Draft Amendment to the EET Act
In response to the findings of the Constitutional Court, the Ministry of Finance submitted a draft amendment to the EET Act for comments. The amendment has been declared effective from the 1st of January 2019.
I have informed you already about the provisions of the findings of the Constitutional Court that were cancelled. The amendment is only the constitutional possibility for the Government on how to implement the two last waves of EET and exclude specific receipts from the obligatory evidence.
However, the amendment has been written hastily and tries to mainly appeal to the related VAT rate cuts. For the taxpayers, however, it does not bring relief.
I would like to give my view on the provisions of the amendment. I focus on the probability of what chance the proposed changes have going through the legislative process.
1) What seems likely to pass:
Monitoring the revenue only in the Czech Republic. Revenues collected by Czech taxpayers abroad will not be subject to EET. It is a practical change.
Permanent exclusion from EET for:
- Revenues from gambling. This sector is already closely monitored and regulated.
- Revenues for visually impaired people.
- Telecommunication services are revenues from realised calls, messaging and data services.
- Revenues from commercial air transport.
2) What is going to pass:
The inclusion of activities in the so-called 3rd and 4th wave into the obligatory EET with effect from the 1st day of the third month after the amendment comes into effect. The inclusion of all activities is currently the priority of strongest political party. The finding of the Constitutional Court pointed out that this is not a matter of general regulation without taking the impact into account, in particular, on the smallest taxpayers. The amendment and its future amendments will seek the parameters how to accommodate to this view.
Reducing the VAT rate to 10%, for example:
- Water and sewerage.
- Catering and soft drinks.
- Selected craft and personal services (especially household cleaning, minor repairs of bicycles, shoes and clothes, hairdressing and beauty services, home care).
- Delivery of cut flowers and foliage.
In times of economic prosperity, the reduction of VAT rates is very popular, especially from a political point of view. The negative impact into the state budget is to be offset by the higher consumption of the population. Unfortunately, based on practical and historical experience, rate reductions will result in lower prices for final consumers with little likelihood.
3) What does not look like passing:
Effective from the 1st of January 2019. Due to the political situation and several controversial provisions, I do not expect it to be realised in the first half of 2019.
Special regime for “low-income” taxpayers, who are not taxpayers and have maximally one employee. At this moment, there is a limit 200000 CZK and 1 thousand invoices within the 12 months. The reason I think is simple. This paper evidence does not bring any administrative relief, rather vice versa. The payer has to submit a legitimate request. When the request is satisfied, get a block of invoices, and must record the revenue on a daily basis and report it to the tax office for each month. He must also constantly monitor his turnover and expose an information notice. The threat of most sanctions, of course, still remains.
A lower rate for draft beer. It is just a buttering the voters up, the beer drinkers. The European Commission would almost certainly begin a process with the Czech Republic to remove this provision, because the serving of alcoholic beverages with a reduced VAT rate is not acceptable in the EU.
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