E-commerce in the Czech Republic

An e-shop can be operated by either natural or legal people, Czech or foreign. Czech entities and foreign branches need to obtain a trade license from the Czech Trade License Office covering the intended scope of activity carried out through the e-shop, and companies have to be properly established and registered in the Commercial Registry.

Foreign entities residing in the EU, which are entitled to operate an e-shop in their country of residence/establishment, may run an e-shop in the Czech Republic without a duty to obtain a trade license or register its branch into the Commercial Registry. Nevertheless, having a delivery address in the Czech Republic may prove to be advantageous in certain situations.

To secure proper fulfilment of all statutory obligations, the operator of the e-shop should be aware of which legal system governs relationships with its customers (e.g. rights and obligations of the parties to the contract, claims of the customer in case of defects or limitation periods).

In case the e-shop is operated by a Czech-based entity which offers goods or services to Czech customers, Czech law would probably be the first choice. If the headquarters of the operator of the e-shop offering goods and services in the Czech Republic resides abroad, the answer to this question may not be as clear.

Law governing the contract can be established on the basis of an EU regulation No. 593/2008 which determines the law decisive for consumer contracts. First, differences are made between contracts entered into by two entrepreneurs within their business activity and consumer contracts, i.e. contracts between an entrepreneur and a consumer. A consumer is a natural person concluding a contract outside his trade, business or profession.

As a general rule, consumer contracts are governed by the law of the country of residence of the consumer. The EU law, however, allows parties to choose the governing legal system. Nevertheless, such a choice cannot deprive the consumer of protection provided by the legal system applicable under the general rule. The EU law further contains some exceptions from the general rule, applicable for example to contracts on provision of services, if the place of performance lies outside the country of the consumer’s residence, insurance and transport contracts.

If a contract concluded through an e-shop is not a consumer contract, the choice of the governing law is possible without any limitations. In case of lack of such a choice, the EU regulation contains rules for determination of the applicable legal system.

So for e-shops, which intend to sell goods or services to Czech customers, the following conclusion can be made: the contract concluded with consumers through an e-shop will be governed by the Czech law. Non-consumer contracts will be governed by the law of the seller’s/provider’s residence, if no other choice is made.

Consumer protection in the Czech Republic stems partially from the EU harmonization, therefore provisions similar to the Czech regulations can be expected also in other EU countries. On the other hand, EU countries are allowed to apply some additional consumer protection arrangements, so rules applicable in each EU country (including the Czech Republic) should be crosschecked. For an e-shop, especially provisions relating to consumer contracts (and particularly to distance contracts) are relevant. A distance contract is a contract:

Among these rules, it is possible to highlight provisions imposing information obligation on the trader towards the consumer, provisions regulating the process of concluding the contract and provisions regulating the content of the contract (prohibited provisions, termination of the contract, quality guarantee and the consumer’s claims from defects of the performance, etc.). The operator of the e-shop should ensure that the web page where the e-shop is located contains all the information required by law and that the contract concluded through the e-shop respects all the consumer’s rights.

Information duty

Before the conclusion of a contract, i.e. generally before an order through the e-shop is finished, the consumer should be informed about the identity of the trader, his address, contact details, specification of the goods or services offered, final price of the goods and services (including all taxes and fees), use of price personification, means of payment and delivery, delivery costs, claims arising from faulty performance or warranty and conditions for their application, length of duration of the contract and ways to terminate it (steps, period for withdrawal and procedure of withdrawal included), costs of distance communication, amount of eventual advance payments, body competent for settlement of consumer disputes, etc.

Process of conclusion of the contract

Consumers should be informed about particular steps of concluding the contract and before final placing of the order should have a chance to verify and eventually correct the data inserted into the order.

In the context of ordering (specifically the Order button) goods and services, the consumer must be informed of the obligation to pay, i.e. the consumer must be clear from the order that by sending (confirming) it, he undertakes to pay.

The trader should also inform the consumer where the concluded contract is available for the consumer, about languages in which the contract can be concluded or any rules of behaviour bounding on the trader.

After the order is placed by the consumer, the trader is obligated to immediately confirm receipt of the order also by one of the means of distance communication (for example by an e-mail).

Content of the contract

The contract concluded through the e-shop is regulated by the applicable law. For a private contract, the principle of contractual freedom usually applies, nevertheless in the case of consumer contracts, the freedom is to a significant extent limited in favour of the consumer.

First, certain provisions are explicitly prohibited by law and cannot be applied by the trader. Arrangements establishing disproportional unbalance between rights and obligations of the trader and of the consumer are prohibited in general.

In addition, the contract cannot contain arrangements restricting or excluding consumers’ rights from faulty performance, allowing the trader to withdraw from the contract without any reason, allowing the trader to change unilaterally rights and obligations of the parties to the contract, disallowing the consumer to file an action at court and forcing him to sue the trader at an arbitration court not being bound by the consumer protection provisions, etc.

Czech law also contains some provisions protecting consumers that are applicable for all sales contracts, not only distance contracts.

It is worth mentioning that under these provisions the consumer is entitled to raise claims from faulty performance within 24 months from takeover of the goods (or within the warranty period stated on the cover). These provisions also determine the respective claims consumers have in case of faulty performance.

In case of distance contracts consumers also have the right to withdraw from the contract without any reason within 14 days from takeover of the goods (it is sufficient that the consumer dispatched the withdrawal announcement within this term). If the consumers have not been informed about this right by the trader, the period for withdrawal prolongs to 1 year and 14 days.

For avoidance of disputes, it is recommended to offer to the customers a template withdrawal form. When this form is used by the customer, the trader is obligated to confirm its receipt within undue delay. The consumer must return the goods obtained on the basis of the contract within 14 days from the withdrawal. Within the same period, the trader is obligated to return the price paid by the consumer together with delivery costs in the manner the price was paid or in a manner agreed on with the consumer.

When placing the order, the traders often require customers to provide to the trader certain personal data, such as name, address, phone number, e-mail address, date of birth, sex. Such personal data serve mainly for invoicing and delivery of the goods and services, however, some traders use the personal data also for other purposes, such as marketing, advertising, references, statistics, etc. Processing of personal data is regulated, and when a trader processes personal data, statutory obligations must be fulfilled.

Processing of personal data is allowed only if at least one of the statutory titles is met, only for the purpose for which they were obtained, only for as long as a legitimate reason for their processing exists and only with regard to data that are necessary for fulfilment of the purpose of their processing (exceptions apply).

Before processing may commence, the customer has to be informed about the purpose of processing the data (the purpose must be laid down by the controller before processing of the data is commenced), who will be processing the data, what kind of data will be processed, for how long the data will be processed and about rights of the data subject regarding access to, correction of, or destruction of the data and other information required by law. The controller is also obliged to adopt technical and organizational measures preventing leakage and abuse of the personal data of the customers and such measures must be documented. Employees of the controller are bound by the statutory confidentiality duty with regard to the data and the measures adopted for their protection.

Commercial messages

Sending commercial messages is a common practice for e-shops, whether it is sending information about new products or birthday cards. Commercial communications are generally considered to be all forms of communication, including advertising and solicitations to visit websites, intended to directly or indirectly to promote the goods or services or the image of the business that the trader sends to its customers.

This is the case when the e-shop operator receives electronic contact (e.g. e-mail) from its customer in connection with the sale of products or services. The e-shop operator may send commercial communications to the e-mail received in this way, provided that the customer has the possibility to easily and free of charge refuse such commercial communications and that the commercial communications concern similar products or services purchased by the customer on the e-shop.

Cookies

Almost every e-shop operator uses cookies on its website. Cookies are small text files that are stored on the hard drive of the computer or other device from which the visitor browses the website. Cookies have various uses, such as ensuring the technical operation of a website, enabling website operators to understand visitor preferences, create targeted advertisements or obtain other information about customer behaviour.

Corporate income tax filing obligations

Once registered for corporate income tax purposes, the e-shop is liable to file its Czech corporate income tax return on annual basis. The time-limit for filing the return is generally three months following the end of the taxable (accounting) period. If the corporate income tax return is filed by a tax advisor or if the entity operating the e-shop becomes liable to a statutory audit, the time-limit for the submission of the corporate income tax return is prolonged to six months following the end of the taxable (accounting) period.

The corporate income tax liability (self-assessed by the e-shop) is payable within the filing deadline.

As a consequence of the corporate income tax liability, the obligation to corporate income tax advance payments arises. Advance payments must be paid semi-annually if the last known tax liability ranges between CZK 30,000 – CZK 150,000 (approx. EUR 1,250 – EUR 6,250). In this case the advance payment is set at 40% of the last known tax liability.

If the last known tax liability is higher than CZK 150,000 (approx. EUR 6,250), the advance payment is ¼ of the previous tax liability and is paid quarterly.

VAT registration

Provided that the e-shop has registered seat, place of business or fixed establishment in the Czech Republic, the threshold for mandatory VAT registration is the turnover of CZK 2,000,000 (approx. EUR 83,300) for a period of immediately preceding 12 consecutive calendar months.

A foreign taxable person that realizes long-distance sales (i.e. sale of goods via e-shop) in the Czech Republic to Czech final customers has to register for VAT in the Czech Republic if the total value of the transactions carried out to the European Union customers reaches EUR 10,000 in the relevant calendar year and the year immediately preceding and is not registered to One Stop Shop scheme in his home country.

The entity operating the e-shop (both Czech and foreign) may however apply for voluntary VAT registration. The process of voluntary VAT registration is more demanding from the administrative perspective lately.

VAT filing obligations

Once VAT registered, a liability to file VAT returns in which the VAT liability or entitlement to VAT recovery are calculated and reported arises. The compulsory VAT reporting period for newly registered VAT payers is a calendar month.

Starting from 2016, VAT registered persons are also obliged to file special tax return called VAT Control Statement through which further details on transactions are reported (e.g., invoice number, identification of supplier or customer, tax base, VAT amount). The VAT Control Statement is filed within the same deadlines as are relevant for VAT returns filing. The VAT Control Statement is only a reporting tool that allows financial authorities to have more control over correct and complete reporting of VAT liabilities.

VAT identified person

Even if not VAT registered in the Czech Republic, the e-shop should be aware of the risk of becoming VAT identified person. The e-shop would become liable to register as VAT identified person in the following situations:

In the situations described under the first two bullet points, the VAT identified person becomes liable to file VAT return through which the Czech VAT liability is reported. At the same time no entitlement to input VAT deduction arises to the VAT identified person. In the third case a liability to file VAT return and EC sales list arises. No liability to pay output VAT and apply input VAT deduction is connected with filing the VAT return. The VAT return serves for reporting purposes only.

Other tax registrations

The liability to other tax registrations should be assessed with regard to the nature of the e-shop and its operations. As relevant examples could serve registration to personal income tax from employment activities provided that the entity operating the e-shop has employees, registration to road tax if the entity operating the e-shop operates vehicles for business purposes in the Czech Republic, real estate tax registration if the entity operating the e-shop owns real estate in the Czech Republic, etc.

To be able to realize the customer supplies, the e-shop will first acquire the relevant goods. The decision on the supplier of the goods to be sold by the e-shop will most likely be business-driven. Nevertheless, the VAT liabilities relevant to the purchase transaction must be assessed in line with the VAT legislation to avoid any negative consequences.

The diversity of purchase (of goods) transactions is almost unlimited. Below are comments on the most common ones.

Acquisition of goods in the Czech Republic

Provided that the e-shop seated in the Czech Republic will acquire goods locally (i.e. from a taxable person registered for VAT in the Czech Republic), the e-shop as the purchasing party will be entitled to claim input VAT through its VAT return.

The relevant VAT may be claimed based on a tax document containing all the prerequisites defined by the VAT legislation.

However, for certain commodities the Czech VAT legislation defines a VAT treatment that varies from the one described above. If for one transaction the purchase price of such commodities without VAT exceeds CZK 100,000 (approx. EUR 4,160) and if the goods are acquired by a Czech VAT registered payer (i.e. Czech VAT registered e-shop), then so-called local reverse charge mechanism applies. Under the local reverse charge mechanism, the supplier transfers the VAT liability to the customer (i.e. Czech VAT registered e-shop). This means that the supplier applies no VAT on the delivery of the goods to the customer. The customer (i.e. Czech VAT registered e-shop) is consequently obliged to declare the output VAT relevant to the acquisition of goods in its VAT return. Simultaneously, the input VAT relevant to the purchase of the goods may under standard conditions be claimed through the VAT return.

Some of the concerned commodities are as follows:

• mobile phones
• portable automatic data processing devices (such as laptops, tablets etc.)
• video game consoles

Acquisition of goods from the EU

When acquiring goods from other EU member states, reverse charge mechanism applies to the purchasing party – VAT registered e-shop in the Czech Republic.

Under the reverse charge mechanism, the supplier of the goods treats the delivery of the goods to a customer seated in another EU country as exempt from VAT. The purchasing party (i.e. the Czech VAT registered e-shop) is subsequently obliged to declare the output VAT relevant to the acquisition of goods from other EU member state through its Czech VAT return. Simultaneously the input VAT relevant to the purchase of the goods may under standard conditions be claimed through the Czech VAT return.

Acquisition of goods from 3rd countries – import of goods

In the case of the import of goods to the Czech Republic, the tax administration is divided between the tax and customs authorities. If the importer of the goods is Czech registered VAT payer, the tax authority is the relevant tax administrator. The assessment and collection of VAT will be in the hands of the customs authority if the import to the Czech Republic will be realized by a person not VAT registered in the Czech Republic.

The import of goods to the Czech Republic by Czech registered VAT payer is reported in its VAT return through the reverse charge mechanism. The purchasing party declares the output VAT arising from the imported goods through its Czech VAT return. Simultaneously the input VAT relevant to the purchase of the goods may under standard conditions be claimed through the Czech VAT return.

The sale of goods may create various VAT situations to consider. When concluding on the VAT treatment to be applied, many indicators will need to be evaluated, e.g. where are the goods located at the moment of sale, whether the e-shop is registered for VAT in the Czech Republic, are the goods sold to a Czech customer or to a foreign one and many others.

The text below comments on the VAT treatment of some of the situations that may arise on the sale of goods.

Czech seated and VAT registered e-shop sells goods to Czech customer (non-taxable person); the goods are located on the territory of the Czech Republic at the time of sale:

Under this scenario the e-shop will be liable to apply output VAT on the sale of the goods.

The Czech seated and VAT registered e-shop sells goods to an EU customer (non-taxable person); the goods are located on the territory of the Czech Republic at the time of sale:

Delivery of goods to the final customer (non-taxable person) to other EU member state where the goods are transported from the Czech Republic by the supplier or by third person engaged for this purpose (e.g. courier service, post office) by the seller falls under distant sale regime (provided that the sold goods are not used goods, goods that are delivered with installation and assembly or new means of transport).

For the determination of the correct VAT treatment in this situation, the overall value of the relevant transactions to the EU final customers carried oud by the e-shop is decisive. As a relevant transaction are considered in particular distanced sale of goods and provision of telecommunication services, radio and television broadcasting services and electronically provided services to a non-taxable person.

The Czech VAT will be applied and reported in the Czech VAT return of the Czech e-shop on the sale of goods if the place of taxable supply will be in the Czech Republic. The place of the taxable supply will be in the Czech Republic provided that the following conditions will be met:

• the sold goods are not subject to excise tax (e.g. tobacco products, alcohol beverages)
• the overall value of relevant transactions (without VAT) carried out by the e-shop to the EU final customers does not in both the given and the preceding calendar year exceed the amount EUR 10,000

If the above conditions will not be fulfilled, the e-shop will become liable to register for VAT in the EU member state of consumption and apply the relevant VAT rate as defined by the VAT legislation of the given EU member state on the sale of goods to the customer. Subsequently, the e-shop will be liable to comply with VAT reporting and payment obligations as defined by the VAT legislation of the other EU member state.

Starting from 1st July 2021, the e-shop may register for One-Stop Shop (OSS) scheme which enables online sellers, including online marketplaces/platforms to register in one EU Member State. This is valid for the declaration and payment of VAT on all distance sales of goods and cross-border supplies of services to customers within the EU. Therefore, the e-shop does not have to VAT register in each EU member state of delivery of goods or provision of services and might tax the goods by relevant VAT rate in a single OSS declaration.

Even if the e-shop will not fulfil the above conditions obligating it to VAT registration in the other EU member state, the e-shop will be entitled to VAT register voluntarily in the other EU member state. However, in this case the e-shop will be obliged to comply with VAT reporting and payment obligations defined by the other EU member state.

EU seated and VAT registered e-shop sells goods to a Czech final customer (non-taxable person):

This scenario mirrors the one described in the above example. Therefore, the place of taxable supply will be in the other EU member state provided that the conditions given by the Czech VAT legislation (and giving rise to obligatory Czech VAT registration) are not fulfilled. Under this scenario the sale of goods to Czech final customer (non-taxable person) will be subject to VAT of the other EU member state.

If, however, the value of the goods and electronically provided services sold to EU final customers (non-taxable persons) in the given and the preceding calendar year exceeds EUR 10,000, the EU e shop would become liable to VAT register in the Czech Republic. As a consequence, the EU e-shop will be liable to apply Czech VAT on the sales to Czech Republic final customers (non-taxable persons) and comply with its Czech VAT reporting and payment obligations.

In case of registration for OSS in its EU member state, the Czech VAT is applicable, however, the VAT registration in the Czech Republic is not required. The Czech VAT will be reported in the home member stated in OSS scheme.

The Czech seated and VAT registered e-shop sells goods to a third country customer (non-taxable person); the goods are located on the territory of the Czech Republic at the time of sale:

Under this scenario the sold goods exit from the territory of the EU and are released to export customs regime. Should this be the case, the sale of goods to the final customer (non-taxable person) would be exempt from VAT in the Czech Republic. Any duty and VAT could be assessed to the customer based on the legislation of the country of destination.

Sale of goods by the Czech seated and VAT registered e-shop to a Czech final customer (non-taxable person); the goods are dispatched from the warehouse located in other EU member state:

This situation would be very likely connected with the VAT registration of the Czech seated e-shop in other EU member state. The main reason behind this VAT registration is the entitlement to apply for input VAT of the other EU member state in case of local purchases or import of goods from third countries.

At In this case, the place of supply is always in the country where the goods are located after dispatch or transport, regardless of the total value of the goods (and selected services) sold to end customers in the EU. For this reason, the supply will be subject to taxation in the country of the end customer and the seller (online shop) will be obliged to register for VAT in that country. If the online store is registered in the one-stop-shop regime, it does not have to register for VAT in the end customer’s country of establishment.

Below we comment on the liability of the e-shop to declare the sale of goods through a tax document as defined by the Czech VAT legislation.

The liability to issue a tax document declaring the sale depends on whether the e-shop is VAT registered in the Czech Republic or not. Our comments to individual scenarios follow below.

Goods delivered within the Czech Republic

Goods sold to Czech end customer (non – taxable person)

In the case of a warranty claim from the customer, the e-shop is liable to issue a confirmation of the warranty claim and a report on the settlement of the warranty claim (declaring how the customer’s claim was dealt with). None of these documents are tax documents.

In this case it will be sufficient for an e-shop to issue any convenient document that will indicate the following information: identification of the e-shop (business name, seat, registration number, VAT number), identification of the customer (name, address), date of order, delivery date, description of the goods sold, total amount including VAT, advance payment, amount to be paid.

Goods sold to person liable to VAT

If the e-shop sells goods to a person liable to VAT, the liability to issue a tax document depends on whether the e-shop is VAT registered in the Czech Republic or not.

As required by the Czech VAT legislation, the tax document must provide the following information: identification of the e-shop (business name, seat, registration number, VAT number), identification of the customer (name, address), description of the goods sold, date of taxable supply (delivery date or date of advance payment receipt), date of issuance of the tax document, unit price of the goods sold excluding VAT and discount (if the discount is not included in the unit price), VAT base, VAT rate, amount of VAT in CZK, total amount to be paid.

In case of exchange or return of the goods, a liability to issue corrective VAT document will arise. Based on  the Czech VAT legislation the corrective VAT document must state the following information: Identification of the e-shop (business name, seat, registration number, VAT number), identification of the customer (name, address), evidence number of the original tax document, evidence number of the corrective VAT document, reason for issuance of the corrective tax document, difference between the original and corrected tax base, difference between the original and corrected amount of VAT, difference between the original and corrected amount to be paid by the customer.

Goods transported from EU

Goods sold to Czech end customer (non-taxable person) – distant sale

If the goods sold to Czech end customer (non-taxable person) are at the time of their sale located on the territory of the EU, the liability to declare the sale of the goods by a tax document will depend on whether the EU e-shop is VAT registered in the Czech Republic or not.

If the e-shop is not VAT registered in the Czech Republic, the VAT legislation of the country where the EU e-shop is VAT registered will be followed when it comes to issuance of VAT documents.

As required by the Czech VAT legislation, the tax document must provide the following information: identification of the e-shop (business name, seat, registration number, VAT number), identification of the customer (name, address), description of the goods sold, date of taxable supply (delivery date or date of advance payment receipt), date of issuance of the tax document, unit price of the goods sold excluding VAT and discount (if the discount is not included in the unit price), VAT base, VAT rate, amount of VAT in CZK, total amount to be paid.

In the case of exchange or return of the goods, a liability to issue corrective VAT document will arise. Based on  the Czech VAT legislation the corrective VAT document must state the following information: Identification of the e-shop (business name, seat, registration number, VAT number), identification of the customer (name, address), evidence number of the original tax document, evidence number of the corrective VAT document, reason for issuance of the corrective tax document, difference between the original and corrected tax base, difference between the original and corrected amount of VAT, difference between the original and corrected amount to be paid by the customer.

Goods sold to person liable to VAT

In the case of sale of goods to a person liable to VAT, the rules for issuance of a VAT document as valid in the given EU country will apply. The rules of the given EU country will also apply to a situation when receiving VAT advances from the customers, or in case of exchange or return of the goods.

Goods transported from 3rd country

Goods sold to Czech end customer (non-taxable person)

If the goods are transported to Czech end customer from a 3rd country, then regulations of the 3rd country are decisive when it comes to rules governing the issuance of VAT/sales documents.

On 1 July 2021 the VAT exemption for the importation of goods not exceeding EUR 22 has been removed. As a result, all goods imported to the EU are subject to VAT.

If the sale of goods is facilitated by online sellers or through an electronic interface (e-shop) to buyers in the EU, the seller/electronic interface is considered to have made the sale and is in principle liable for the payment of VAT.

To simplify the declaration and payment of VAT for goods sold from a distance by sellers from either the EU or from a non-EU country or territory the seller may apply for Import One-Stop Shop (IOSS). If a business is not based in the EU, it will normally need to appoint an EU-established intermediary to fulfil its VAT obligations under IOSS. The IOSS simplification is applicable only to purchases made by a buyer within the EU and for goods valued at less than EUR 150. For goods valued more than EUR 150 shall apply the rules for standard import of goods from a non-EU country.

Goods sold to a person liable to VAT

If the goods are transported to Czech end customer from a 3rd country, then regulations of the 3rd country are decisive when it comes to rules governing the issuance of VAT/sales documents.

It is essential for the e-shop (with no regard to the destination from where the goods are shipped) to be able to prove both the date of receiving the advance payment (in case of receiving advances from the customers) as well as the date of taxable supply (i.e. the date on which the customer overtakes the goods). Receipt of the payment can be proved by a bank account statement in case of card/bank transfer or by a confirmation from courier company in case of cash on delivery. The handover of the goods to the customer can be proved by a confirmation issued by the courier company proving that the goods were handed over to the customer or by a delivery note. Even though there is no legal obligation to issue delivery notes, it is a common practice in case of e-shop sale.