VAT

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Amendment to Act no. 222/2004 Coll. on Value Added Tax (hereinafter referred to as the “VAT Act”)

1. Change of Steps of Foreign Persons during VAT Refunds

From 01 January 2017, the steps taken by foreign persons when claiming entitlement to input VAT refund from goods and services purchased in Slovakia are unified for foreign persons that only perform transactions with transfer of tax duty to the purchaser in Slovakia.

According to the amendment, in these cases, priority should be given to deduction of input VAT by filing a VAT Refund Application for VAT paid for goods and services over deduction of VAT in a tax report.

The above change can be expected to influence cash flow of foreign payers negatively due to a longer period that refunds of input VAT will take.

2. Compensation for Retaining of Overpaid Tax

The regulation valid from 1 January 2017 introduces the so-called interest on retained overpaid tax during a tax inspection.

A taxpayer shall become entitled to a compensation for retaining of overpaid tax if a tax inspection began in the legal period for refunding overpaid tax, on the first day following the expiration of six months from the end of the original period for refunding overpaid tax.

A tax authority shall award interest on retained overpaid tax to a payer by a decision issued within 15 days from the refunding of overpaid tax; the interest shall be returned within 15 days from the effective date of the decision (after the expiration of the appeal period).

The awarded interest will be calculated for each day from the beginning of entitlement to interest on retained overpaid tax until the day of refunding of the overpaid tax. The basis for the calculation of the retaining interest is the amount of the refunded overpaid tax resulting from the tax inspection. Shall the tax inspection terminate without a negative finding, the interest on retained overpaid tax shall be calculated from the originally reported amount of overpaid tax.

The interest rate used for the calculation of interest shall be an interest rate equal to double the interest rate of the European Central Bank valid on the first day of the calendar year for which the interest is calculated, however, not less than 1.5%. The minimum amount of interest on retained overpaid tax is also set to EUR 5.00.

A tax authority may also decide not to award the interest on retained overpaid tax to a payer if the payer fails to fulfil their duties during a tax inspection, fails to appear when summoned, to receive documents, and/or cannot be contacted.

This provision is also applicable to unfinished tax inspections started prior to 1 January 2017.

3. Extension of Reverse Charge in Construction Industry

The amendment, valid from 1 January 2017, should, above all, increase legal certainty and reduce administrative load during reverse charge in case of supply of construction works.

Shall a supplier supply construction works and/or goods with installation and assembly and shall the supplier reasonably expect that reverse charge should be applied thereto (due to the fact that these transactions are listed in section F of the statistical classification of products) and the invoice includes the words “reverse charge”, the recipient will be the person obliged to pay the tax.

However, this provision does not mean that the supplier and the purchaser can agree on the application of reverse charge for the recipient.

The amendment also introduces an obligation of the supplier that performed such a supply to include the issued invoices in their VAT control report despite the fact that they will not be included in the tax report. In relation to such reporting a new form of part A.2 of the control report is also introduced.

4. Deferred Effect of Self-Taxation during Import of Goods

Self-taxation when importing goods from third countries should have entered into effect since 2013. However, the entry into effect is deferred once again.

The said provision will enter into effect no sooner than in the period 2 years after the year when the difference between the top limit of the public administration debt defined for the relevant budgetary year and the current amount of public administration debt published by the European Commission exceeds 11%.

The introduction of reverse charge to the recipient for imports from third countries would both positively impact the cash flow of taxpayers and reduce their administrative load.

According to the prognosis for the upcoming years, the entry of this provision into effect can only be expected at a later time.

For more information about this topic, please contact:

Ms. Kvetoslava Čavajdová
Tax manager Mazars
Specialist in Corporate Income Tax & VAT