I.
The National Council of the Slovak Republic had its first reading on 26 June 2019 for the approved a parliamentary motion to promulgate the law amending Act No. 222/2004 Coll. on Value Added Tax, as amended (“VAT act”). The draft amendment proposes reducing the VAT rate to 10% on all foodstuffs, with exceptions specified by law (beverages, sweets, food additives, aromas, nutritional supplements and confectionery products). The amendment is expected to be approved and should take effect on 1 January 2020.
II.
On the same day, and also in its first reading, a proposal to promulgate a law to add Annex 7 to the VAT act was also approved, and which would define the list of products eligible for the reduced tax rate. This parliamentary motion proposes the introduction of a reduced tax rate on newspapers, magazines and periodicals, including those that are illustrated or that contain advertising materials. The justification report for the draft law also contains specific negating restrictions and therefore that the reduced tax rate will not be applied to newspapers, magazines and periodicals in which advertising materials, either individually or collectively, account for more than 50% of the total content. The given reduced tax rate is also not applied to newspapers, magazines and periodicals in which erotic content, either individually or collectively, account for more than 10% of the total content. The amendment is expected to be approved and should take effect on 1 January 2020.
III.
The government’s draft amendment of the VAT act is in the inter-departmental commenting process and is intended to introduce a number of changes. One of them is the introduction of the new CALL-OFF STOCK tax regime with respect to the delivery of goods.
- CALL-OFF STOCK regime
The CALL-OFF STOCK regime is intended to cover the relocation of a domestic taxable person’s taxable goods to another member state for their subsequent delivery to a customer known in advance. The CALL-OFF STOCK regime is applied upon the cumulative fulfilment of specified conditions, specifically:
- goods are dispatched or transported by a VAT payer or third party on its behalf from a domestic location to another member state to which the goods will be delivered at a later time and after completion of transport to a taxpayer who will be authorise to take over title to such goods pursuant to an agreement between taxable persons;
- the VAT payer who dispatches or transports the goods under the previous subsection does not maintain its registered office or a permanent establishment in the member state to which the goods are dispatched or transported;
- the taxable person to whom the goods are to be delivered is registered and has a VAT identification number in the member state to which the goods are dispatched or transported, and the dispatching or transporting VAT payer knows their business name and VAT identification number assigned by the given member state at the time such dispatch or transport begins;
- the VAT payer specified the relocation of the goods in its records;
- the VAT payer specified the VAT identification number of the taxable person who acquired the goods and assigned by the member state to which the goods are dispatched or transported in its summary reporting statement.
- If the conditions specified above are met, the relocation of the goods to another member state will not be considered relocation under §8 (4) of the VAT act.
Differentiation between the CALL-OFF STOCK regime and standard deliveries of goods
The amendment to the VAT act resolves the conditions for differentiation to ensure the relocation of goods to another member state by a VAT payer (using the CALL-OFF STOCK regime) is not considered delivery of the goods, and therefore to avoid interchanging these tax regimes. One of the conditions is the requirement that the relocated goods be turned over to the buyer (or the obligation of the seller to transfer title to dispose of the goods as their owner) within 12 months of completion of transport.
If the goods are not delivered to the taxable person within 12 months from the completion of transport, such relocation of the goods to another member state would be considered a taxable transaction on the date following the expiration of this 12-month period.
No such taxable transaction occurs in such case if the goods were returned back to their domestic point of origin within this 12-month period and the supplier recorded such fact in its records.
After fulfilment of the conditions for the CALL-OFF STOCK regime and the transfer of title to dispose of the goods as the owner occurs within a 12-month period after the completion of transport, then delivery of the goods occurs at the moment the title to dispose of the goods as their owner transfers to the party acquiring to the goods.
The essence of the CALL-OFF STOCK regime is that the goods relocated from a domestic point of origin to another member state are considered delivered by the supplier and exempt from VAT until such moment that the customer acquires title to dispose of such goods as their owner.
Record keeping duty under the CALL-OFF STOCK regime
In connection with the CALL-OFF STOCK regime, the VAT payer will have the obligation to maintain a record for all relocated goods, returned goods or replacement of the taxable person under the CALL-OFF STOCK regime to contain the following information:
- the member state from which the goods were dispatched or transported and the date of dispatch or transport of the goods,
- the VAT identification number for the taxable person to whom the goods are to be delivered as assigned by the member state to which the goods are dispatched or transported,
- the member state to which the goods are dispatched or transported, the VAT identification number of the owner of the warehouse, the address of the warehouse where the goods are stored after arrival and date of arrival of the goods at the warehouse,
- the value, a description and the quantity of the goods that arrived at the warehouse,
- the VAT identification number for the taxable person replacing the person identified in the second subsection (change from the original to a new customer),
- the tax base, a description and the quantity of the delivered goods and the date at which delivery of the goods was completed and the VAT identification number for the customer,
- the tax base, a description and the quantity of the delivered goods and the date of the occurrence of any conditions and the corresponding reason for which the relocation of the goods no longer fulfils the conditions for CALL-OFF STOCK,
- the value, a description and the quantity of returned goods and the date of the return of the goods back to the member state from which they were dispatched or transported.
The VAT payer (identified as the customer in the CALL-OFF STOCK regime), the person registered for VAT under §7 or §7a of the VAT act, shall maintain a record for all goods dispatched or transported to it domestically from another member state within this regime containing:
- the VAT identification number of the taxable person whose goods were relocated within the stipulated CALL-OFF STOCK regime,
- a description and the quantity of goods to be delivered,
- the date on which the goods to be delivered arrived at the warehouse,
- the tax base, a description and the quantity of goods delivered to it and the date on which the acquisition of title to the goods within the European Union was completed,
- a description and the quantity of goods and the date on which the goods were removed from the warehouse based on an order from the taxable person specified in the first point,
- a description and the quantity of any destroyed or missing goods and the date of destruction, loss or theft of the goods that were previously delivered to the warehouse or the date on which it was determined that goods were destroyed or missing.
The summary reporting statement under the CALL-OFF STOCK regime
In connection with the application of the CALL-OFF STOCK regime, the VAT payer will be obliged to submit a summary reporting statement per calendar month (or quarter) in which:
- it dispatched or transported goods in the CALL-OFF STOCK regime;
- the taxable person for whom the goods were dispatched or transported under the CALL-OFF STOCK regime if replaced by another taxable person (change in customer).
Given that the delivery of the goods within the CALL-OFF STOCK regime does not have to occur in the same period in which such goods were dispatched or transported, the VAT payer may be required in practice to file a summary reporting statement for such goods twice – the first time when the goods are dispatched and the second upon delivery of the goods.
- Assignment of transport in a chain of deliveries within the EU:
The amendment of the VAT act shall also specify to whom the dispatch or transport of goods is assigned within a chain of deliveries involving the same goods transported directly from the supplier to the customer within the European Union, which has an influence on the VAT regime that is applied. If the same goods are involved in multiple consecutive deliveries and such goods are dispatched or transported from one member state to another member state directly from the initial supplier to the final customer within a chain of deliveries, such dispatch or transport is only assigned for delivery completed for the intermediate person. If the intermediate person reports their VAT identification number to their supplier as assigned by the member state from which the goods were dispatched or transported, such dispatch or transport is only assigned for the delivery of goods completed by the intermediate person. Any other supplier within a chain of deliveries other than the initial supplier within the chain of deliveries is defined as an intermediate person.
- Reduction in VAT for free-of-charge transfer of assets valued at up to EUR 1,700
The amendment of the VAT act contains a proposal to consider the age of a non-depreciated asset within the delivery of goods for personal consumption, free-of-charge or for any purpose other than business use. Beginning in 2020, the tax base for goods with an acquisition cost not to exceed EUR 1,700 and a service life of greater than one year should have a “hypothetical” residual value, that would be calculated in the same manner as for assets that would be depreciated for tax purposes using the straight-line method over a four-year period. This means that if, for instance, a VAT payer provided a five-year-old computer with an original value of VAT 1,500 at no charge, he would not have to pay the tax on such donation.
- Change in conditions for VAT exemption for deliveries of goods to the European Union
The amendment of the VAT act proposes, with a reference to Article 45a of Council Implementing Regulation (EU) 2018/1912, specifies the specific documents demonstrating that the supplier dispatched or transported goods to another member state. Under the draft amendment, a supplier must have a minimum of two documents that function as non-conflicting evidence and confirmation of the dispatch or transport of goods to another member state to apply the VAT exemption.
A condition for exempting the deliveries of goods to another EU member state will include the supplier filing a summary reporting statement for the given period with accurate, complete and correct data for the given period. The tax office will no longer recognise the VAT exemption for deliveries of goods to other member states beginning in 2020 if the supplier fails to file the summary reporting form for the given period or if the data in a submitted summary reporting form is inaccurate, incomplete or incorrect. This above does not apply if the supplier is able to sufficiently justify the inaccuracy or incompleteness of such data, which was not the result of intentional action.
- Adjustment of the tax deduction from services rendered on fixed assets
The amendment proposes that a VAT payer be obliged to adjust the VAT deducted from services rendered on fixed assets for which no VAT deduction was applied during their acquisition under the assumption that such services resulted in a permanent increase in the value of such fixed asset. The VAT payer must adjust the VAT deducted from such services if the fixed asset is delivered for their personal use, the personal use of their employees or if the fixed asset is delivered at no charge. Adjustment of the VAT deducted from services shall be performed:
- for a period of no more than 60 calendar months (after considering the period during which the fixed asset was used for business purposes after the services were rendered) from application of the VAT deduction for an fixed asset that is a moveable asset with a value of EUR 3,319.39 and higher and with a service life of greater than on year;
- for a period of no more than 240 calendar months (after considering the period during which the fixed asset was used for business purposes after the services were rendered) from application of the VAT deduction for fixed assets which are structures, building lots, flats and non-residential premises.
- Adjustment of the VAT deduction for moveable fixed assets sold within 5 years from their acquisition
The amendment of the VAT act should introduce a stipulation whereby if in a five-year period for adjustment of the VAT deduction, a VAT payer delivering a moveable fixed asset:
- with VAT or with the tax exemption and eligible to deduct such tax, this asset shall be treated as if it was used exclusively for business purposes until the end of the five-year period for adjustment of the tax deduction;
- with the tax exemption but ineligible deduct such tax, this asset shall be treated as if it was used exclusively for purposes other than business usage until the end of the five-year period for adjustment of the tax deduction;
