Czech general domestic VAT reverse charge stalled

The Czech tax authorities have delayed again the start of a pilot of the general domestic reverse charge, aimed at reducing VAT fraud. Since the European Commission has only given till June 2022 to trial the regime, and the Czechs have been delayed several already, it now considers it too late to properly introduce the measures and evaluate its benefits.

The Czech Republic lead the campaign of member states seeking to give the greenlight on the use of the reverse charge on domestic goods. This took over five years, and held up other measures including the harmonisation of VAT on e-books and their printed equivalent. 

The measure, which takes out the cash payment of VAT from B2B transactions, had been agreed with the European Commission ('EC') as a derogation from the EU VAT Directive in 2019.  The EC had only granted a two-year period for the measure until 2022. It will only apply for transactions at or above €17,500. The measure means the seller does not have to charge or collect VAT on domestic transactions. Instead, the customer reports the transaction in their VAT return twice. VAT reverse charge is already frequently applied on cross-border transactions and some, limited domestic supplies, in VAT-fraud sensitive sectors.