Electronic registration of sales is a system of online communication between entrepreneurs and financial authority established in the Czech Republic by Act No. 112/2016 Coll., on Registration of Sales, as amended ("Act").
Why was it introduced?
Long-term and systematic fiscal evasion had become common practice in certain areas of business in the Czech Republic. According to the data of the Czech statistical office, unrecognized income reached approximately CZK 170 billion each year.
Financial authority did not have all the means necessary to efficiently and effectively control all fiscal entities which resulted in above mentioned fiscal evasion. That was the main reason behind the introduction of the new modern electronic system of sales registration. From now on, entities are obliged to register their sales that come from their business activities and are simultaneously paid by any means.
Apart from the prevention of fiscal evasion and guaranteeing the tax revenue of the state, the electronic sales registration helps to restore fair competition among businesses. Moreover, business entities would not be burdened with random tax controls, and overall tax administration related to such controls would be reduced.
Who is obliged to use the electronic registration of sales and since when?
The electronic registration of sales is aimed at all entities that pay or are obliged to pay income tax in the Czech Republic. That means all individual entrepreneurs as well as legal entities with business activities.
The obligation is being imposed on entities in four phases, each of them targeting different groups of obligors. The first group of entrepreneurs affected by the registration of sales was comprised of accommodation and food services providers, and started on 1 December 2016. The second phase targeted retail trade and wholesale since 1 March 2017. The obligation for the third phase has been in force since 1 March 2018, and impacts on other professions (except those in the fourth phase), such as freelance professionals, transport and agriculture providers. On 1 June 2018, the fourth phase should be in force and thus, the electronic registration of sales should be applicable to all entrepreneurs defined in the Act. The fourth phase's entrepreneurs include selected crafts and manufacturing activities providers.
What sales have to be registered?
Entrepreuners are obliged to register sales that come from their business activities and are paid in cash, by credit card, cheque, promissory note or other similar means such as a meal ticket.
Direct bank account transfers are exempt from the registration of sales.
How does the electronic registration of sales work?
The basic concept of the electronic registration of sales is the registration of every transaction through the web application of the financial authority, after which the customer receives a receipt with the unique code from the entrepreneur.
The registration begins at the moment when the entrepreneur sends an XML data message about the transaction to the financial authority. This financial authority sends back confirmation of receipt with a unique code in the format of FIK (i.e. fiscal identification code). After that, the entrepreneur issues a receipt including FIK and provides it to the customer. The customer receives his receipt.
The customer may verify his or her receipt through the web application of the financial authority using the FIK. The entrepreneur may verify his or her sales through the same web application using his or her name.
Receipt Lottery for the customers
An additional instrument to the electronic registration of sales is the Receipt Lottery intended for customers, which started on 1 October 2017. The main purpose of this instrument is to support the effectivity of sales registration and proper tax revenue.
Participation in the Receipt Lottery is free of charge. Everybody who registers his or her valid receipt through the designated web page or mobile app takes part in monthly draw. The number of registered receipts is not limited, thus the more receipts a customer registers, the higher possibility he or she has of winning. The draw is every 15 days in the following month after the registration. Distributed winnings reach approximately CZK 5.4 million each month.