Novela zákona o dani z pridanej hodnoty

We would like to inform you that on 24 April 2024 the National Council of the Slovak Republic adopted an amendment (“the Amendment”) to Act No. 222/2004 on Value Added Tax (“the VAT Act”).

The approved wording introduces several changes compared to the original proposal, which we analyzed in our article available at this link. The key change is postponement of the effective date for most of the proposed changes until 2025.

Below is a summary of the main changes brought about by this newly adopted VAT legislation.

Special scheme for small enterprises

Following transposition of the Small Enterprises Directive, a new system of VAT exemption within the EU for both domestic and foreign small enterprises will become effective from 1 January 2025.

Foreign taxable persons may benefit from this system if they meet all the following conditions:

• Their annual turnover in Slovakia in the current calendar year does not exceed EUR 62,500 and did not exceed EUR 50,000 in the previous year
• Their annual turnover in the EU did not exceed EUR 100,000
•  They are assigned a VAT identification number with the suffix “EX” in the Member State of establishment. They will be informed of the Slovak version of this number.

If so, foreign taxable persons will be able to supply VAT exempt goods and services in Slovakia without the obligation to register.

A similar regime will also apply to domestic taxable persons operating abroad if they meet all the following conditions:

• Their annual turnover in the EU does not exceed EUR 100,000
• Their local annual turnover in the Member State in which they wish to apply the special scheme is below the set threshold
• They apply for a VAT identification number with the suffix “EX” in Slovakia (and indicate the Member States in which they wish to apply the scheme).

Domestic taxable persons meeting these conditions will be able to supply VAT exempt goods and services without the obligation to register in the Member States notified to them.

VAT registration of domestic taxable persons

Effective from 1 January 2025, the Amendment modifies both the period over which turnover is calculated and the turnover threshold for mandatory registration of domestic taxable persons.

The Amendment introduces two turnover thresholds and if these are exceeded, a taxable person will be obliged to register for VAT:

• If their turnover exceeds EUR 50,000 per calendar year, a taxable person will become a VAT payer from the first day of the year following the calendar year in which the turnover was exceeded.
• If their turnover exceeds EUR 62,500 per calendar year, a taxable person will become a VAT payer on the day on which the turnover was exceeded.  

Simultaneously, the Amendment brings changes to the VAT registration process. Notably, it shortens the deadline for filing a VAT registration to five days. Additionally, a taxable person becomes a VAT payer from the day when the event triggering the VAT registration obligation occurs (previously, they became a VAT payer based on a decision issued by the tax authority).

The conditions of voluntary registration remain unchanged.

VAT registration of foreign taxable persons

Effective from 1 January 2025, the provisions regulating the VAT registration of foreign taxable persons will also undergo changes. A foreign person will become a VAT payer by carrying out a taxable transaction which is subject to VAT and obliges the person to register for VAT. Currently, a foreign taxable person becomes a VAT payer based on a decision issued by the tax authority.

Also in this case, the registration process has changed. Among other things, a deadline of five days has been added, by which a foreign person is obliged to submit an application for a VAT registration. Furthermore, a deadline of 10 days has been added for the tax authority by which the tax authority must register the taxpayer and assign them a VAT number. Additionally, a foreign person can apply to cancel their VAT registration at the earliest after the lapse of one calendar year from the day on which they became a VAT payer.

Late VAT registration

With effect from 1 January 2025, the provision of the VAT Act regulating late VAT registration changes fundamentally.

If the taxpayer has not fulfilled their VAT registration obligation according to Article 4 or Article 5 of the VAT Act or has submitted this application late, they are obliged to submit delayed VAT returns and VAT ledgers. All these documents need to be submitted in chronological order, beginning with the first period for which they did not submit them, due to failure to fulfill VAT registration obligations within the statutory deadline.

The current legislation allowed taxable persons to submit one “historical” tax return in which they reported all these transactions.

This change will significantly increase the administrative burden on taxable entities which register late for VAT. Moreover, late filing of VAT returns is subject to penalties.  

Leasing

There is a change to the VAT treatment of leasing contracts that include a negotiated option to purchase the goods provided to the lessee. This applies to contracts, where, at the time of their conclusion, the use of the purchase option is the lessee’s only economically rational choice. Such a delivery will no longer be considered a delivery of service, where VAT was applied on individual instalments throughout the lease period. It will now be considered a delivery of goods on which VAT needs to be paid on the entire lease value at the beginning of the contract when the goods are handed over to the lessee.

This change will mainly affect leasing companies. Therefore, we recommend that you thoroughly analyze current contract terms and conditions.

The change to the current VAT treatment of handover of goods under a leasing (or similar) contract with a negotiated option to purchase should be applicable to contracts concluded from 1 January 2025.

Reverse charge on imports

The Amendment introduces the option to apply a reverse charge on imports of goods from third countries to Slovakia. In practice, this mechanism will eliminate the obligation to pay import VAT for selected entities. You can read more about this topic in our alert: Legislative proposal introducing reverse-charge mechanism on import VAT (ey.com)

A reverse charge on imports can be applied when both the following conditions are met:

• The entrepreneur (or declarant acting as an indirect representative) must be a registered VAT payer
• They must have a valid status as an Approved Economic Operator in Slovakia according to customs regulations (AEO license).

The effective date of this mechanism has been postponed to 2025 and 2026. With effect from 1 July 2025, a taxable person established in Slovakia, on whose account a customs declaration is made and who meets the stipulated conditions, will be able to apply a reverse charge mechanism on imports of goods. Accordingly, the taxable person will be able to apply the reverse charge mechanism for the first time to imports of goods for which a tax liability arises after 30 June 2025. For taxpayers on whose account a customs declaration is made under the centralized customs procedure, the reverse charge mechanism will come into effect no earlier than 1 January 2026.  

VAT deduction based on a document other than an invoice

Effective from 1 January 2025, the Amendment introduces the possibility of VAT deduction on intra-community acquisition of goods from another EU Member State also based on an alternative document, if an invoice is not available. However, the VAT payer’s alternative documents must prove both the actual acquisition of goods and the corresponding tax liability.

Other changes

Effective from 2024:  

• Domestic providers of payment services – the Amendment introduces the obligation for domestic providers of payment services to make available to the Financial Directorate of the SR all records which they are obliged to keep. Providers are obliged to make these records available upon request by the tax authority if they have not been made available within the specified time period, or if they are found to be incomplete or incorrect. Non-compliance with this obligation will be treated as an administrative offence under the Tax Procedural Code. This obligation becomes effective from the date the Amendment to the VAT Act is enacted.
• Reduced VAT rate – to remove the difficulties that the current wording of the provision caused in practical application, the conditions for applying a reduced VAT rate to supplies made by registered social enterprises will be modified effective from 1 July 2024.
• Services provided to members (cost-sharing) – effective from 1 July 2024, the application of VAT exemption provided by a legal entity will be narrowed only to cases where all members of this legal entity exclusively carry out VAT-exempt services due to public interest or an activity which is not exempt from tax. This change will predominantly affect the financial sector, which benefited from this exemption.

Effective from 1 January 2025:

• An additional five-day period – if the VAT payer does not have a VAT number assigned by the deadline of fulfilling certain VAT obligations (issuing an invoice, submitting a VAT return, submitting a VAT ledger), they have an additional five-day period from the date when the official VAT registration decision is delivered to them, to fulfill these obligations.
• Unpaid liabilities – it is specified that the obligation to return VAT for unpaid liabilities arises in the tax period in which the 101^st day after the due date occurs.
• Change in the place of supply of services – the rules for determining the place of supply of specific services delivered to a non-taxable person (cultural, artistic, sports, scientific, educational, entertainment and other similar services are changed, if these are made available online or otherwise virtually.
• Simplified invoices – the level at which a document issued by an electronic cash register is considered a simplified invoice is reduced from EUR 1,000 or EUR 1,600 to EUR 400.
• Theft – the obligation to return deducted VAT in case of theft is extended to any illegal removal of goods.

Other legislative news

Other legislative updates in Slovakia include approvals of laws that amend the VAT Act, such as Lex Consolidation and the Act on the Transformation of Business Companies.

Increase in the tax rate

Within the framework of the approved draft to improve the state of public finances, the so-called Lex Consolidation, the scope of the reduced tax rate for provision of restaurant and catering services has been narrowed. Effective from 1 January 2024, beverages with an alcohol content over 0.5% by volume served in restaurants and catering establishments will no longer be eligible for the 10% reduced tax rate. Instead, these beverages will be subject to the standard tax rate of 20%.

New option for the transformation of business companies

Effective from 1 March 2024, Act No. 309/2024 Coll. on the Transformation of Business Companies will introduce a new option for the transformation of business companies in Slovak law, termed “division by spin-off”. A spin-off is a procedure in which the company being divided is not dissolved and part of the company’s capital, specified in the transformation project, is transferred either to an existing company, a newly established one, or a combination of both. According to the Amendment to the VAT Act, a taxable person to whom tangible and intangible assets divided by spin-off or cross-border spin-off are transferred in the Slovak Republic also becomes a VAT payer

Should you wish to learn more about the above-mentioned topics or discuss their impact on your business, please do not hesitate to contact us.