The value added tax rate on beer is changing as of May 1, and what it will be depends on where you drink it.
The confusing rates caused a storm on social media when a company called V4 Group posted a graphic on Facebook showing the different taxes for nine situations. The Czech Finance Ministry says is is a tempest in a teapot as the changes are actually really simple.
“The reduced 10% VAT rate will be applied to draft beer consumed in a restaurant. The basic 21% VAT rate will continue to be applied to packaged beer and draft beer consumed outside of restaurants. Non-alcoholic beverages, including non-alcoholic beer, will continue to be included in the reduced 15% VAT rate, with the exception of beverages served in catering establishments, subject to a 10% VAT rate,” the Finance Ministry stated.
While the Finance Ministry did not dispute the V4 chart, they said it was filled with “extreme examples that do not happen in practice” such as non-alcoholic draft beer tapped into a pitcher (džbán) and taken away from the establishment. This would be taxed at 15% VAT, according to the V4 Group chart.
The seemingly random distinctions did not go unnoticed by critics. “From May 1, a beer at a stand will be subject to a different VAT than a beer in the restaurant, and this will in turn have a different VAT than the beer taken away in a pitcher. However, non-alcoholic beer at a stand has a different VAT than if you had it in a restaurant. I’m sorry, I’m completely confused about the settlement of the business environment,” ODS Deputy Chairman Martin Kupka said on Twitter.
Od 1.5. bude pivo ve stánku zatížené jinou DPH než pivo v restauraci, a to zase bude mít jinou DPH než pivo s sebou do džbánku. Ovšem nealko pivo ve stánku má jinou DPH, než když si ho dáte v restauraci. Omlouvám se, už jsem z toho narovnání podnikatelského prostředí celý zmatený
— Martin Kupka (@makupka) February 4, 2020
The Pirates also don’t see the logic. “For so long the government has been leveling the business environment until tap beer at a restaurant has 10% VAT and at the stand opposite 21%. A team of pros, really,” Pirate member Mikuláš Ferjenčík said.
Other people speculated on ways of saving money, such as buying tap beer at a fast food place and pouring into an empty cup with a lid to take it away, thus saving 11 % on tax.
A film fan referenced the classic Czech movie My Sweet Little Village (Vesničko má středisková), where a character poured beer out of his window. The tax code does not cover that situation, they claim.
The Finance Ministry, though, insists the changes are really minor and dictated by European guidelines. “It can be said that the only change introduced by the Ministry of Finance is a reduction in VAT on the provision of catering services, the sale of soft drinks and draft beer in restaurants, and that is in connection with the remaining EET wave,” the Finance Ministry stated. EET is the Electronic Evidence of Transaction, which requires all sales to be electronically reported to the Finance Ministry.
The distinction between a restaurant and a beer stand has to do with whether they are providing a service or simply delivering goods. “The essence of a restaurant service that has added value must be fulfilled, such as service, seating, air conditioning, toilet use, glass cleaning, washing, and other features typical of restaurant services that elevate them beyond mere ‘delivery’ of goods,” the Finance Ministry said.
“It is precisely and only in the case of restaurant services that the harmonized European legislation makes it possible to apply a reduced VAT rate to the sale of alcoholic beverages. The sale of draft beer in a plastic cup at a stall within a sports or cultural event was, and will continue to be, considered a ‘delivery of goods’ … since such a stall does not predominantly fulfill the restaurant service features,” The Finance Ministry concludes.