Changes in the Slovak VAT as of 1 January 2023

1. Changes in the VAT bad debt relief

In order to improve payment discipline in Slovakia, the state is proposing new measures that have an impact on both suppliers and customers of goods and services.

Changes applicable for the supplier

• The range of eligible unpaid receivables, from which the VAT payer (supplier) can additionally request VAT from the Tax Authority is being expanded through the correction of the tax base for bad debts mechanism.
• The possibility to request a correction for bad debts with a low value of up to 300 EUR including VAT is canceled if it has not been paid for more than 12 months. Instead, a new option to apply for a correction of the tax base is being introduced. The following conditions for correction of tax base for bad debts have to be met:

•  150 days have elapsed since the receivable for the supply of goods or services became overdue at max of unpaid value, while the receivable:

• is not more than EUR 1 000, including tax, and the VAT payer proves that a reminder was sent for payment to customer;
•  is more than EUR 1 000, including tax, and the VAT payer proves that the lawsuit was filled in court other than an arbitration tribunal in this respect; or
•  is more than EUR 1 000, including tax, and the VAT payer proves that the receivable is subject to the execution.

The aforementioned correction to the tax base may be made by the supplier for unpaid receivables, if 150 days from the due date have elapsed after 31 December 2022.

Subsequently, if customer paid the overdue receivable either fully or partially, the supplier must correct the tax base and remit the VAT accordingly.

• The additional conditions when the supplier must refund the requested VAT from the state are also specified.
  • The supplier will be obliged to refund the additionally requested VAT, which was claimed on the basis of demanding payment of the claim by a lawsuit in court, if the supplier withdraws the lawsuit, the court proceedings are stopped for reasons on the supplier’s side, or the court does not fully or partially grant the claim to the supplier.

The supplier is still obliged to issue a corrective document.

Changes applicable for the customer

• A customer who is the VAT payer is obliged to remit the VAT deducted from purchased goods and services if the invoice is overdue either fully or partially for more than 100 days. This only applies if the VAT was charged on the supply.
• The customer has the obligation to refund deducted VAT in case of unpaid invoice much earlier than the supplier has the right to request additional VAT from the Tax Authority. Therefore, the customer cannot rely only on receiving a corrective document from the supplier, but must monitor ageing of the liabilities himself.
• The customer has the obligation to refund the deducted VAT as well– VAT payer who has entered insolvency proceeding, bankruptcy or restructuring and receives a correction document from the supplier.
• The customer is obliged to refund the VAT only to the extent in which he previously deducted it, i.e. the customer will take into account the possible proportional deduction of VAT, adjustments of deductible VAT or take this obligation into account when deducting VAT during registration.
• If the customer - VAT payer may remit the overdue invoice after the correction of the input VAT, the customer has an additional right to deduct VAT to the extent in which the obligation was paid to the supplier.

The above mentioned change will apply to obligations for the supply of goods or services for which the obligation has not been settled and 100 days have elapsed after 31 December 2022.

Another change for customers is the introduction of the fictional of delivery of a corrective document issued and delivered by the supplier when correcting the tax base of an irrecoverable receivable. If the customer has not received the correction document by the end of the calendar month following the calendar month in which it was sent to him, he shall be deemed to have received it on the last day of that following calendar month. Although the customer does not receive such a document, he shall be obliged to reimburse the VAT deducted if the supplier has claimed a correction of the taxable amount for irrecoverable debts and proves that he has sent the document.

2. Additional reporting obligation for Slovak banks and other payment institutions (proposed effective from 1 January 2024)

The European Union wishes to introduce greater control over the correct collection of VAT in electronic commerce. For this reason, the EU directive should be implemented in all member states by 1 January  2024.

All payment institutions that do business in Slovakia and mediate cross-border payments for their clients will also have to generate and send selected data to the Financial Directorate of the Slovak Republic on a quarterly basis. Payment institutions will thus report data on selected cross-border payments, the settlement of which they mediate. Data on the recipients, the volume of transactions and the time of their settlement will be reported. Banks and non-bank institutions will report data on the recipient of a cross-border payment to the Financial Directorate of the Slovak Republic if there are more than 25 cross-border payments for the same recipient in one quarter.

The Financial Directorate of the Slovak Republic will then send these data to the central European payment system (so-called CESOP), where they will be evaluated. The conclusions from this evaluation should be accessible to the relevant tax authorities in the Member States.

3. Simplification for exempted financial and insurance activities and delivery and rental of real estate

Taxable persons who carry out exclusively financial, insurance activities or the supply and rental of real estate, to which exemption from VAT is fully applied, no longer have to register for VAT after reaching a turnover after 1 January 2023. Current VAT payers who supply only these exempt services can apply to cancel their VAT registration after the first of January. The mentioned change relieves selected payers from submitting VAT returns and VAT control statements.

If the taxable person that exclusively supplied these VAT exempt activities did not manage to register by 31.12.2022, after 1.1.2023 it no longer has to do so, nor does it have to retroactively file VAT returns for the periods when this change did not apply.

4. Refund of deducted VAT in case of theft

In the event that property was stolen from the VAT payer, which is not a depreciable property with a purchase price of less than 1,700 euros and a useful life of more than a year, and at the same time it is not a stock, he does not have to refund the full deducted VAT. The VAT payer is obliged to refund only the proportional part of the deducted VAT corresponding to the "fictitious" tax residual value, while this asset will be viewed as if it had been depreciated for four years.

5. Reduced VAT rate for restaurant, catering services and ski lifts from 1.1. to 31.12.2023

The National Council of the Slovak Republic approved a parliamentary bill expanding the range of selected goods and services with a reduced VAT rate of 10% during the period from 1.1.-31.12.2023 for the following services:

• transportation of persons via cable cars and ski lifts
• accessibility of indoor and outdoor sports facilities for the purpose of playing sport
• entrance fees to artificial swimming pools (e.g. water parks)
• restaurant and catering services (must provide restaurant services only) within the meaning of the EU Regulation, with ancillary services such as service, eating areas, washable crockery and cutlery, the provision of toilets for customers, or changing rooms and space for customers, i.e. outside the importation of food, window-service or kiosk sales of food

This change was adopted by the Parliament in order to boost the tourism in Slovakia and to help establishments overcome the energy crisis and compensate for the losses caused by the pandemic period.

6. Other changes

• The definition of the import of a small shipment of non-commercial goods for coffee and tea is being introduced due to differences in the collection of customs duties and VAT. If the content of a small non-commercial shipment consists of coffee, coffee extract and essence, or tea, tea extract or essence, the application of exemption from import VAT will also depend on the fulfillment of quantitative restrictions.
• The deadline for paying VAT when acquiring a new motor vehicle from another member state is extended, if the tax authority has not notified the personal account number to the taxpayer. VAT will be payable within seven days from the receipt of the notification of the taxpayer's personal number by the tax authorities.
• In the case of delayed VAT registration, the tax authority will no longer be obliged to open a VAT audit if a there is a VAT underpayment reported in extraordinary VAT return. The tax authority can also check the values in the VAT return in other ways (e.g. by appeal, local investigation).
• An exemption from VAT is added for the European Commission and its similar bodies, if it supplies or acquires goods to/from another member state in connection with the COVID-19 pandemic, if these goods are provided free of charge.

Read more about Changes to the Income Tax Act from 1 January 2023