This topic in general terms was discussed in our introductory article. Below we will explain the specifics of Amazon sales for tax residents of the Czech Republic. We would like to remind you that everything described applies to Amazon, eBay and other e-commerce platforms.
In the table below, let us review in detail the VAT obligations for residents of the Czech Republic who decided to sell goods on Amazon platform. The abbreviation we used for Czech companies is “s.r.o.”, and for Czech individual entrepreneurs is “OSVČ”.
|Warehouse location country||Seller||To whom and where goods are sold||Tax obligations related to VAT|
|Czech Republic||Czech s.r.o. / OSVČthat are non-payers of VAT||Czech companies, Czech individual entrepreneurs and to Czech citizens on the territory of the Czech Republic||Sale of goods without VAT, until exceeding the total turnover of 1 million CZK within 12 consecutive months|
|Czech Republic||Czech s.r.o. / OSVČthat are VAT payers||Czech companies, Czech individual entrepreneurs and to Czech citizens on the territory of the Czech Republic||Sale of goods with Czech VAT rate|
|Czech Republic||Czech s.r.o. / OSVČthat are non-payers of VAT||EU citizens in any other EU country||Sale of goods without VAT until exceeding 1 million CZK turnover or until exceeding the VAT limit established in one of the EU countries where the goods are sold. After surpassing the limit, registration to VAT in that country is required|
|Czech Republic||Czech s.r.o. / OSVČthat are VAT payers||EU citizens in any other EU country||Sale of goods with the Czech VAT rate. It is necessary to track the limits of goods shipped to other EU countries. If the limit has been reached then the VAT registration is required and sell goods with the local VAT rate in that country where the limit is exceeded|
|Czech Republic||Czech s.r.o. / OSVČthat are non-payers of VAT||EU companies / EU individual entrepreneurs from other EU countries||Sale of goods without VAT, registration to VAT in the Czech Republic after exceeding 1 million CZK turnover within 12 consecutive months|
|Czech Republic||Czech s.r.o. / OSVČthat are VAT payers||EU companies / EU individual entrepreneurs from other EU countries||If the buying party is a VAT payer (verify on the VIES) – sale of goods will be exempt from VAT. If the buying party is a non-VAT payer then sell goods with the Czech VAT rate|
|EU||Czech s.r.o. / OSVČ: VAT payers and non-VAT payers||EU citizens, including to the Czech Republic||Mandatory VAT registration and sales with the local VAT rate in the country where the warehouse is located. It is necessary to track the limits for sending goods to other EU countries, including to the Czech Republic. If the limit is exceeded then register to VAT and sell goods with the local VAT rate in the country where the limit has been reached|
|EU||Czech s.r.o. / OSVČ:VAT payers and non-VAT payers||EU companies / EU individual entrepreneurs from other EU countries||Register to VAT in the country where your warehouse is located. If the buying party is a VAT payer (verify on the VIES) – the sale of goods will be exempt from VAT. If the buying party is a non-VAT payer then sell goods with a VAT rate of the EU country where the warehouse is located.|
We support the above information by presenting it with two examples:
Case 1. A Czech company (s.r.o.), a non-VAT payer, decided to sell merchandise in the USA on the Amazon platform. The goods will be purchased in China. The goods will be delivered directly to the USA by a shipping company from China. The merchandise will be stored in the US at the Amazon warehouse. The goods, until sold to customers, are the property of the Czech company. The Czech company will pay Amazon for the services (warehousing, sorting of goods and other Amazon services related to the order processing). Amazon receives provisions for its services. Once a month, Amazon sends to the Czech company an invoice for its services and provisions. Will this activity oblige to register for VAT in the Czech Republic? What VAT obligations will the Czech company have with receiving an invoice from Amazon for services and provisions?
Moving goods from China to the US is not a subject to the Czech VAT. A sale of merchandise outside the European Union is also not a subject to the Czech VAT; and is not reflected in the Czech VAT reports. For buying services, the rules are different. With the receipt of an invoice for services from a non-Czech resident legal entity (Amazon – legal entity, location: USA), the place of VAT payment (VAT obligations) is transferred to the buying party (the Czech company – s.r.o.). In this case, the Czech company has an obligation to register as an “Identified Person” to VAT, and to pay 21% of VAT in the Czech Republic from the Amazon invoice for services. As a reminder, the “Identified Person” to VAT is not eligible for VAT refunds on purchases. You could also read more about the VAT obligations for “Identified Persons” in our blog.
Case 2. A Czech manufacturer of goods, a VAT payer, decided to sell goods within the EU using the Amazon platform. This Czech company will use the Amazon warehouse services in the EU, specifically in Germany and Italy. The goods will be moved from the Czech warehouse to Amazon warehouses in Italy and Germany. The dispatching of goods to customers from the Amazon warehouse will be handled directly by Amazon. What VAT obligations will be resulting from this scenario?
The first part is the movement of the goods without changing the ownership from the Czech Republic to the Amazon warehouse in the EU. Such freight forwarding will be a subject to VAT regulations in the country where the goods are moved. Step one, it will be necessary to register for VAT in the country where the warehouse is located (in Germany and Italy, and we recommend completing a registration to VAT process in advance, even before shipping your goods, so you could get your VAT deductions). The second part is the sale of goods to individuals for personal use with the VAT rate of the country where the warehouse is located, until the limit on sending goods to some EU countries is reached. When the limit is exceeded for a calendar year, then register to VAT in the country where the limit has been exceeded, and sell goods to the country where the limit is exceeded with the VAT rate of that country. The third part is purchasing Amazon services. The Czech VAT payer company will recognize VAT on the purchased services and reflect this in the Czech VAT report in the Czech Republic. Unlike the previous example, the VAT-payer company is entitled to a VAT refund on the purchased Amazon service. In addition, let us imagine that on 20 October 2020, the limit was reached on sales of goods to Poland from a German warehouse. This means that the Czech VAT payer company within 15 days will have to register to VAT in Poland, and to begin to use the Polish VAT rate from October 21, 2020 when selling goods to Poland.
If you have not found a solution for your situation in our blog or you have additional questions, we would be happy to assist you.
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