Czech Republic’s lower chamber of parliament has passed the bill amending the VAT Law on 30 October 2024, aiming to incorporate the Amending Directive to the VAT Directive (2020/285) concerning the special scheme for small enterprises, among other provisions.

For the bill to take effect, it must be approved by the Senate, signed by the President, and published in the Official Gazette.

Most of the amendments in the bill will become effective on 1 January 2025.

Council Directive 2006/112/EC allows Member States to continue to apply their special schemes to small enterprises in accordance with common provisions and with a view to closer harmonisation. However, those provisions are outdated and do not reduce the compliance burden of small enterprises, as they were designed for a common system of value added tax (VAT) based on taxation in the Member State of origin.

In its action plan on VAT, the Commission announced a comprehensive simplification package for small enterprises which aims to reduce their administrative burden and helps create a fiscal environment to facilitate their growth and the development of cross‐border trade. The simplification package entails a review of the special scheme for small enterprises as outlined in the Communication on the follow‐up to the action plan on VAT. The review of the special scheme for small enterprises therefore constitutes an important element of the reform package set out in the action plan on VAT.

In order to address the issue of the disproportionate compliance burden faced by exempt small enterprises, certain simplification measures should also be available to them.

The special scheme for small enterprises currently only allows for an exemption to be granted to enterprises established in the Member State in which the VAT is due. This has a negative impact on competition in the internal market for enterprises not established in that Member State. To address this and to avoid further distortions, small enterprises established in Member States other than that in which the VAT is due should also be allowed to benefit from the exemption.

Small enterprises may only benefit from the exemption where their annual turnover is below the threshold applied by the Member State in which the VAT is due. In setting their threshold, Member States should abide by the rules on thresholds laid down by Directive 2006/112/EC.