VAT

New call-off stock arrangements

By implementation of the Council Directive (EU) 2018/1910, the VAT rules for call-off stock arrangements, when Slovakia is the country where the transport of goods ends, were amended. At the same time, new rules were introduced for call-off stock arrangements, when Slovakia is the country where the transport of goods starts.

The application of rules for call-off stock will require the involved parties to keep in detailed records, the content of which is subject to a special definition. Moreover, the goods shall be supplied to the taxable person for whom they were intended within 12-month period after the arrival of the goods.

Ascription of the transport in the case of chain transaction

In order to avoid different approaches amongst Member States, which may lead to double taxation or non-taxation, and in order to enhance legal certainty for operators, a common rule was established by the Council Directive (EC) 2018/1910. With effect as from 1 January 2020, this directive is implemented to the Slovak VAT law.

If the transport is organized by the intermediary operator, the dispatch or transport shall be ascribed only to the supply made to the intermediary operator. This requires the intermediary operator to communicate to his supplier the VAT identification number issued to him by the Member State other than is the Member State from which the goods are dispatched or transported. Otherwise, the dispatch or transport shall be ascribed only to the supply of goods by the intermediary operator.

Intra-Community supply of goods

As from 1 January 2020, for exemption of the supply of goods from one Member State to another Member State, the VAT identification number issued to the acquirer by the Member State other than is the Member State from which the goods were transported is one of the substantive conditions. The acquirer shall communicate this VAT number to his supplier.

Further, since 1 January 2020, for exemption it is also required to declare the supply of goods to another Member State in the EC Sales List.

Moreover, a common rule was established as regards the proving of the transport of the goods to another Member State by the new Article 45a of the Council Implementing Regulation (EU) 2018/1912.

Exemption for transactions of international trade in the customs warehouse, special or tax warehouse

The new rule for exemption was introduced and this for transactions related to trading with crude oil in customs warehouse or special warehouse and with mineral oil in tax warehouse.

Amendment to the list of goods being subject to 10% VAT rate

Newspapers, magazines and periodic press extend the list of goods being subject to the reduced 10% VAT rate, if some conditions are met. Further, some foodstuffs, vegetable, fruit and fruit juice extend this list also.

Free of charge supply of tangible assets with small value

With the aim to define similar conditions for tax base determination for free of charge supplies of tangible assets with small value (which is not subject to depreciation for income tax purposes) to conditions, which are defined for depreciable tangible assets, the legal fiction was introduced for VAT purpose that the tangible assets with small value are subject to 4-year depreciation period.

Adjustments to input VAT deduction from technical upgrade services

Services resulting to technical upgrade of taxpayer´s capital goods, with respect to which no VAT deduction was claimed at the moment of its acquisition, are subject to adjustment as far as VAT deduction is concerned, too.

For further details regarding the VAT amendments please see here.

Income tax

Lower tax rate

Tax rate for entrepreneurs – natural and legal persons – has decreased to 15%, if their income from business does not exceed 100 000 EUR.

Extension of tax exempted income of employees

• The employee’s income in kind in the form of provided education, which is a prerequisite for the execution of employer’s business activity, is exempted. This is conditional on a working relationship of at least 24 months to the beginning of the relevant academic year. For the employer, the cost of such employee training is a tax-deductible expense.
• Contributions from the employer’s social fund to preventive medical examinations of employees beyond the limits set by special regulations are considered as an exempted income for the employee.
• Tax exempted is also employee´s income provided to him/her by the employer in line with the Labour Code in the form of contribution for sport activities of child. This applies on contribution up to maximum 55% of the qualified expenses, however, not more than EUR 275 per calendar year and for all employee´s children. For the employer, the costs on such contributions are tax deductible expenses.

Amendments to tax loss deduction rules

The condition of equality of tax loss deduction was abolished and at the same time, the period for its deduction was extended from 4 years to 5 years. It was also introduced that, during the tax period, tax loss deduction of up to 50% of the tax base is possible only (for natural persons up to 50% of the partial tax base of business income).

Tax deductible expenses

Introduction of special rules for electric cars

There is a new tax depreciation category “0” with a depreciation period of 2 years. To this category belong personal cars – electric cars (battery electric cars and plug-in hybrid electric cars).

Abolishment of some limits for tax deductible expenses

As of 1 January 2020, the rules for claiming expenses on commissions for mediation as tax deductible expenses are less strict. Further, less strict rules were introduced for expenses related to obtaining standards and certificates and also for expenses on contractual fines, late charges and late interests.

Business and management services

Services sorted to the code Classification products 70.1 a 70.22 fall as of 1 January 2020 also under payment condition for the tax expenditure purposes.

Introduction of a fiction of receivable that is not time-barred

For the purposes of claiming adjustments to receivables and expenses arising from write off of receivables in the tax-deductible expenses, a specific definition of receivable, which is not considered to be time-barred, was introduced. As a receivable that is not time-barred to the end of the tax period shall be considered a receivable, which was in the tax period at least one calendar day not time-barred.

Amendments related to loan for use agreements

To the loan for use agreements, similar rules as for the rental of assets shall be used.

Expenditures on research and development

A tax advantage, which consists of “super deduction” of expenditures on research and development from the tax base increased on 200% since 1st January 2020. Furthermore, the carry forward period for “super deduction” (for example due to tax losses) was extended from 4 years to 5 years.

Payment of interest and royalties to a foreign related person

The 24-month time test under Section 13 of the Income Tax Act for the tax exemption of interest and royalties arising from a source in the Slovak Republic and received by legal entities that are resident in the EU shall be examined prospectively. If the minimum holding period of 24-months is met after the day when the payment has been made, a taxpayer may request the tax administrator to refund the withheld tax on a separate form.

Business combinations

A definition of the tax non-resident’s income with the source in Slovakia was extended in order to cover also the following incomes:

• Unrealized exit earnings, which are subject of the special exit tax;
• Income from redistribution of the “capital fund of contributions”;
• A difference from the revaluation of the assets contributed outside the registered capital to a company seated in the Slovakia;
• Income from paid out revaluation difference from revaluation in case of merger, fusion or division of the companies.

Extension of exemption to sales of shares in simple joint stock company (“j.s.a.”)

Subject of the tax-exemption according to Section 13c of the Income Tax Act is also legal person´s income from the sale of the common shares or shares with special j.s.a. shareholder´s rights, if defined conditions are fulfilled.

Extension of the definition of “dividend”

As share on profit (dividend) is also considered:

• Usage of retained earnings after tax for creation of “capital fund of contribution”,
• And redistribution of reserve fund resources among shareholders, in the same part as they were created from retained earnings after tax.

Introduction of new measures regarding the action against tax avoidance

A list of non-cooperating countries

Instead of the term “taxpayer of a non-contracting state”, a term “taxpayer of a non-cooperating state” shall be used. The new term covers also a taxpayer from the state, which is listed in the so-called blacklist of the EU as non-cooperative in tax matters.

ATAD 2 implementation for hybrid mismatches

The approved changes also include measures implementing the Council Directive (EU) 2017/952, which aims to prevent the use of hybrid elements as a result of different tax assessments of financial instruments and taxpayers, particularly in the international context, leading to reduction of the tax liabilities.

Amendments to rules on advance tax payments

The threshold for the payment of tax advances for natural and legal persons increased from 2 500 EUR to 5 000 EUR. At the same time the rules for stipulation of the last known tax liability for tax advances has been amended.

Administrative simplification

The requirements for demonstration the right to claim tax bonus on child are less demanding. Administrative simplification covers also exchange of information and documents between employer and employee for the purpose of the income tax on income from dependent activity.

For further details regarding the income tax amendments please see here.

Motor vehicle tax

Negative definition of the subject to tax amended

Vehicles that are not subject to tax are vehicles with specific license number containing one of the following letters:

• M – newly produced vehicles, newly bought non-registered vehicles, vehicles used for test operation,
• H – historic vehicles,
• S – sports vehicles with FIA license or FIM, which are not for everyday use.

Tax payments

Since 1 January 2020, a motor vehicle tax does not need to be paid if the tax amount does not exceed EUR 5.

Bank levy

Bank levy rate

The original annual levy rate 0,2% has doubled. The actual annual bank levy rate is therefore 0,4%.