The General Financial Directorate has published new information that provides an in-depth overview of tax obligations arising from the VAT Act relating to taxable persons not established in the territory of the country. In particular the obligation to register and the establishment of registration for VAT payment among such persons in the Czech Republic. In the information special attention is given to the tax impacts of forwarding goods, typically when selling goods over the Internet to persons in the Czech Republic.
A person not established in the territory of the country is deemed to be a taxable person (a person undertaking economic activity, i.e. an entrepreneur) who:
- does not have a registered office in the territory of the country;
- carries out the taxable supply of goods or provision of services where the place of taxable supply is in the territory of the country; and
- does not have establishment in the territory of the country or has establishment in the territory of the country that do not provide the relevant supply.
The mandatory registration of persons who are persons not established in the territory of the country occur specifically in the following cases:
Provision of taxable supply in the territory of the country
A person not established in the territory of the country becomes a VAT payer at such time as it carries out the supply of goods or the provision of a service with a place of taxable supply in the territory of the country and when the beneficiary of such supply is not obliged to declare VAT on the relevant supply.
The information includes specific examples of when the foregoing conditions are met, or are not met, and the obligation to register for VAT is established, or is not established.
The supply of a service or of goods, in that the place of taxable supply is not in the territory of the country
If the place of taxable supply of the provided service or goods is not in the territory of the country, a person not established in the territory of the country is not obliged to register in any case.
The supply of a service with a place of taxable supply in the Czech Republic when the beneficiary is obliged to declare and pay tax
The beneficiary is obliged to declare and pay tax if it is:
a taxable person (i.e. an entrepreneur) having its registered office in the territory of the Czech Republic;
a taxable person (i.e. an entrepreneur) not having its registered office in the territory of the Czech Republic but registered as a VAT payer here.
If the foregoing persons are the beneficiary of the service, the provider of the service, the person not established in the territory of the country, is not obliged to register in the Czech Republic. The same principle as for services applies to the supply of goods with installation and assemblage or the supply of goods through systems or networks.
The supply of goods with a place of taxable supply in the Czech Republic when the beneficiary is obliged to declare and pay tax.
The beneficiary is obliged to declare and pay tax if it is:
a payer that is already registered for VAT in the Czech Republic on the date of supply of the goods.
In all other cases, the supply of goods with a place of taxable supply in the territory of the country, for example even the supply of goods to another Member State by a person not established in the territory of the country, irrespective of whether supply meets the conditions for exemption or not, establishes the obligation on the person not established in the territory of the country to register for VAT.
Forwarding goods
Forwarding goods is understood to be supplying goods within the territory of the European Union on the condition that the goods are sent by a taxable person to a person for whom the acquisition of these goods is not subject to tax and these goods are not subject to excise duty, a new means of transport, goods with installation or assemblage or used goods such as a work of art or a collector’s item. One typical example is the frequently used Internet sales.
When forwarding goods, the place of taxable supply is in the state of the sender if the total price does not exceed the limit of CZK 1,140,000, not including VAT, in the Czech Republic. If, therefore, the sender sends goods to non-VAT payers (citizens) in the Czech Republic below this limit in a calendar year, it is not obliged to register for VAT in the Czech Republic. It is obliged to register the moment it exceeds this limit.
It ensues from the above that persons not established in the territory of the country will most commonly be obliged to register when providing taxable supply to a citizen of the Czech Republic or to another non-taxable person at the time of provision of that supply. The generally recognised mandatory obligation to register when exceeding turnover of CZK 1,000,000 for the 12 directly-preceding, consecutive calendar months does not apply to persons not established in the territory of the country.
Acquiring goods from another Member State
Should a person not established in the territory of the country acquire goods from another Member State, for example relocating its goods to a warehouse in the Czech Republic, it is obliged to register as an identified person.
The limit of 326,000 is not tested for persons not established in the territory of the country during acquisition, meaning that the person not established in the territory of the country becomes the identified person immediately on the date of first acquisition.
It ensues from the above that if such relocated goods are subsequently delivered in the Czech Republic to non-VAT payers or delivered to another Member State, the person not established in the territory of the country is obliged to register as a VAT payer the very next day.
Mergers
A person not established in the territory of the country also becomes a VAT payer in the case that the assets and liabilities of a legal person ceasing to exist or a divided legal person that was a payer are part of merger, as of the date on which the merger is entered in the Commercial Register.
Registration application
If a person not having its registered office in the territory of the country becomes obliged to register, it is obliged to submit a VAT registration application within 15 days of the date on which it becomes a VAT payer.
The registration application may only be submitted electronically, by way of tax portal or data box.
Voluntary registration
A person not established in the territory of the country has the option of submitting a voluntary VAT registration application. Such person becomes a payer on the day following the date of notification of the decision of the tax administrator with which it is registered.
