VAT

The possibility to decrease a tax base if a supplier’s receivable becomes uncollectible

From January 1, 2021, a possibility to correct a tax base when suppling goods or services is introduced directly into the act, if the taxpayer or the supplier didn’t receive a payment or if his receivable became uncollectible. This applies to the supply of goods and services in the domestic country, at a price at which the tax was applied by the taxpayer.

The receivables are considered as uncollectible for this purpose when it may concern cases such as receivables recovered in execution proceedings, receivables from customers in bankruptcy proceedings, in the process of discharge from debt or in a case of the customer´s extinction or death.

The receivable or its part with a value not exceeding EUR 300 including the tax becomes uncollectible after 12 months from the due date of the receivable, if the taxpayer can prove that he took the steps to collect the receivable within his regular business activities.

The taxpayer might not be able to correct the tax base in case of, e.g. supply of goods and services to persons with a special relationship to the taxpayer, i.e. persons with close business, employment and family ties with the taxpayer, who have a high probability of jointly coordinated business proceedings.

If any payment is received after the adjustment of the tax base in connection with an uncollectible receivable, the taxpayer is obliged to make a correction of the reduced tax base in the amount corresponding to the tax base and the tax calculated from the received payment. The recognition of a tax base adjustment at the supplier is conditioned by the preparation and distribution of the correction document.

The possibility of a tax base correction applies as well to cases when a taxpayer supplies goods and services for which the tax base is specifically determined (sale of tourism services, supply of used goods, antiques, collectibles and artworks) and when a customer or a third party doesn’t pay the taxpayer or pays only partially.

The period within which the taxpayer can correct the tax base in case of total or partial non-payment of the consideration is 3 years.

Export of goods

From January 1, 2020, an option is given to the taxpayer to prove the dispatch or transport of the goods which he supplies to the destination in the territory of third countries, in cases when:

• under customs legislation, the taxpayer may lodge an oral customs declaration for the export customs procedures, or
• in a case of an act treated under the customs legislation as a customs declaration for the export customs procedures,
• also by other evidence. According to the customs regulations, the evidence may be for example, a proof of payment, a copy of the delivery note confirmed by the recipient and others.

Provision of services and distance sale of goods (e-commerce)

The change in the term „distance sale“

From July 1, 2021, the term “distance sale” shall be replaced by the term “intra-Community distance sale of goods” and by term “distance sale of goods imported from third countries”.

Intra-Community distance sale of goods

The place of the delivery of goods shall be the member state in which the dispatch and transport of goods for the customer ends (so-called the member state of consumption).

The threshold EUR 10.000 for the application of the exemption:

• To support micro-companies trading in the territory of the European Union, a single threshold of EUR 10.000 has been set for all member states. Whereas, in addition to the distance sale of goods, this threshold shall also apply to the supply of telecommunication services, radio and TV broadcasting services and electronically supplied services if they are provided to a non-taxable person.
• In a case when the entrepreneur has his registered office, a place of business or a residence in only one member state and the total value of the goods sold at distance, and of the above-mentioned digital services provided to another member state other than the one in which the entrepreneur is established doesn’t exceed the value of EUR 10.000 in the current or previous calendar year, excluding the tax, the entrepreneur shall be entitled to taxation of the supply of such service by the tax of the member state, in which he has a registered office. When selling goods at distance to another member state, the entrepreneur is entitled to pay the tax of the member state in which the transport of the goods begins (usually it is a supply of goods from the member state where the supplier is established).
• In a case when the entrepreneur meets all conditions for taxation of distance sale of goods in the member state where the transport of the goods begins, he may choose administratively more demanding taxation of goods in the member state of the termination of the transport of the goods to the customer and taxation of the services in the member state of the establishment of the customer. However, it is necessary to do so for at least two calendar years.

Distance sale of goods imported from third countries

The place of the delivery shall be determined based on the facts whether the member state of the import is identical to the member state of the dispatch or transport termination. If this is not the case, the place of the delivery of the goods is the member state in which the dispatch or transport to the buyer ends (so-called member state of consumption).

In case when the goods are sold at distance and are imported to the same member state as the member state of the dispatch and transport termination, the place of the delivery of the goods is in this member state only in a case, when the supplier applies a special scheme for such sale of goods (“one stop shop”) according to § 68c. If the supplier doesn’t apply the mentioned special scheme to such deliveries, the place of the delivery shall be determined according to the basic principle and the tax shall be levied exclusively on the import of goods.

New fiction of supply of goods from July 1, 2021

If a taxable person facilitates the supply of goods in the territory of EU made by a taxable person not established in the EU through electronic interface, he shall be deemed in accordance with the amendment as a person who received these goods from the supplier and who supplied them to the buyer himself.

The legal fiction in the sale of goods to the final consumer via the online platform, this from economic point of view one transaction shall be considered, for the VAT purposes, as two transactions. Separately shall be determined the place of the delivery of goods for the first supply to the platform operator and separately for the second supply to the customer by the platform operator. The transport will be assigned to the supply of goods by the taxable person to the final customer and at the same time, the supply of goods by the original supplier to this taxable person in the EU shall be exempt from VAT with the right to deduct the tax.

If the taxable person facilitates the distance selling of goods imported from the territory of third countries in consignments with their intrinsic value not exceeding EUR 150 through the use of an electronic communication interface, the fiction that the taxable person has received and delivered the goods shall also apply.

Import of consignments whose value doesn’t exceed EUR 22

From July 1, 2021, the exemption from tax on the imports of consignments with a value not exceeding EUR 22 is abolished.

Optional special schemes “one-stop-shop” (OSS)

The optional one-stop-shop scheme will be possible from July 1, 2021 also for other services provided to non-taxable persons whose place of the delivery is in the member state of the consumption, as well as for the intra-Community distance sale of goods and certain domestic supplies of goods. The possibility to apply OSS to certain distance sales of goods imported from third countries shall be also introduced.

The persons applying the special schemes of the OSS shall submit only single tax return in a single member state of the EU for all deliveries in the whole EU.

More detailed information about OSS scheme and VAT changes can be found HERE or in our eBook about VAT changes in the EU and their impact on e-commerce valid from July 1, 2021 HERE.

Income tax

Income tax registration

The registration of taxpayer ex officio should be postponed from January 1, 2021 to January 1, 2022 due to technical reasons of the Financial Administration and the individual registers. The current method will be valid until December 31, 2021.

From January 1, 2021, the obligation to register taxpayers who have a business license granted in another state, but due to the existence of a place of effective management in Slovakia, they are taxpayers with unlimited tax liability in Slovakia.

Request for annual settlement

From January 1, 2021, an employee may ask any employer for the annual settlement, who is a taxpayer and who has paid him a taxable wage during the tax period.

Changes in the case of application of employee tax benefits

From January 1, 2021, the law should explicitly regulate that if an employee´s employment is terminated, the employer will take into account the tax bonus and the non-taxable part of the tax base for the last time in the calendar month in which the employee´s employment ended, unless declared by employee otherwise.

Tax advances

In the case of advances on corporate income tax, the obligation to pay the difference on tax advances paid from the beginning of the next tax period to the deadline for submitting a tax return should be cancelled from January 1, 2021, in case that on the basis of the submitted tax return, the taxpayer would be obliged to pay higher tax advances for the following tax period.

The tax administrator will send a notification on the amount and maturity of income tax advances to all taxpayers from January 1, 2022.

Extension of incomes of non-residents that are considered as incomes from a source in Slovakia

The income of a taxpayer with limited tax liability from a source in Slovakia shall include also the income from the sale of virtual currency if the payment comes from a taxpayer with unlimited tax liability in the territory of Slovakia.

Extension of CFC rules to natural persons

In order to limit a tax avoidance and to tax in Slovakia shares in profits (dividends) of a foreign company or of an entity, whose income weren´t tax at least at the minimum effective tax rate or are domiciled in non-cooperating countries, the amendment to the Income Tax Act shall introduce rules for controlled foreign companies (so-called CFC rules) from January 1, 2022, even for natural persons. Originally, the change was proposed to be accepted from January 1, 2021, but it was approved with a delayed effectiveness from January 1, 2022.

By applying the CFC rules, in Slovakia, the profit shares (dividends) in a CFC company shall be taxed at the moment of their potential claim of a natural person’s taxpayer.

The tax rates apply the same as for the taxation of profit shares, i.e. 7 % or 35 % for non-cooperating countries. The taxpayer will be able to set off the tax paid in the following tax periods when the dividends are essentially paid.

More detailed information about the amendment to the act from the natural person point of view in Slovakia can be found HERE.

Reverse hybrid entities

In connection with the implementation of Council Directive (EU) 2017/952 (the so-called ATAD 2 Directive), the proposed act supplements the Income Tax Act with legislation concerning a reverse hybrid entity. At the same time, the definition of a transparent company was introduced,

Pursuant to the new provision of the Income Tax Act for a reverse hybrid entity, the incomes attributable to foreign (non-resident) shareholders meeting the criteria of 50 % or more in relation to transparent companies will be taxed at the level of a transparent company at corporate income tax rate of 21 %, if these incomes of the non-resident cannot be taxed through a permanent establishment in Slovakia according to Section 16 (3) or according to Section 16 of the Income Tax Act and the incomes will not be taxed in the country of residence of the non-resident, nor abroad.

The subjects of collective investment that have a wide range of unit-holders where the ownership of the fund is dispersed and where no unit-holder has a controlling interest, diversified portfolio of securities and are subject to investor protection regulation in Slovakia are granted the exemption to the application of this provision.

The provisions concerning the tax regime of a reverse hybrid entity shall apply for the first time in a tax period beginning on January 1, 2022 at the earliest.

Adjustment of the tax residence

From January 1, 2021, the Income Tax Act cancels the exemption from tax residence for natural persons who cross the borders of the Slovak republic on a daily basis for the purpose of performing a dependent activity in the Slovak republic and who would otherwise be taxpayers with unlimited liability in Slovakia. The aim is that the tax residence of natural persons who cross the borders of Slovakia on daily basis for the purpose of performing dependent activity should be determined according to the tie-breaker rule in the relevant double tax treaty.

Besides, the definition of the place of the effective management of a legal person for the purposes of determining tax residence is clarified. The place of effective management is considered a place where most of the business and management decisions are made or taken on behalf of the legal entity, regardless of who makes these decisions.

More detailed information about the changes in the Income Tax Act in Slovakia can be found HERE.

A new institute of a “micro-taxpayer”

From 2021, new institute of so-called “micro-taxpayer” came into effect in Slovakia and its main purpose is to support SMEs. A micro-taxpayer is a natural person – entrepreneur, i.e. a self-employed person or a legal person whose taxable incomes (revenues) for the taxation period don’t exceed the amount of EUR 49,780. The definition also contains a negative description, e.g. for dependant persons carrying a controlled transaction.

Taxpayers who are considered as „micro-taxpayers“ apply several benefits, such as:

• Preferential regime when depreciating movable assets
• Preferential regime for tax provisions
• More convenient rules for amortization of tax losses

More detailed information about the „micro-taxpayer“ institute in Slovakia can be found HERE.

DAC 6: Reporting obligation for cross-border arrangements

The reportable cross-border arrangement is every cross-border arrangement if it contains at least one of the hallmarks listed in the Annex no. 1a of Act no. 442/2012 Coll. as amended. The first reporting obligations must be fulfilled by January 31, 2021 and by February 28, 2021 in relation to reportable cross-border arrangements introduced between June 2018 and December 2020.

Information on the reportable cross-border arrangement shall be notified by the obliged person to the Financial Directorate of the Slovak republic, electronically via the financial administration portal and using the electronic structured DAC6 Notification form.

In relation to the new arrangements from January 1, 2021, the obliged person is obliged to file the information within 30 days from the availability, preparation or implementation of the reportable arrangement and subsequently within 30 days from the last day of the calendar quarter, if new information is available to the intermediary since the last submission.

The tax office is entitled to impose a fine of up to EUR 30,000, even repeatedly, in the event of non-compliance with the above obligation.

More detailed information about the reporting obligation for the cross-border arrangements can be found HERE.

Exemption from interest for late payment and imposition of a sanction

Interest for late payment and imposition of a sanction for not paying or levying tax, tax difference or tax advances which became due from March 12, 2020 to December 31, 2020 within the statutory period and amount are exempted, if the taxpayer pays for them or levies them no later than June 30, 2021.

Motor vehicle tax

A change for tractors and semi-trailers

A new annex to the Act no. 1a is being introduced, and it sets fixed tax rates specifically for tractors and semi-trailers. For every tractor and semi-trailer without semi-trailer combination of vehicles, the next lower tax rate for the relevant category will be applied. At the same time, obligatory pairing of tractors and semi-trailers to semi-trailer combination of vehicles in order to apply the next lower tax rate was abolished.

Annual tax rate adjustment

A preferential adjustment of the annual tax rate according to the age of the vehicle was introduced for vehicles of categories M2, M3, N3. The tax rate for vehicles of a category M2, M3, N3:

• is decreased by 50% during the first 36 months from the date of the first vehicle registration,
• is decreased by 40% during the following 36 months,
• is decreased by 30% during the following 36 months,
• is decreased by 20% during the following 36 months,
• is decreased by 10% during the following 12 months,
• annual tax rate is used from 157. month.

The annual tax rate for vehicles of a category O4 is decreased by 60% regardless the age of the vehicle.

More detailed information about the motor vehicle tax can be found HERE.

New obligations for auditing individual financial statement

New package of obligations called „Lex korona“ made changes also in § 19 Verification of financial statements by an auditor in the Accounting Act.

Since 2021, companies are obliged to audit their financial statements for two consecutive accounting periods, if they meet at least two of following criteria:

• net turnover exceeded EUR 6,000,000,
• total sum of the assets exceeded EUR 3,000,000,
• average number of employees exceeded 40.

These limits will increase again from 2022.

Changes in the accounting procedures for subsidies

Act no. 349/2020 Coll. with effect from December 9, 2020 changed Act no. 71/2013 Coll. on the provision of subsidies within the competence of the Ministry of Economy of the Slovak Republic (referred to as “Act No. 71/2013 Coll.”), to pay rent in the next wave of a pandemic related to the spread of COVID-19.

A landlord in the name of a tenant and on his own behalf applies for rent subsidy. Upon request, the tenant shall immediately provide the landlord with the cooperation necessary for the purpose of providing the rent subsidy. The rent subsidy may be provided to the tenant in the amount in which the rent discount was provided upon agreement between the landlord and the tenant, but not more than 50 % of the rent for the period of difficult use.

More detailed information can be found on the website of Ministry of Finance of the Slovak republic.

In § 52a of the measure of the Ministry of Finance of the Slovak Republic no. 23054/2002-92, by which the details on accounting procedures and framework financial statements for entrepreneurs accounting in double-entry bookkeeping (referred to as „DE accounting procedures), paragraph 8 is added, according to which in the tenant´s accounting on the basis of the subsidy approval notice, the regulation of the rent subsidy is charged to account 346 – Subsidies from the state budget and with a corresponding entry in favour of account 648 – Other income from economic activity in material and temporal connection with the incurred rental costs.

The amount in which the tenant waived the performance from the rent subsidy in favour of the landlord is charged to account 321 – Suppliers and with corresponding entry in the favour of account 346 – Subsidies from the state budget. In the landlord´s accounting, the amount in which the tenant waived the performance from the rent subsidy in favour of the landlord is charged in favour to the materially relevant receivables account and with a corresponding entry to the debit of account 315 – Other receivables.

Changes in accounting for goodwill in 2021

From December 31, 2020 (Measure no. MF/011805/2020-74), the second sentence is specified in § 37 par. 11 of accounting procedures, which adjusts the calculation of goodwill on a merge if the merging entity has an interest in the successor entity, whereas it is not a merge in which own shares or own business shares are created according to the Commercial Code (it is not a merge according to the § 26 par. 7 of accounting measures).

In this case, the goodwill shall be booked as a difference between the real value of the share attributable to the carrying amount of the assets and liabilities in the successor entity and the value of equity of the successor entity, which falls on the share of the merging entity in the successor entity.

Changes in accounting for unforeseeable receivables

From January 1, 2021 (Measure no. MF/011805/2020-74), in § 52 par. 11 of accounting measures, a method of accounting is established: – reduced VAT, if after the tax liability arose, the taxpayer did not pay in full or partially for the supply of goods or services and his receivable from this supply became unforeseeable according to the § 25a of Act no. 222/2005 Coll. on value added tax, as amended by Act no. 344/2020 Coll. Such VAT reduction shall be charged to account 343 – Value added tax with a corresponding entry in the accounts receivable; – corrections of deducted VAT in case of unforeseeable receivable according to the § 53b of the cited act. Such a correction of  deducted VAT shall be charged to account 343 – Value added tax with a corresponding entry in the accounts payables.

Minimum wage

From January 2021, the minimum wage was increased from EUR 580 to the amount of EUR 623. The hourly minimum wage increased from EUR 3.333 to EUR 3.580 per hour.

Increase in the minimum wage will also affect the amount of minimum wage entitlement that is based on the degree of work difficulty and wage benefits for night shifts, on-call duty, Saturday work and Sunday work.

The non-taxable part of the taxpayer also increases to EUR 375.95 per month. The maximum assessment base for social insurance is also increased from January 1, 2021 to EUR 7,644.

Tax bonus for dependent child

January 1, 2021 – June 30, 2021

• EUR 46.44 – child up to 6 years
• EUR 23.22 – dependent child over 6 years

July 1, 2021 – December 31, 2021

• EUR 46.44 – child up to 6 years
• EUR 39.47 – child over 6 years and up to 15 years
• EUR 23.22 – dependent child over 15 years

Meal vouchers and financial contribution for meal

From March 1, 2021, it is possible to provide financial contribution for meal to employees other than those listed above, with an exception of those whom the employer provides meals in his own catering facility or a catering facility of another employer.

The employer is obliged to allow his employees to choose between a meal voucher or a financial contribution for meal.

More information about meal vouchers and financial contribution for meal in Slovakia can be found HERE.

Housework and telework

The amendment to the Labour Code introduced clarification of the conditions for housework and telework. If the employee performs work that could be performed at the employer´s workplace, regularly and within specified weekly working time or its part in his/her household, it is considered as a housework, respectively a telework, if he performs work using information technologies, in which electronic data transmission at a distance takes place on a regular basis.

The amendment also specified obligations of the employer regarding the measures to be taken by employees in such a form of work and extended them to housework. On the employee side, a new obligation for employee performing housework or telework is to immediately inform the employer about technical issues associated with malfunction of technical or software equipment, malfunction of internet connection or other similar causes that prevent him from performing work.

More information about the housework and telework can be found HERE.