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Czech Republic Announces Anti-Avoidance Measures

Wednesday, June 5, 2019

The Czech Ministry of Finance announced on May 31, 2019, a legislative package to implement the European Union directive on the mandatory reporting of tax planning arrangements and the EU VAT "quick fixes."

According to the ministry, the proposals amend the Act on International Cooperation in Tax Administration, which incorporates Directive 2018/822 into the Czech law, intended to enable new risks of tax avoidance to be identified earlier and for measures to be taken to block harmful arrangements. EU member states will be required to automatically exchange the information they receive through a centralized database.

EU member states have until December 31, 2019, to transpose the directive into their national laws and regulations. The new reporting requirements will apply from July 1, 2020. Member states will be obligated to exchange information every three months, within one month from the end of the quarter in which the information was filed. The first exchanges should therefore be completed by October 31, 2020.

In addition, the package includes measures to implement the EU VAT "quick fixes." Agreed by EU finance ministers in 2018, these four short-term harmonization measures cover:

  • Call-off stock. The proposals provide for a simplified and uniform treatment for call-off stock arrangements, where a vendor transfers stock to a warehouse at the disposal of a known acquirer in another member state;
  • The VAT identification number. To benefit from a VAT exemption for the intra-EU supply of goods, the identification number of the customer will become an additional condition;
  • Chain transactions. To enhance legal certainty in determining the VAT treatment of chain transactions, the proposals establish uniform criteria;
  • Proof of intra-EU supply. A common framework is proposed for the documentary evidence required to claim a VAT exemption for intra-EU supplies.

These adjustments will apply from January 1, 2020.