The General Financial Directorate (GFD)—responding to frequent inquiries regarding the value added tax (VAT) treatment on the purchase and sale of electronic communication services—clarified that application of a different regime before the effective date of an appendix would not be challenged if the regime has been applied in good faith and in mutual agreement of both parties.
The first part of the appendix specifies the conditions that must be met to apply the reverse-charge mechanism. The second part describes specific examples. Apart from a basic condition under which both the service provider and the service recipient must be VAT-payers, the appendix points out that both parties to a transaction must also operate in the electronic communication sector. For these purposes, a business entity is an entity that purchases services with the intention of subsequently selling them for profit (no matter whether it succeeds). An increase of the price by potentially necessary administrative costs associated with the re-sale is not considered an intention to generate profit.
Read a March 2017 report prepared by the KPMG member firm in the Czech Republic