EET on the scene again: reality versus expectations
EET on the scene again: reality versus expectations
The debate on the reintroduction of electronic sales records is returning in a modified form, which should reflect the experience of the past and the conclusions of the Constitutional Court. The new version is to be technically simpler, less administratively burdensome and more focused on risk areas. Nevertheless, a number of open questions remain – from real fiscal benefits to constitutional sustainability to practical impacts on entrepreneurs and customers.
In the previous article, we introduced you to the essential parts of the paragraph wording of the Act. Below, we offer a view of the areas that will be key in practice and will certainly be the subject of professional and public discussion in the coming months.
Naturally, the discussion also touches on the simplified EET OFF regime intended for entrepreneurs with incomes of up to CZK 1 million. The question arises whether there will be room for some entrepreneurs to move "below the limit".
From a practical point of view, however, a massive use of this regime does not seem likely. The incentive to pay a higher lump sum tax in exchange for the possibility of not recording sales is rather limited, especially if a free state application and a one-off tax credit are to be available as a motivational element for joining the system.
At the same time, it is necessary to add that a significant fiscal effect cannot be expected for small entrepreneurs. With low incomes – from which expenses must be deducted – there is relatively little room for taxable profit. Although each limit setting theoretically allows you to work with the limit, here its amount is so low that any optimizations would probably not have a major systemic impact.
From the perspective of tax administration, however, the difference is in the context of the transaction. QR payment is typically an on-site payment, similar to cash or card payment in an establishment. On the other hand, a transfer made "remotely" without physical contact has a different risk profile and usually a higher degree of traceability in bank traces.
However, the practical question remains how it will be technically possible to distinguish that a particular transfer has been entered via a QR code. The banking system itself probably does not distinguish between the method of entry; The QR code only makes it easier to fill out the order. In practice, therefore, the distinction could be made more through an on-site inspection – for example, by finding out that the merchant offers QR payment as a common payment method.
In addition, the constitutional dimension hangs over the entire area. In the past, it has been stated that if the state has the opportunity to obtain the necessary information in another way, entrepreneurs cannot be burdened with a duplicate obligation. Therefore, it cannot be ruled out that the scope of card or QR payment records will again be subject to judicial review and the resulting form of the system may still change.
However, it should be remembered that the fine can reach up to CZK 500,000, which can be a significant intervention for smaller entrepreneurs. Compared to the closure of the establishment, this is a milder solution, but it will still be important to monitor how the sanction policy will be set up and applied in practice.
From the point of view of tax law, tipping is the employee's income in connection with the performance of work, and therefore taxable income. However, if it is handed over in cash directly to the employee, the formal setting of duties is difficult to apply in practice and has been in a certain gray area for a long time.
The situation is different with non-cash tips sent to the employer's account. If it is subsequently paid to an employee, it is subject to levies and a tax burden, which significantly reduces its net worth. This partly explains the preference for cash tips on the part of businesses, while customers are increasingly not carrying cash.
The proposed amendment seeks to clarify this area, but only for selected categories of services. This can lead to unequal access between different professions – for example, between catering and other personal services. Such a selective solution can raise new interpretative questions without systematically eliminating all existing problems.
From a macroeconomic point of view, a decisive part of tax revenues is generated by large entities. A significant systematic non-declaration of cash sales cannot be realistically expected for them. For smaller firms, there may be some "equalization" of part of the revenues, but the overall fiscal impact is unlikely to be significant.
The importance of EET 2.0 may thus lie more in the cultivation of the business environment and in the comparison of conditions between cash and non-cash payments. A side effect may also be a wider acceptance of card or QR payments, which has long been welcomed by customers.
The state already has an extensive amount of data from other control mechanisms. The key question therefore remains whether the new system will bring measurably higher tax collection, or whether its main benefit lies in the preventive and cultivation effect.
From the point of view of practice, the second option seems more likely. EET 2.0 can contribute to the comparison of market conditions and to greater transparency where the cash economy has so far prevailed. However, its real impact will depend not only on the setting of the rules, but also on their practical enforcement and possible assessment by the Constitutional Court.
In the previous article, we introduced you to the essential parts of the paragraph wording of the Act. Below, we offer a view of the areas that will be key in practice and will certainly be the subject of professional and public discussion in the coming months.
Where does the grey area really arise and can the new regime effectively "illuminate" it?
Traditionally, space for the grey economy arises where a significant part of sales is made up of cash payments. This is where it is easiest not to declare part of the income, and this is where the proposal is focused.Naturally, the discussion also touches on the simplified EET OFF regime intended for entrepreneurs with incomes of up to CZK 1 million. The question arises whether there will be room for some entrepreneurs to move "below the limit".
From a practical point of view, however, a massive use of this regime does not seem likely. The incentive to pay a higher lump sum tax in exchange for the possibility of not recording sales is rather limited, especially if a free state application and a one-off tax credit are to be available as a motivational element for joining the system.
At the same time, it is necessary to add that a significant fiscal effect cannot be expected for small entrepreneurs. With low incomes – from which expenses must be deducted – there is relatively little room for taxable profit. Although each limit setting theoretically allows you to work with the limit, here its amount is so low that any optimizations would probably not have a major systemic impact.
Are QR payments really a different category than regular transfers between accounts?
The proposal distinguishes between payments via QR code at the establishment and regular online transfers from account to account. Technically, in both cases, it is a bank transfer – the QR code only pre-fills the payment details.From the perspective of tax administration, however, the difference is in the context of the transaction. QR payment is typically an on-site payment, similar to cash or card payment in an establishment. On the other hand, a transfer made "remotely" without physical contact has a different risk profile and usually a higher degree of traceability in bank traces.
However, the practical question remains how it will be technically possible to distinguish that a particular transfer has been entered via a QR code. The banking system itself probably does not distinguish between the method of entry; The QR code only makes it easier to fill out the order. In practice, therefore, the distinction could be made more through an on-site inspection – for example, by finding out that the merchant offers QR payment as a common payment method.
In addition, the constitutional dimension hangs over the entire area. In the past, it has been stated that if the state has the opportunity to obtain the necessary information in another way, entrepreneurs cannot be burdened with a duplicate obligation. Therefore, it cannot be ruled out that the scope of card or QR payment records will again be subject to judicial review and the resulting form of the system may still change.
Are the proposed sanctions proportionate?
The new regulation no longer provides for the possibility of closing the establishment or suspending the performance of activities. This shift can be seen as a step towards greater proportionality of sanctions. Harsh interventions are to be replaced by standard fines.However, it should be remembered that the fine can reach up to CZK 500,000, which can be a significant intervention for smaller entrepreneurs. Compared to the closure of the establishment, this is a milder solution, but it will still be important to monitor how the sanction policy will be set up and applied in practice.
Will the new definition of tipping bring more certainty or new inequalities?
The issue of tipping is one of the most sensitive points of the proposal. Not much is likely to change for customers – tipping will remain voluntary. However, it may be important for businesses to define the rules more precisely, especially for non-cash payments.From the point of view of tax law, tipping is the employee's income in connection with the performance of work, and therefore taxable income. However, if it is handed over in cash directly to the employee, the formal setting of duties is difficult to apply in practice and has been in a certain gray area for a long time.
The situation is different with non-cash tips sent to the employer's account. If it is subsequently paid to an employee, it is subject to levies and a tax burden, which significantly reduces its net worth. This partly explains the preference for cash tips on the part of businesses, while customers are increasingly not carrying cash.
The proposed amendment seeks to clarify this area, but only for selected categories of services. This can lead to unequal access between different professions – for example, between catering and other personal services. Such a selective solution can raise new interpretative questions without systematically eliminating all existing problems.
Do the expected revenues to the state budget correspond to reality?
The assessment of the fiscal benefit must take into account not only the potential increase in tax collection, but also the related expenditure and relief associated with the proposal. After accounting for them, the net effect can be significantly lower than what is publicly presented.From a macroeconomic point of view, a decisive part of tax revenues is generated by large entities. A significant systematic non-declaration of cash sales cannot be realistically expected for them. For smaller firms, there may be some "equalization" of part of the revenues, but the overall fiscal impact is unlikely to be significant.
The importance of EET 2.0 may thus lie more in the cultivation of the business environment and in the comparison of conditions between cash and non-cash payments. A side effect may also be a wider acceptance of card or QR payments, which has long been welcomed by customers.
Is EET 2.0 a tool for higher tax collection, or rather a signal towards transparency?
The new form of the system takes into account some of the shortcomings of the original regulation. Nevertheless, it cannot be ruled out that the final form will again be co-determined by judicial review.The state already has an extensive amount of data from other control mechanisms. The key question therefore remains whether the new system will bring measurably higher tax collection, or whether its main benefit lies in the preventive and cultivation effect.
From the point of view of practice, the second option seems more likely. EET 2.0 can contribute to the comparison of market conditions and to greater transparency where the cash economy has so far prevailed. However, its real impact will depend not only on the setting of the rules, but also on their practical enforcement and possible assessment by the Constitutional Court.