Foreign Online Shops for Czech Consumers: Mainly with Regard to Requirements for Online Shops Exclusively Operated from Abroad

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Foreign Online Shops for Czech Consumers: Mainly with Regard to Requirements for Online Shops Exclusively Operated from Abroad

By Gabriela Hájková[*]

Introduction


More and more Czech consumers are attracted by online shops, including foreign ones. What requirements for operating online shops must be met and what rules apply to online shops which offer services exclusively from abroad but are not present in the Czech Republic?  

 

Unlike the majority of articles on online shops which are mainly focused on the protection of consumers in connection with goods and services purchased online, this article deals with the requirements and duties of operators of online shops, mainly operators who are not Czech entities but foreign entities or entities established in another Member State of the European Union.

Online shop as unqualified trade

Under Enclosure No. 4 to Act No. 455/1991 Sb., on Trade Licensing operating of online shops is an unqualified trade classified under branch of activities No. 48 “Wholesale and Retail”. In general, businesspersons who intend to operate an online shop must meet the basic conditions for operating a trade under the Trade Licensing Act. 

 

Foreign businesspersons who want to do business and render services in the Czech Republic must meet the conditions stipulated by the Trade Licensing Act and notify the trade. Foreign legal entities must relocate their registered office or at least establish a branch in the Czech Republic and subsequently notify the trade and register the branch in the Commercial Register.

What conditions must be fulfilled by foreign businesspersons who intend to offer online goods and services to Czech consumers exclusively from abroad, without any presence in the Czech Republic? As responses to this question differ significantly, in this article we aim to clarify the issue at hand.

 

Directives on electronic commerce

 

The operating of online shops is mainly regulated by Directive 200/31/EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market[1]. Under paragraph 18 of the Preamble of this Directive “information society services span a wide range of economic activities which take place on-line; these activities can, in particular, consist of selling goods on-line. Consequently, the operating of online shops is an information society service and as such it is subject to the Directive[2].

 

Though under Article 3 of the Directive designated “Internal Market” all Member States are to ensure that information society services provided by a service provider established on its territory comply with national provisions applicable in the Member State in question which fall within the coordinated field, another paragraph of this Article also stipulates that Member States may not restrict the freedom to provide information society services from another Member State. Consequently, information society service providers[3] must comply with the local regulations applicable to the respective coordinated field, and simultaneously the freedom to provide information society services which are rendered by providers from other Member States may not be restricted.

 

Exceptions to when restrictions are possible are stated in Article 3, paragraph 4 of the Directive. Member States may take necessary measures to maintain public order, protect public health, public security and to protect consumers and investors.

 

The principle excluding prior authorisation stipulated in Article 4 of the Directive is quite fundamental in respect of the requirements for the operation of a foreign online shop which offers services exclusively from abroad. Let me cite the first paragraph of this Article: “Member States shall ensure that the taking up and pursuit of the activity of an information society service provider may not be made subject to prior authorisation or any other requirement having equivalent effect.”

 

This principle has been fully transposed to s9(2) of Act No. 480/2004 Sb., on Certain Information Society Services and on Amendment to Certain Legislation (the “Act” or “Act on Certain Information Society Services”) under which paragraph 1 of the same Section does not apply to information society service providers established in another Member State of the European Union which render the services in the Czech Republic unless this Act or special legislation stipulate otherwise.   

 

For the sake of completeness we must say at this point that s9(1) imposes on providers who render their services through a business or a branch in the Czech Republic a duty to observe the Act and special legislation regulating the conditions for commencing and carrying out activities which are the object of the service rendered, mainly legislation regulating the business licence, required expert qualifications, required content and quality of rendered services and liability of the service providers for violation of these duties.

 

Though s9(2) of the Act clearly stipulates that these duties and legislation do not apply to providers established in another Member State of the European Union, s9(3), on the contrary, emphasises the duty of service providers to fulfil duties arising from other legislation to protect public order, public health, public security and consumers.  

 

It clearly arises from the above that the Directive and the Act on Certain Information Society Services, which transposes the Directive, do not impose a duty on information society service providers[4] established in another Member State of the European Union which render services in the Czech Republic to notify the trade and establish a branch in the Czech Republic.  

 

For the sake of completeness, we must note that this applies on the condition that service providers operate an online shop from abroad and are not, in any manner, present in the Czech Republic, including the server which the service providers use to operate the online shop, a warehouse or an outlet where goods may be collected or claimed.

 

Czech legislation

Czech legislation includes a remedy within the meaning of Article 3(4) of the Directive when it stipulates several duties which arise from special legislation regarding the protection of public order, public health, public security and consumers, and that service providers are always bound by them.[5] Consequently, foreign online shop operators established in another Member State who render services in the Czech Republic are obliged to observe many Czech legal regulations, mainly the Act on Protection of Consumers No.  634/1992 Sb., the Act on Protection of Personal Data No. 101/2000 Sb. and other legislation.

 

This other legislation includes mainly Act No. 89/2012 Sb., the Civil Code (the “Civil Code”), in particular provisions on obligations arising from contracts concluded with consumers (ss1810-1867). The duty of businesspersons to conclude a contract with consumers in the official language of the Member State of the European Union where the consumer resides or whose national the consumer is, based on the consumer’s choice, arises from s1860. The requirement for comprehensibility arises from s1811 of the Civil Code. Under this Section, all communication of businesspersons intended for consumers must be clear, comprehensible and in the language of the contract entered into with the consumers.

 

It is obvious from these provisions that all contractual documents, including business terms and conditions and other information or notifications to Czech consumers regarding the offer and sale of goods and services online must be in Czech.

 

The Civil Code includes many other special provisions which concern obligations from contracts concluded away from business premises using means of remote communication (e-commerce), such as the duty of businesspersons to provide consumers before concluding a contract substantial information on the future contract[6], including advice on potential withdrawal from the contract, and other duties whose content and extent is not the focus of this article.

 

What about taxes, mainly VAT?

Businesspersons who operate an online shop, are registered for VAT in another Member State and sell goods to Czech consumers are obliged to register for VAT in the Czech Republic and apply Czech VAT if the sold goods are subject to excise tax or if the total value of supplies exceeds CZK 1,140,000 in a calendar year. Under s8(3) of Act No. 235/2004 Sb., on Value Added Tax, operators of online shops may voluntarily apply for registration for VAT and pay VAT in the Czech Republic before they reach the threshold limit. In such a case, online shop operators are obliged to proceed in this manner until the end of the calendar year immediately following the year in which they made this decision.

 

Conclusion

We may sum up that businesspersons who offer goods and services to Czech consumers in an online shop exclusively operated from another Member State do not have the duty to notify the trade or establish a branch in the Czech Republic on condition that they are established in another Member State where the respective online shop is operated and are not, in any manner, present in the Czech Republic, including the server which the businesspersons use to operate the online shop, a warehouse or an outlet where goods may be collected or claimed. 

 

Foreign businesspersons who operate an online shop in the Czech Republic and offer goods and services to Czech consumers are obliged to observe Czech legal regulations on protection of consumers and personal data and last but not least, to meet conditions for concluding contracts away from business premises. These conditions may be discussed in our next article on electronic commerce.

 


 

[1] Directive on Electronic Commerce, the “Directive”

[2] which also applies to other information society services, such as providing information and online business communication which are services vested in transferring information using a communications network

[3] including online shop operators

[4] including online shop operators

[5] See s9(3) of the Act on Certain Information Society Services

[6] which are listed in s1820 of the Civil Code


 

[*] Gabriela Hájková is a partner and the Leader of Corporate Practice Group in the Prague office of PETERKA & PARTNERS. Gabriela can be contacted at hajkova@peterkapartners.cz.

 

Friday, January 18, 2019
Taxation, Commercial Transactions and Finance / Consumer Transactions, Trade Law / Trade Regulation