Electronic sales records in the Czech Republic: not the best way to raise tax revenues?

Published on: 06/06/2017
Last update: 17/01/2018

Electronic Records of Sales (EET) is a system that allows the recording of all cash payments for goods and services. Since the end of 2016, the system has been the foundation of communication between businesses and the Financial Administration of the Czech Republic, the government department responsible for managing taxes.

According to a statement by the Financial Administration, “long-term and systematic tax evasion in some areas of business has become almost commonplace in the Czech Republic. According to the Czech Statistical Office, unreported revenues amount to about CZK 170 billion (EUR 6.4 billion) per year, which is more than twice the deficit of the state budget. ... It was therefore necessary to come up with new, yet proven, modern instruments to prevent tax evasion and provide the Financial Administration with adequate tools to effectively obtain information on whether or not taxpayers correctly report their cash sales and do not act at the expense of other business owners.”

Policy Context

The February 2014 Program Statement of the Czech Government introduced provisions on effective retail sales control. The Ministry of Finance, inspired mainly by a revenue-control model used in Croatia, subsequently started to prepare an electronic revenue-record system, with January 1, 2016 as the target launch date. The main role in promoting this system was adopted by the Minister of Finance, Andrej Babiš, whose entrepreneurial empire has made him one of the richest citizens of the Czech Republic. The minister himself had been suspected of abusing his power and position during his entire time in office, though this had no bearing on the introduction of the sales record system.

Description of target users and groups

The system will in due course be mandatory for all business entities who pay tax, as well as for some non-profit organisations. It primarily benefits the Financial Administration, to which it provides a huge amount of detailed information about the Czech business environment.

Providers of hospitality, catering and accommodation services, wholesalers and retailers who receive cash, card payments, checks, bills of exchange or equivalent, including on-line sales, are all required to record their revenues using the system. The system is being introduced gradually, in four phases:

  • •The first phase, which has been running since December 1, 2016, covered catering and accommodation services and hospitality providers.

  • •In the second phase, which began on March 1, 2017, wholesalers and retailers joined the system.

  • •The third phase, starting on March 1, 2018, will include professions such as doctors, lawyers and accountants; transport and agriculture; food and beverage production and other manufacturing activities; and organisers of sports and cultural events.

  • •The fourth and last phase, beginning on June 1, 2018, will include selected crafts and production activities.

Other businesses that have been indirectly affected by the EET include telecommunications operators and software producers. The new system has generated demand for cash registers, other hardware, and software. This in turn has led to fierce competition, with rapid market dominance by the largest companies, notably O2. Every business has had to invest at least several thousand crowns in electronic devices, software, and training for new systems to monitor their business.

To a certain extent, the law also applies to non-profit organizations, such as amateur sports clubs and various semi-formal civic groups. Every farmers’ market or village dance must now record payments if sales are more than CZK 300,000 (EUR 11,000) a year.

Description of the way to implement the initiative

To register its revenues electronically, each organisation must choose a device that matches its business model. Most businesses use a cash register, but a computer, tablet or even a mobile phone connected to a printer can also serve. The device must be technically capable of sending the required sales data to the tax portal via the Internet and issuing a receipt for the customer. The law does not prescribe the use of any particular device: cash registers, for example. do not need to be specially certified.

To offset the cost of adapting to the EET, a business can apply for a tax allowance of CZK 5,000.

To start the revenue tracking process, each business must register with its tax office – either electronically or in person – to gain access to the Financial Administration server. Subsequent access to the EET is via a portal, through which the business generates access certificates for uploading to individual applications.

The data can be sent in real time or in batches. In the standard online mode, a connection to the Financial Administration takes place at the time of payment. Within two seconds the Financial Administration sends the merchant a fiscal identification code (FIK), which is printed on the customer receipt. This is handed over to the customer by the vendor. The receipt has mandatory elements, the absence of which is subject to fines.

A simplified EET mode allows offline reporting.

In this case the necessary data is sent to the Financial Administration server, via a data message, within five business days of the sale. The business gives the customer a receipt that lacks the FIK code from the Financial Administration, but must instead include a signature code that is unique to that transaction.

Technology solution

Technology choice: Proprietary technology

Main results, benefits and impacts

According to the Financial Administration, the main impact of introducing electronic sales records is expected to be an improved environment for entrepreneurs, especially the elimination of unequal conditions that hinder competition. The resulting level playing field will allow the VAT rate for catering services to be reduced from 21% to 15%, and honest entrepreneurs should no longer be burdened by random tax audits. Entrepreneurs can use the data collected by the system to obtain a better overview of their inputs and outputs, and to detect fraud by employees. In turn, the new legislation protects employees by making sure that they are paid according to the law.


Critics, however, argue that the EET will have no measurable benefits. They believe the amount of tax collected will not increase significantly, and that the increased administrative burden will cause some small businesses to close, increasing unemployment. In addition, they say the new system increases government control over society and creates unfair business benefits for banks, credit card providers and mobile operators. These companies do not have to use the new system, while their service levels and prices are already widely criticised by the public.

Return on investment

The government expects the EET to provide more efficient financial management, more effective targeting of tax audits, a reduced burden for entrepreneurs, and faster and more accurate responses to fraud.

The new system should also improve tax collection, leading to a reduction in the state budget deficit. It is assumed that in just five years, from the first two sectors alone (hospitality, accommodation services, and trade), the state will collect up to CZK 60 billion (CZK 12 billion per year) more than under the previous system.

According to Czech Television, however, experience in Croatia suggests a different outcome. Croatia has used an EET system since 2013, and individual entrepreneurs have indeed started to pay more money in taxes – but the overall amount of VAT collected remained roughly the same (HRK 40 billion). Electronic records of sales have therefore not brought any significant income to the Croatian treasury.

Only time will show whether the introduction of the EET in the Czech Republic will really benefit the country. Until then, however, we can be concerned about the risk of leakage and misuse of sensitive data and business secrets, and of reduced competition.

According to Specifications of the Electronic Records of Sales Project study from 2016, the total cost of introducing the EET will be CZK 391 million.

Lessons learnt












Scope: National


Type of document
General case study