Electronic recording of sales launched in the Czech Republic

24.02.2016

Having been previously obstructed by the opposition, the vastly discussed governmental bill on the electronic records of sales – ERS (in Czech: elektronická evidence tržeb, or EET) was approved by the Chamber of Deputies at the beginning of this February. Although the bill may still be rejected by the upper chamber of the Czech Parliament or vetoed by President, it will likely be adopted in the end.

The ERS Act, proclaimed to primarily aim at solving tax evasion caused by non-reporting revenues, brings revolutionary changes in the manner of recording businesspersons' incomes. The ERS will ensure that the data concerning each businessperson's transaction will be sent on-line to Financial Administration bodies. Every cash income of an entrepreneur will be recorded through the Internet in the central data repository of the Financial Administration at the time of its payment. A unique code for confirmation will be immediately (in a few seconds) sent back to the entrepreneur to be stated on the bill/receipt that the entrepreneur will deliver to the customer. Any and all cash payments (including tokens, coupons and meal vouchers), payments by cards or other electronic means, as well as payments by promissory notes or cheques, will be subject to registration. Payments made by collecting or transferring amounts from bank accounts will not be subject to registration.

The obligation to record all revenues electronically should apply to both personal tax and corporate tax payers. Even entrepreneurs who do not have a physical store or are only engaged in seasonal business will not be exempt. Fortunately, the ERS in the Czech Republic should be introduced on a step-by-step basis, always for separate groups of entrepreneurs and over a period of 18 months from the date the recording system will be launched, i.e. likely from this November. The launching will take place in four stages – the ERS will first apply to operators of accommodation and catering facilities, the second stage will apply to retailers and wholesalers, followed by persons engaged in other activities, such as transport and agriculture, and in the last stage crafts and production activities should be involved.

The ERS system will cause wrinkles to many retailers and make all entrepreneurs involved expend some money, since it will require them to implement special technical solutions tailored to individual types of traders and their needs. Anyone subject to the ERS system will be required to have an Internet connection (save for a few exceptions granted in justified cases) and an appropriate electronic device (a registration cash desk, computer, laptop, tablet or smart phone), including the cash desk software or application that will enable recording the payment and printing a receipt for the customer. The ERS Act is also to envisage solutions for ad hoc situations, such as the cancellation of a transaction on the cash desk (that will be sent as a minus item to the central data repository) or any Internet connection outage (in that case, the off-line records regime will be used).

The introduction of the ERS system should make fraudulent actions of any entrepreneur easily recognisable for not only the Financial Administration bodies, but also the customers as such. According to the Ministry of Finance's statement, the e-sales system should increase the efficiency of revenue audits which should be aimed only at businesses at which any inconsistency appears, not bothering the dutiful businessmen with unnecessary inspections. Only practical life will show whether these announcement are really given effect to and what the economic impacts of the e-sales introduction will be.