Jan. 1. 2010 effective VAT changes

Providing a service to an EU country. In 2010, VAT is stated by applying the following two rules:

B2B – Business to BusinessCommercial company bills another commercial company for services provided.

In such a case, the duty of paying VAT devolves to the customer. The customer in question is not obligated to produce its Tax Identification Number (VAT). If the service recipient is the undertaker but no VAT payer, it is obliged to get registered as the VAT payer in the country where its business office is registered.

The legislation within the entire European Union has been overall harmonized so that customers will find this condition even in their national tax regulations.

For this reason, we také the liberty of drawing attention to this duty since the obligation exists from 1 January 2010 to file, along with the regular income tax return, a summary report on business performances made in the EU countries. Starting today, the invoices going to the EU states will be provided with the reference to the obligation of the VAT duty devolvement into the recipient’s country as follows:

„According to Par 9 in Art 1 of VAT Act No. 235/2004 Coll., VAT tax should be cleared by the client.”

B2C – Business to CustomerCommercial company bills the end user.

There is no change for such a case, and the undertaker is still obliged to pay VAT in its country of registration.

Providing a service abroad (third country, non-EU)

There is no change in this business case. The customer’s country of registration is the performance location. VAT is not billed.

Goods sale vs. export

The goods being exported is freed from VAT and the performance location is devolved to the goods delivery location if the goods is being delivered along with its transport. Important is to prove the condition of goods’ leaving the Czech Republic territory, or the EU.

In our case when we bill the sale of a computer system to the customer, but we still have it in the server center, there is no way for proving the EXPORT as the goods is still in the Czech Republic. For this reason, it is necessary to bill these sales to clients along with the basic VAT rate of 20%.

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