On 4 June 2015 the Czech Government proposed draft No. 513 on electronic evidence of revenue to the Parliament (the “Bill”). Under the Bill, businesses’ cash revenue shall be registered at the time of payment in the central data storage of the Financial administration body. After registration, a unique code shall be generated and sent back to the entrepreneur to be printed on the receipt. Direct debit payments are excluded from such registration.

If the Bill passes in its current form, it will impose a duty on every seller or service provider to buy electronic cash registers, connect to a cash register network and send information about each transaction to the respective local Financial administration body. The obligation to evidence revenue is imposed on all income tax paying legal entities that generate cash revenues while carrying out their business activities, as well as on natural persons who are entrepreneurs accepting cash payments. On the other hand, artisans who do not have their own commercial premises shall not be obliged to register cash revenues.

As compensation, an amount of CZK 5000 would be provided to businesses and the rate of VAT for restaurant food would be reduced from 21% to 15%. The Bill, inspired by the Croatian system, should come into force by February 2016.

Expectations

The Bill should reduce tax evasion significantly and strengthen the relative position of above-board businesses in the market. The estimated number of businesses which would be affected by revenue registration requirements is 600,000. The Czech government expects to raise approximately 12 billion CZK from the services sector which may enable it to avoid raising tax rates in future.

Criticism and opposition

The Bill has been criticised by legal experts as ambiguous and lacking basic knowledge about doing business. Moreover, entrepreneurs fear the Bill will force them to fund the entire system as well as possible malfunctions of electronic cash registers which could result in merchants’ inability to carry on their business. Czech “right wing” parties (not currently represented in Government) oppose the proposed solution as well by pointing out possible liquidation consequences for small entrepreneurs due to the costs of new software and equipment. They propose to reform the policy of the state financial administration rather than to impose such obligations on private companies and individual entrepreneurs.