warehouse located in another EU member state, purchase of goods from a supplier with a place of supply in another EU member state)? In such case, you will have to continue to file VAT returns in the individual EU member states. However, you should only report those supplies in the local VAT return that do not concern consignment of goods that is subject to OSS.

3.     Review your 2020 turnover

EUR 10 thousand threshold, the exceeding of which triggers an obligation to file a VAT return in another EU member state, is calculated on an annual basis. A law amendment introducing these changes has not yet been finalized though (currently pending approval by the Senate). If the law is adopted with the current wording, the applicable threshold will also have to be determined not only for year 2021, but also for the already elapsed part of the year 2020.

Have you exceeded the EUR 10 thousand threshold in one of these periods? As of 1 July 2021, you should levy VAT from every parcel destined to another EU member state not in the Czech Republic, but in that other EU member state. Newly, you can arrange this via OSS.

4.     The limit also applies for VAT non-payers

You should also pay attention in cases where you are a VAT non-payer. The threshold of EUR 10 thousand and obligation to levy VAT in another EU member state applies to you as well. Regardless of the fact that your domestic supplies are not subject to VAT.

When selling goods to customers in the Czech Republic, you do not have to apply VAT as long as you do not exceed local turnover triggering a VAT registration obligation (CZK 1 million). However, if you ship goods to end consumers in other EU members, you should newly also monitor the EUR 10 thousand threshold. You can fulfill your VAT obligations in other EU member states by registering for OSS. However, before doing so, you have to register as an identified person in the Czech Republic.

5.     Do you only sell goods in the Czech Republic? There is no impact then

If you are operating e-commerce where you sell goods exclusively domestically or only rarely to other EU member states, there is no reason to worry. The upcoming changes should not impact you.

Changes when importing goods from abroad

The law amendment will also impact foreign e-commerce operators based in third countries outside EU. Previously, shipments from such countries with value of less than EUR 22 and subject to a customs procedure were exempt from VAT. Once the VAT amendment comes into force, the exemption is abolished such that VAT will have to be levied from small shipments as well.

For these operators, a new so-called Import One Stop Shop (IOSS) will be introduced, which will enable to take care of import obligations as part of a single administrative place. It will serve to levy tax from shipments fulfilling the following two conditions:

• Goods not being subject to excise tax,
• Goods with value of less than EUR 150.

This will simplify the procedure for the end recipient. Customs procedure and release of goods into free circulation will be handled on the account of the operator.

Once the VAT amendment comes into force, small shipments sent to the Czech Republic by a foreign e-commerce operator are subject to VAT. Parcels with value of up to EUR 150 continue to be exempt from customs duties. In case of importing goods not exceeding EUR 150 in value, it will be possible to file a customs declaration digitally through eCEP application.

Sales through Amazon, eBay and other „market places“

The law amendment also governs conditions when goods are sold by foreign entities through a so-called market place (typically Amazon or eBay). In order to levy VAT the law amendment introduces a new concept. The market place operator becomes a deemed customer towards the e-commerce operator as well as a deemed vendor towards the actual customer.

The exact conditions depend on where the e-commerce operator is based, where the goods are stored and to which state they are being shipped. If sales through Amazon, e-Bay and other foreign market places are relevant to you, you should discuss your situation with experts, to avoid any issues or even sanctions.

As you can see, the VAT law amendment includes many critical changes.

Have you reviewed all publicly available sources but are still unsure how to correctly apply the new rules? Please do not hesitate to contact us, we will be happy to assist you.