This special newsletter is to provide you with the information about the updated changes in the Act on Value Added Tax, effective from 2017.
2. Changes to the Act on Value Added Tax:
2.1 Tax Deduction by Foreign Taxpayers
A taxpayer, that is registered as a foreign taxable person following section 5 and complies with the conditions for tax refund to a foreign person from another Member State or from a third state, cannot apply tax deductions to goods and services through tax return, except the following cases stated in section 49 (9):
– application of tax deduction to goods and services used for supplies of goods and services, where the person obliged to pay the tax is the supplier.
– purchase of goods or services from another inland taxpayer with the transfer of tax liability; e.g. transfer of tax liability following section 69 (12) (j) of the Act on VAT in the building sector (SPECIFICATION OF SECTION 49 (9) BY THE AMENDMENT).
So, a foreign person will preferably apply tax refund through an application for the refund of tax paid for goods and services before deduction of the tax through tax return.
2.2 Refunding tax to persons enjoying privileges and immunities following international law and tax exemption
By the amendment to the act, the period for tax refund is reduced from two years to six months after registration of diplomatic personal vehicles or diplomatic commercial vehicles with assigned vehicle registration plates starting with EE or ZZ, for which the tax has been refunded and the vehicles are destroyed or alienated. Where a foreign taxpayer has claimed refund of tax paid at the price of a personal vehicle and ends its operation in the Slovak Republic, it is obliged to repay the tax within six months after registration of the vehicle.
2.3 Transferring tax liability in construction works. Persons obliged to pay the tax to the tax administrator
In practice, a supplier of construction works can be classified differently than its client, mainly due to different description of the same activity. For this reason, so-called legal fiction has been introduced in order to transfer the tax liability in construction works, which is to transfer the legal certainty for both the supplier and the client and to eliminate excess administrative burden in multiple checks of correctness of the classification according to the CPA classification.
A new provision has been inserted in the act, stating that where a taxpayer supplies construction works or goods with installation and considers these construction works or goods with installation to be a supply following section 69 (12) (j) and where the invoice issued states the information “transfer of tax liability”, the taxpayer being the receiver of the supply is the person obliged to pay the tax.”.
2.4 VAT Control Statement
A new obligation of the taxpayers that make a supply with a transfer of tax liability in the building sector – to report issued invoices in the VAT control statement, even where the supplies are not reported in the VAT return. The invoice will be reported in part A.2. of the VAT control statement and the data stated in the invoices will be used in the analytical activity of the financial administration.
2.5 Compensation for the retention of excess deduction during tax inspection
The amendment to the act introduces financial compensation for the retention of excess VAT deduction, co-called excess deduction interest.
Where the period for the retention of excess deduction exceeds six months after passing of the period for refund of the excess deduction as provided for by the law, a taxpayer is entitled to the excess deduction interest. The taxpayer will not file any application for recognising excess deduction interest as the respective tax authority will issue a decision on recognition of excess deduction interest of its own motion. A taxpayer is not entitled to the interest where the duration of the tax inspection is prolonged from reasons at the taxpayer’s part by repeated failure to fulfil the obligations imposed to the taxpayer in course of the tax inspection, to collect mails, to attend the tax authority at request without stating a reason and to be reached at its address, where the tax authority will issue a decision about it.
According to the transitional provision, the legal regulation of the entitlement to financial compensation for the retention of excess deduction during tax inspection will apply to the cases of retention of excess deduction based on a tax inspection which began after 1 January 2017 as well as to the cases where a tax inspection began before the effectiveness of this amendment and did not finish before 1 January 2017.
2.6 Self-assessment of the import of goods from third countries
With the effect of the amendment to the Act on Value Added Tax from 31 December 2016, the effect of self-assessment of the import of goods from third countries is suspended. The effect of self-assessment of the import of goods through a filed tax return will be applied depending on the amount of the debt of the public administration of the Slovak Republic and will be applied from 1 January of the calendar year following the year, in which the European Commission (Eurostat) published data relating the amount of the debt of the Slovak public administration, according to which the difference between the upper limit of debt determined for the given year and the current level of the debt for the respective budget year is more than 11 percentage points.
