News for Importers and Exporters

13 October 2009

Taxation and customs authorities in the Czech Republic are currently reconsidering their approach to VAT and EORI registration in respect of branches of foreign companies. Below we set out the impacts of these changes on branches that import and export goods.

Change in the VAT Registration of Branches of foreign companies

Taxation authorities in the Czech Republic are replacing previously issued certificates for VAT registration of branches of foreign companies with new certificates in which the business name and registered office of the foreign entity, the founder, rather than the branch, is listed. This step is a logical result of the fact that a branch is not a standalone legal entity, but is a part of a business entity, namely the foreign company. When the foreign company registers for VAT in the Czech Republic, the branches that were formed by that company will also be registered. A foreign company and its branches shall use the same tax identification number (Tax ID).

Cancellation of EORI Registration of Branches of foreign companies

As with VAT registration, customs authorities are also currently reviewing the EORI register with the aim of cancelling EORI numbers issued to branches of foreign entities. To prevent confusion in customs proceedings, all relevant branches of foreign companies will first receive individual announcements about the planned cancellation of the EORI number. The date from which the change will be applicable will be determined upon mutual agreement.

Subsequently, the branch will use the EORI number of its founder in its communication with customs authorities. If the founder is a company registered in a different EU country, its Czech branch will use the EORI number issued by the customs authorities in the EU member state of its founder instead of the EORI number issued in the Czech Republic.

Practical Impacts in Customs Proceedings

Problems may arise during customs proceedings when branches of foreign companies are authorised to act independently, ie the names, addresses and EORI numbers of organisational branches are currently indicated in import and export customs declarations as declarants, consignees or consignors of the goods.

As soon as the current EORI numbers of branches of foreign companies are cancelled, the only change will be that the EORI number of the founder will be used. The name and contact details of the Czech branch will remain unchanged.

The pertinent fact is that the EORI register is used in import customs proceedings to decide whether the importer is a VAT payer in the Czech Republic and, therefore, whether it will self-assess the import VAT or whether it will be assessed by the customs authorities. If the information about the registration of the company for Czech VAT is missing in the EORI register, the Czech customs authority should assess import VAT for the branch of foreign companies.

To prevent such situations from occurring, it is necessary that the founder of the branch includes information in the EORI register that confirms it is registered for VAT in the Czech Republic. This information may be entered only through customs authorities in the country in which the founder was assigned the EORI number. For example, if the EORI number starts with “GB”, it was allocated in Great Britain and the registration for Czech VAT must be announced and recorded in the EORI register at the relevant British customs authority.

What does this mean for you?

• If you are a branch of a foreign company, the Czech EORI number allocated to you will soon be cancelled. Please agree with the customs authority on the date as of which the number can be cancelled.
• After the EORI number is cancelled, use the EORI number of the founder in customs proceedings, but continue to use the name and contact details of the Czech branch.
• Ask the founder to ensure that information indicating that the founder (and consequently also its branch) is registered for VAT in the Czech Republic is entered in the EORI register. The registration for VAT will need to be proved to the customs authority that issued the EORI number for the founder. If the Czech tax ID is not recorded in the EORI register, the Czech customs authorities will assess import VAT for goods imported into the Czech Republic.

If these issues relate to your company, we would be happy to provide you with more detailed information. Do not hesitate and contact us.

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