The Constitutional Court of the Czech Republic has scrapped part of the Act on the Electronic Registry of Sales
Evidence of payment by card has been cancelled, taxpayers falling in the 3rd and 4th phases of the electronic registry of sales (EET) do not have to register (for now), the mandatory VAT identification of individuals has been overturned and the government is restricted with the regulations it can issue.
The Constitutional Court of the Czech Republic, in its finding in December 2017, summarised that Act No. 112/2016 Coll., on the registry of sales (ZoET), is not unconstitutional. However, the Court found that certain parts of this law did not comply with the constitutional order of the Czech Republic and abolished those parts of the law.
Changes as of 1st March 2018
The most important change is the abolition of the obligation to record sales for taxpayers falling in the so-called 3rd and 4th phases. However, the reason for the abolition is only due to the solution chosen for the 3rd and 4th phases of the new registration was adopted without taking all possible impacts on the remaining part of the mandatory entities into full account. In the Court´s finding, it appeared directly: “saying that, when felling the forest, the chips are flying where they may, has no place within the regulatory measures in the legal state”. I expect there will be a new amendment of the Act (ZoET), which will restrict the mandatory registry of sales for the remaining taxpayers, for example limited by turnover or in relation to whether the taxpayer pays a flat tax.
In addition, you will no longer have to register payments by a card or online payments via the Internet, as these payments are traceable. The state itself must adhere to a certain informational self-limitation, if it can also secure the information in a different way.
The Constitutional Court of the Czech Republic also abolished the mandatory VAT identification of individuals on receipts for ZoET purposes. This is due to the fact that the VAT number of individuals in the Czech Republic contains the birth number, i.e., the personal data of the taxpayer. I would like to point out that this is really just about ZoET, the mandatory elements according to § 29 of Act No. 235/2004 Coll., On VAT (VAT identification as a compulsory part of the tax document) and other regulations, were not, or even could not be, reviewed. However, besides the arguments of the domestic regulations – Act No. 133/200 Coll. and Act No. 101/2000 Coll. – even the Regulation (EU) 2016/679 of the European Parliament and of the Council (better known as the GDPR) was also expressed, so I expect a swift replacement of this identifier in the near future.
Changes as of 1st January 2019
The government of the Czech Republic will no longer be able to do the following through its regulation:
- identify sales that can be recorded in a simplified mode,
- nor exclude sales whose recording would make impossible or substantially make the smooth and economic performance of the activity more difficult from which the revenue is derived,
- and last, but not least, to determine sales that are not temporarily registered sales.
In connection with the above, Government Regulation No. 376/2017 Coll., which excluded the temporary sales of pre-Christmas carp and permanent sales of blind people, was abolished.
This is an unconstitutional transfer of the legislative power to the executive power. It cannot be determined whether the government has exceeded its mandate or not unless it is sufficiently clear to define this empowerment. Even in the case of EET, it must be primarily defined by law, to whom the duty to register falls and to what extent. The repealed provisions also violate the principle of equality and non-discrimination. Tax entities whose economic activity was not exempted may be in a worse position. The legislator itself has to sufficiently, rationally and predictably determine the potential possibilities of exempting a tax entity from the EET, in such a way that the constitutionally required equality of rights is at stake.
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