We in general terms discussed this topic in our introductory part. Below we will explain the specifics of Amazon sales for non-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 a previous blog post, we took a close look at how to interact with Amazon, as well as various tax obligations related to selling goods via these platforms. In this blog, we will directly study the theory and review some cases of working on the Amazon platform by non-residents using as an example of the Czech Republic. The rules we discuss in this article will work similarly in all other EU countries. As non-residents of the Czech Republic, we consider foreign companies (LLC, LTD., GmbH, Etc.) and individual entrepreneurs, whose legal registration address is located outside the Czech Republic, and those that do not have a permanent representative office (branch) in the Czech Republic.
In several cases, obligations to register for VAT in the Czech Republic may arise from sales through an online store:
1. Purchase or transfer your own goods from another EU country to the Czech Republic before registering for VAT: in this situation, a non-resident automatically becomes so-called an Identified Person to VAT (in Czech. “Identifikovaná osoba”) from the date of the first purchase / transferring goods (§ 6g of the VAT Law). The Identified Person is not entitled to a VAT refund from the state that is why we recommend registering in advance as a full-fledged (classic) VAT payer even before moving your goods, because this will allow you to take an advantage of the VAT refund from each purchase. You can read more about VAT obligations of the Identified Person in our earlier blog.
2. Sale of goods from a warehouse in the Czech Republic: in this case, a non-resident company / individual entrepreneur becomes a classic VAT payer from the date of the first sale of goods from the Czech warehouse (§ 6c of the VAT Law).
3. Exceeding a limit 1 140 000 CZK, when selling goods from a warehouse located in another EU country to the Czech citizens for their personal consumption: in this scenario, a non-resident company / individual entrepreneur becomes a classic VAT payer in the Czechia with the first sale in the Czech Republic after the limit had been reached.
How to register a non-resident for VAT in the Czech Republic?
A legal entity/individual entrepreneur, a non-resident of the Czech Republic, who has fulfilled the condition for mandatory VAT registration in the Czech Republic have to submit an official application for VAT registration within 15 days from the day when according to the Law, it became a VAT payer in the Czech Republic (i.e. when storing goods in a warehouse in the Czech Republic, from the first sale of goods in the Czech Republic, or after exceeding the limit on selling goods to citizens for their personal use in the amount of 1,140,000 CZK).
We recommend that you take advantage of the voluntary VAT registration option even before the legal obligation in registering occurs. This will allow you to avoid paying VAT when moving goods to a warehouse in the Czech Republic (importing from countries outside the EU or purchasing / moving your own goods from the EU) and will let you in atimely manner to fulfill all tax responsibilities.
What is required to register for VAT?
- Completed application form for VAT registration in the Czech Republic is submitted only in electronic format (via the company’s Datova Schranka mailbox or by using a special electronic signature)
- Completed company’s questionnaire (description of the company’s activity, detailed explanation of reasons for VAT registering in the Czech Republic and other information about the company)
- Mandatory attachments to the application form for registration with VAT:
- Company’s / Individual Entrepreneur’s extract from the commercial register and a permit to carry out business activities (trade license): provide the originals or notarized copies translated to Czech language
- Company’s / Individual Entrepreneur’s bank account information (i.e. a copy of the agreement with the bank or bank statement) translated to Czech language
- Confirmation of VAT registration in other countries (if there is such a registration): provide the originals or notarized copies translated to Czech language
In practice, as a rule, it is enough to attach non-notary-certified documents with a non-notarized translation to Czech language. However, the Tax office has the right, if in doubt, to demand the document’s originals or the notarized translation into Czech language. Keep that in mind.
The application form is submitted electronically to the Tax Office in the Moravian-Slez Region (in Czech. “Finanční úřad pro Moravskoslezský kraj”).
Submission of VAT reports:
VAT payers or Identified persons to VAT (in Czech. “Identifikovaná osoba”) have to submit monthly VAT reports. VAT reports should not be submitted by non-residents who do not have permanent establishments in the Czech Republic, only in the case of zero business activity, so-called a “zero VAT report”. The deadline for submitting the report and paying the tax is no later than the 25th day of the month following the reporting one. For instance, October VAT report is submitted and the tax is paid prior November 25th.
The full-fledged (classic type) VAT payer has the right to choose a quarterly VAT reporting period in the event that the annual turnover exceeds 10 000 000 CZK. The decision to switch to a quarterly cycle of filing reports has to be reported to the Tax office before the end of January of the current year.
Let us review in more detail obligations for registration and VAT payment for non-residents of the Czech Republic who use their sales e-commerce platforms Amazon, eBay, etc. In the table below, we do not differentiate whether a non-resident is a classic VAT payer or a non-payer of VAT in his country, since this fact does not matter much.
|Warehouse location country||To whom and where goods are sold||Tax obligations related to VAT|
|Czechia||Czech companies, individual entrepreneurs and citizens throughout the Czech Republic||VAT registration in the Czech Republic from the first sale of goods, selling goods with the Czech VAT rate|
|Czechia||Citizens in other EU countries||VAT registration in the Czech Republic from the first sale of goods, selling goods with the Czech VAT rate. It is necessary to track the limits for shipping goods to other EU countries. If the limit is exceeded then registration to VAT and sale of goods with the local VAT rate of the country where the limit is exceeded|
|Czechia||Companies and individual entrepreneurs in other EU countries||VAT registration in the Czech Republic from the first sale of goods. If the buying party is a VAT payer (check on VIES) then sales are exempt from VAT. If the buyer is a non-payer of VAT then sell goods with the Czech VAT rate|
|EU, a country other than the country of residence||Citizens of the EU countries||Registration to VAT in the country where the warehouse of the first sale is located, and selling with the VAT rate of the country where the warehouse is located. It is necessary to track the limits for shipping goods to other EU countries. When the limit is exceeded then registration to VAT and selling goods with the local VAT rate in the country where the limit has been reached|
|EU, a country other than the country of residence||Companies and individual entrepreneurs in other EU countries||Registration to VAT in the country where the warehouse of the first sale is located. Sale to entrepreneurs from the country where the warehouse is located with the VAT rate of that country. If the buying party is a VAT payer from another EU country (not the one where the warehouse is located) then the sale is exempt from VAT. If the buyer is a non-payer of VAT then selling goods with the VAT rate of the country where the warehouse is located|
Now we can look at some practical examples:
Case 1. A legal entity is a German VAT payer who sells goods on Amazon platform. The goods are purchased in China, delivered directly to the Amazon warehouse in the Czech Republic where they will be stored. The Amazon platform itself is engaged in shipping goods to customers, and issues a monthly invoice for its services. The goods will be sold in the Czech Republic to citizens for personal use and to companies.
A German company will have to in advance register to VAT in the Czech Republic, preferably even before the start of activities, in order to be able to avoid paying VAT when importing goods to the Czech Republic. It is necessary to sell goods with the Czech VAT rate. By the 25th of each month, VAT recognition and control reports for the previous month have to be submitted (for example, October 2020 VAT report has to be submitted by November 25, 2020). VAT on invoice for Amazon services will be taxed in Germany.
Case 2. Legal entity is an Italian non-payer of VAT that sells his goods on Amazon. The warehouse is located in Germany; the sale is carried out throughout the EU to both individuals for personal consumption, and to entrepreneurs who are VAT and non-VAT payers from other EU countries. 10 October, 2020, the sales turnover to individuals in the Czech Republic was reached over (1 140 000 CZK). At the same time, the company has a permanent representative office (sales office) in Germany.
This Italian company has to register for VAT in Germany, in connection with the placement of goods in a warehouse and registration of a representative office. When selling goods to individuals for personal use in Europe, the German VAT rate is used. From 10 October 2020, starting from a parcel on which the Czech limit is exceeded, all sales to the Czech Republic are subject to the Czech VAT rate. In addition, within 15 days since the limit was exceeded, registration to the Czech VAT will be required. When selling goods to entrepreneurs from other EU countries, it is necessary to check whether they are VAT payers in their country of residence or not. This can be verified on the international VIES system. In case of selling goods to a VAT payer, the sale will be exempt from VAT obligations in Germany. If the entrepreneur is a non-payer of VAT, the goods have to be sold with the German VAT rate. Monthly VAT reports are submitted in Germany and, starting from October 2020, additional VAT reports have to be prepared and submitted in the Czech Republic. Important to remember, when selling goods to an entrepreneur who is a VAT payer, a summary report is additionally submitted. Since the Italian company has a permanent establishment in Germany, VAT obligations on Amazon services arise in Germany.
Case 3. A legal entity is a company from China, which places goods at an Amazon warehouse in the Czech Republic. The goods are imported from China to the Czech Republic. The goods are sold to citizens of the Czech Republic and Slovakia. The Chinese company is registered to VAT in the Czech Republic from the beginning of sales. On 15 September 2020, the sales limit to Slovakia was exceeded. When goods are imported into the Czech Republic, this purchase is reflected in the VAT report, because it is subject to VAT in the Czech Republic (the country of import). As the company is already the VAT payer, it is entitled to a refund of the VAT calculated during the import process, which reduces the company’s tax burden. It sells goods in both the Czech Republic and Slovakia with the Czech VAT rate. From the moment of going over the sales limit in Slovakia, and beginning September 15, 2020 (a parcel that falls in the time frame when the limit was reached over), all sales to Slovakia will be with the Slovak VAT rate. VAT registration in Slovakia is required within 15 days from the moment the limit has been exceeded. The place of VAT responsibility on Amazon services is in China.
That is all.
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.
DoMyTax has been providing a wide range of accounting services and tax consulting to companies in the Czech Republic for more than 10 years.
For non-residents of the Czech Republic who require VAT registration in relation with sales on e-commerce platforms (Amazon, eBay, etc.), we have developed a special offer called e-Commerce Tariff. For just 1000 CZK (40 Euro) per month, you will receive a full package of accounting support services including a preparation of VAT reports, control reports as well as email communication regarding your business activities.
Feel free to send us your request for more detailed information; we would be happy to see you as our client.