VAT news and changes

Indirect Tax Alert, October 2016, Issue 5

The current Indirect Tax Alert contains information on important upcoming changes to control statement reporting and activation of electronic mailboxes for legal entities for electronic communication with Slovak public authorities. Please also note the recent judgments of European Court of Justice No C-516/14 Barlis 06 – Investimentos Imobiliários e Turísticos SA on the content of invoices and case No C-518/14 Senatex GmbH related to the retrospective correction of invoices in relation to the right to deduct VAT.

Changes to the control statement

Following an amendment to the Slovak VAT Act with effect from 1. January 2017, information on the supply of construction work must be reported in a control statement by the suppliers even if such supplies are not reported in a VAT return. Customers only currently report received invoices for construction work. The respective invoices must be reported by the suppliers in section A.2. of the control statement. Therefore, a change to the comments and text related to table A.2. of the control statement is required. The structure of the control statement remains unchanged.

Content of invoices for services

The European Court of Justice (“ECJ”) in case C‑516/14 (Barlis 06 – Investimentos Imobiliários e Turísticos SA) dealt with the question of whether the right to deduct VAT can be rejected if an invoice does not contain an accurate description of the supplied service and the period during which the service was supplied. Based on a decision of the ECJ, invoices stating only “legal services provided to date” do not fulfil the formal requirements of invoices based on the VAT rules, as they do not specify the nature and period of the services in question. However, local tax authorities should take into account the substantive conditions of the right to deduct VAT, and additional documentation unambiguously related to an invoice, which documents the supply of service. If these conditions are fulfilled, the right to deduct VAT may not be refused. However, member states have the right to impose sanctions due to the incompleteness of the formal requirements on an invoice, which were not fulfilled in this case.

Retroactive effect of revised invoices on VAT deduction

In case C-518/14 Senatex GmbH, a taxpayer added a missing VAT identification number of a supplier on input invoices after a number of years, following a tax inspection during which it was found that this VAT identification number was missing. The respective local tax authorities rejected the VAT deduction on the grounds that the conditions for VAT deduction were only met in the VAT period in which the correction invoices were issued, but not at the time of supply. However, the ECJ does not share the view of the local tax authorities and admitted the retroactive effect of revised invoices. According to this judgment, the right to deduct VAT may not be refused if the substantive conditions for the right to deduct VAT are met. In addition, adding missing VAT identification number by issuing revised documents (invoices) that clearly relate to the original invoices means that the initial VAT deduction was valid.

Electronic mailboxes according to the Act on e-Government

In relation to Act No. 305/2013 Coll. on the electronic performance of tasks by public authorities (“Act on e-Government”) [in Slovak: Zákon č. 305/2013 Z. z. o elektronickej podobe výkonu pôsobnosti orgánov verejnej moci], electronic communication via electronic mailboxes is being introduced. Electronic mailboxes will be used for web communication between citizens and public authorities (e.g. the delivery of documents or payments). The main goal is effective, administratively simpler and faster communication with public authorities. Communication via electronic mailboxes will not initially include communication with the Financial Administration. Communication with the Financial Administration will continue via its web portal, which has been in use since 2014.

Electronic mailboxes are activated by the Ministry of the Government of the Slovak Republic in cooperation with the National Agency for Network and Electronic Services. Mailboxes will be set up for individuals, individuals - entrepreneurs, legal entities, public authorities and subjects of international law.

From 1 August 2016, electronic mailboxes will be mandatorily activated (activation by law) for legal entities registered in the Business Register of the Slovak Republic with a seat in Slovakia and registered branches (e.g. branch of a foreign entity). As activation is mandatory and automatic, no activity from the owner’s side is required. The activation process is completed by the first login to the electronic mailbox of an authorized person prior to 1 January 2017. This means that if the authorized person does not login by the end of the year 2016, the mailbox will be automatically activated on 1 January 2017. Users can then set up a notification (e-mail or SMS) in their mailboxes upon delivery of received document.

After the mailbox is activated, electronic documents will be delivered to electronic mailboxes according to the Act on e-Government, i.e. public authorities can deliver to such active mailboxes announcements, decisions of authorities, the business register or courts, etc. As electronic delivery has the same legal effect as delivery in paper form and the Act on e-Government also sets deadlines for such deliveries, we recommend you verify your obligations in this respect.

To obtain full access to electronic mailboxes foreign nationals who are statutory representatives will need to authorize a Slovak citizen with a Slovak ID card with an electronic chip as statutory representatives cannot obtain a Slovak ID card with a chip, as its issue is dependent on Slovak citizenship. Foreign statutory representatives with proof of residency in Slovakia who request an electronic chip, must send a request for the establishment of an electronic mailbox to a natural person who is not a citizen of Slovak Republic, to obtain access to their mailboxes.