Amendment to the VAT Act from 1.1. 2018
21/12/17
Indirect Tax Alert, December 2017, Issue 6
The National Council of the Slovak Republic approved an amendment to the VAT Act on 7 December 2017 that will enter into force on 1 January 2018. We informed you about the changes in the previous Indirect Tax Alerts and we now summarize the approved changes that will have the biggest impact.
Cancellation of the minimum amount of VAT base for application of local reverse-charge for agricultural crops and metals
The amendment revokes the minimum VAT base of EUR 5,000 for shifting VAT liability to a recipient (VAT payer) for agricultural crops and metals and metal semi-finished products.
The takeaways
From 1 January 2018, any local supply of the above goods between two Slovak VAT payers is subject to a local reverse-charge, regardless of the value of the supply. The minimum amount of tax base for the application of the reverse-charge for supplies of mobile phones and integrated circuits will be retained.
This change will have a positive effect, but it may also have a significant impact on administration and the reporting of small-scale sales of agricultural crops to other VAT payers. If by now in case of such sales sellers have been issuing e only cash register documents, from 2018 they will need to modify their cash register system, or issue a regular VAT invoice due to this change.
Zavedenie nového inštitútu daňového zástupcu pri nadobudnutí tovaru z iného členského štátu alebo tretieho štátu.
Zahraničná osoba (neregistrovaná pre DPH), ktorá nadobúda tovar v tuzemsku z iného členského štátu na účel jeho dodania do iného členského štátu alebo účely vývozu do tretej krajiny s oslobodením od dane alebo dodania formou zásielkového predaja s miestom dodania v inom členskom štáte, sa môže dať zastúpiť daňovým zástupcom v tuzemsku, a tak sa vyhnúť DPH registrácii.
Využiť inštitút daňového zástupcu, môže len zahraničná osoba, ktorá nie je registrovaná pre DPH účely v tuzemsku a nedodáva tovar alebo službu, pri ktorej by jej vznikla povinnosť platiť daň v tuzemsku. Zjednodušenie je avšak možné aplikovať len na tovar dodávaný prostredníctvom využitia elektronického komunikačného rozhrania ako je elektronické trhovisko, elektronické platforma, elektronický portál alebo podobný elektronický prostriedok.
Zahraničná spoločnosť, ktorá využije možnosť zastúpenia daňovým zástupcom bude pri dodaní tovaru s miestom dodania v tuzemsku povinná vyhotoviť faktúru podľa slovenského zákona o DPH. Na faktúre bude musieť uvádzať údaje o daňovom zástupcovi. Zahraničné osoby zastupované daňovým zástupcom zároveň budú mať nárok na vrátenie DPH z kúpy tovarov a služieb v tuzemsku prostredníctvom refundácie, po splnení zákonných požiadaviek. Novela tiež zavádza detailnejšie podmienky uplatňovania tohto inštitútu pre daňového zástupcu.
Čo z toho vyplýva?
Táto zmena má priaznivý vplyv pre niektoré zahraničné osoby, ktoré sa môžu dať zastúpiť daňovým zástupcom a nemusia sa tak registrovať pre DPH v tuzemsku, ak spĺňajú uvedené podmienky. Požiadavka na predaj tovaru prostredníctvom elektronického komunikačného rozhrania však môže výrazne obmedziť škálu zahraničných zdaniteľných osôb, ktoré môžu využiť inštitút daňového zástupcu.
Cancelation of the obligation to guarantee VAT from the previous stage if the supplier is blacklisted
Under the VAT Act, a customer is liable for the VAT on an invoice that a supplier has not paid, or has become unable to pay if at the time the VAT becomes payable the customer knew, or could have reasonably known, or should have known that the VAT would not be paid by the supplier. Among the reasons as to why a customer knew, could have known, or should have known the Slovak VAT Act defined a listing of such a supplier on a so called black-list of risky suppliers published on the web-portal of the financial directorate. The amendment to the VAT Act removes this condition as, in practice, customers (due to the concern regarding guaranteeing VAT from the previous stage) often paid the amount of VAT charged by the suppliers listed on the black-list straight to the personal account of the supplier kept by the tax office (instead of paying the whole invoice amount to the supplier), i.e. they divided the invoice payment. In practice, various related problems have arisen and due to the minimal use of this institute, this provision has been cancelled.
The takeaways
The fact that a supplier is blacklisted does not automatically mean that the customer is liable for the VAT on an invoice. However, the Financial Directorate will continue to maintain the black-list of risky companies, so VAT payers should still control their business partner's reliability based on this list for their internal purposes, e.g. internal controls when concluding business contracts.
Establishment of a new institute of a tax representative when acquiring goods from another Member State.
A foreign person (not VAT registered) who acquires goods in Slovakia from another Member State pursuant to Article 11 for the purpose of subsequent VAT exempt intra-Community supply or export of such goods, or their supply by a distance sale scheme with a place of supply in another Member State, can avoid VAT registration in Slovakia may be represented by a tax representative in Slovakia.
The tax representative's institute may only be used by a foreign person not registered for VAT in Slovakia who does not supply goods or services in cases where it pays output VAT in Slovakia. Simplification may only be applied to goods sold via the use of an electronic communication interface, such as an electronic marketplace, electronic platform, electronic portal or similar electronic means.
A foreign company that is represented by a tax representative will be obliged to issue an invoice pursuant to the Slovak VAT Act when supplying goods with a place of supply in Slovakia. The invoice must state the tax representative’s identification information. Foreign entities represented by a tax representative will also be entitled to claim input VAT from purchased goods and services in Slovakia via a VAT refund procedure if legal requirements are met. The amendment also introduces more detailed conditions for the application of this institute to the tax representative.
The takeaways
This change will have a beneficial effect on foreign companies who may be represented by a tax representative and so will not need to register for VAT in Slovakia if they meet the above conditions. However, the requirement for the goods to be sold via the use of an electronic communication interface may significantly limit the range of foreign taxable persons eligible for using the tax representative mechanism.
Change in taxation under tour operator margin scheme
In line with EU Court of Justice case-law, from 1 January 2018 the amendment modifies the special tour operator margin scheme. Based on current VAT law, this special regulation only applies if a recipient of tourism services is the final customer – passenger. The amendment extends the application of this special scheme to all sales of tourism services regardless of who is the recipient, i.e. it will also apply to supplies to an entrepreneur (taxable person) purchasing a package of tourism services for its business. Certain application conditions for this special scheme are defined.
The takeaways
As of 1.1.2018, the obligation to apply a special tour operator margin scheme will apply to all sales of tourism services packages by travel agencies which sell such packages on their behalf regardless of the status of the recipient of the package of tourism services.
Expanded definition of the capital property subject to mandatory adjustment of input VAT deduction for a period of 20 years
Under the amendment, the definition of capital property extends to all constructions defined in the building law. This means the mandatory 20-year obligation for adjustment of VAT deducted will apply to all construction types, not only to buildings, as has been the case up to now. An adjustment of the deducted VAT on a construction other than a building will apply only to a construction, where the VAT payer claims related input VAT after 31 December 2017.
The takeaways
During the 20-year period, VAT payers must monitor the change in the scope of use of any type of construction, and not just buildings, i.e. also engineering constructions.
Change of conditions for the application of the triangulation simplification for the first customer
One of the terms for the application of a triangulation simplification under current legislation is that the first customer (middleman) is not registered for VAT in the Member State of the second customer. The amendment regulates this condition to bring our legislation into line with EU legislation, so the middleman cannot be established in a Member State of the second customer (i.e. it does not have a seat, place of business, establishment, or does not usually reside there).
The takeaways
In order to apply this simplification, the first customer may be registered for VAT in the Member State of the second customer (final customer), but it may not be established in that Member State. Foreign companies which do not have a VAT permanent establishment in Slovakia and supply goods as of 1 January 2018 in Slovakia as the middleman to their customers, may use the triangulation simplification.
Introducing a notification obligation when selling an immovable property
If a company decides to apply the taxation of a supply of a building, or part thereof, including the supply of building land, where such supply may be VAT exempt under the VAT law, such a company will be required to notify the customer in writing of its decision on taxation by the deadline for issuing an invoice.
The takeaways
Suppliers will be obliged to notify customers in writing that they have decided to tax the supply of immovable property, so the acquirer (VAT payer) is aware he is liable to pay VAT under the reverse-charge scheme.
Changes in VAT guarantee during VAT registration
The obligation to pay a VAT guarantee is extended to cases where an applicant for VAT registration is an individual or legal person who has a VAT underpayment of EUR 1,000 or more at the date of filing a VAT registration application, or to which the Tax Office cancelled the VAT registration in the past.
Additionally, the provision for immediate reimbursement of the VAT guarantee is added for cases where the VAT registration is cancelled within the general 12-month period for repayment of the guarantee by the tax office as, in this case, there is no longer a reason for having the guarantee in the state budget.
The takeaways
If the Tax Office deregistered a taxable person from VAT, or the taxable person has a VAT underpayment of EUR 1,000 or more, such a taxable person is obliged to deposit a VAT guarantee. The tax office is also required to immediately return a guarantee if the company's registration is cancelled within 12 months of the date of the guarantee deposit.
- A standardised form will be introduced to be filed by the VAT payer with the tax office if they purchase a used motor vehicle from another member state.
- To reduce the administrative burden for VAT payers, the option to issue a summary invoice is extended for rent and supplies of electricity, gas, water and heat for 12 calendar months where the recipient is a foreign taxable person. Currently, the VAT Act only allows such a simplification if the recipient is a local taxable person established in Slovakia.
- The amendment states that persons identified for VAT in Slovakia based on §7 and §7 (a) of the Slovak VAT Act who participate in a triangulation supply as the middleman must submit an EC Sales List.
- The amendment introduces the obligation to refund VAT deducted from a pre-payment paid prior to a supply if, by the end of the last VAT period during de-registration, the goods or services have not been supplied. This obligation does not apply to companies wound up without liquidation if the legal successor is a VAT payer, or becomes a VAT payer.
- The amendment defines the tax point, the amount of the tax base and the right to deduct the VAT in relation to an assignment of the receivables for the application of a cash-accounting scheme.
