The online store or “e-commerce” is an increasingly popular form of supplying products or services via the Internet, i.e. “online”.
Selling over the Internet is characterized by being performed “online” regardless of national boundaries. However, certain restrictions may be associated with national regulations of the individual Member States. Pursuant to the Slovak legislation, a service provider is assessed under the law of the Member State in which it has been registered.
VAT Registration
Obligations of a Domestic E-Commerce Operator
When is VAT registration mandatory?
Under the VAT Act the e-commerce operator as a domestic taxable person shall be obliged to register for VAT if its turnover over a maximum of 12 previous consecutive calendar months exceeds EUR 49,790 (§4 of VAT Act).
In case the e-commerce operator performs transactions with subjects from other Member States or from abroad (countries outside the European Union), the VAT Act defines the following statutory registration obligations:
- The obligation to register for VAT arises to an e-commerce operator, who is not a taxpayer, but who is a recipient of a service from a foreign subject from another Member State. The registration obligation arises prior to receiving a service from a foreign subject from another Member State. (§7a of the VAT Act).
- Provided that the e-commerce operator is not a taxpayer of the VAT or is not a subject registered for tax under § 7a of the VAT Act, he shall be obliged to register for VAT, if he purchases goods from other EU Member States, the value of which in a calendar year reaches EUR 14,000 tax.
- An e-commerce operator who is not a taxpayer and who has an inland registered seat, place of business, business establishment or who usually resides in inland, supplies a service, which place of delivery is in another Member State and a subject liable to pay the tax is the recipient of the service, he shall be obliged to register for VAT prior to the supply of the service.
- If an e-commerce operator supplies goods in the form of mail order sale to another Member State, he shall be obliged to register for VAT in another Member State, if he exceeds the specified limit determined in the national tax legislation of another Member State.
- If an e-commerce operator supplies services with place of delivery in another Member State and a transfer of tax liability to a recipient is not possible, he shall be subject to registration for VAT.
However, we note that the individual supplies of goods or goods to other Member States or abroad and the resulting obligations may be governed by national legislation of individual countries.
Voluntary registration
An e-commerce operator can voluntarily register as a VAT payer also if he does not meet the statutory turnover pursuant to § 4 of the VAT Act, if it is more favourable for his business.
When registering for VAT under § 4, where an e-commerce operator becomes a taxpayer, the benefit provided by the law is the possibility of deducting tax on goods or services that were acquired in the period when the e-commerce operator was not yet a VAT payer. The law defines the precise conditions under which this tax may be deducted i.e. return to the e-commerce operator.
VAT Tax Return, VAT Control Statement and EU Sales List:
An e-commerce operator who has the obligation to register under the VAT Act shall be obliged to file VAT Tax Return for each calendar month, in which the tax liability has incurred, together with the VAT Control Statement.
The e-commerce operator is obliged to file the EU Sales List for each calendar quarter. The possibility of filing the EU Sales List for each calendar quarter does not apply if an e-commerce operator exceeds the statutory threshold of EUR 50,000 – in this case he shall be obliged to file a monthly EU Sales List.
Chargeability of VAT
When the goods are sold domestically, a major influence on determining the place of delivery has the fact, whether the goods were received directly in an e-commerce or a delivery is associated with transport or consignation. In case of a delivery associated with transport or consignation, the place of delivery shall be deemed to be the place, where the goods are located at the time of transport of consignation. If a customer chooses to pick up the goods at an e-commerce personally, the place of delivery shall be deemed to be the place, where the customer picks up the goods. If the delivery of the goods is performed in Slovakia, it is sold to a Slovak customer and the e-commerce is a VAT payer in Slovakia, the tax liability arises on the date of delivery of the goods or on the date of receipt of the payment for the goods.
Costs incurred that are related to the delivery of the goods (cash on delivery and shipping costs) are deemed to be the part of the tax base of the goods sold.
When delivering the goods or providing a service or at the receipt of the payment prior to the delivery of goods or service, the e-commerce operator shall be obliged to issue an invoice with all required essentials pursuant to the VAT Act. The e-commerce operator may decide also to issue an electronic invoice, however in this case consent of the recipient of the goods is required.
Obligations of a foreign e-commerce operator in the Slovak Republic:
If a foreign e-commerce operator supplies goods to inland in the form of mail order sale and the total taxable value excluding tax of the goods supplied in the calendar year reaches EUR 35,000, such foreign subject shall be obliged to register in the Slovak Republic.
A foreign subject may apply for registration also in case the value of goods supplied to inland in the calendar year did not exceed the limit of EUR 35,000.
Definition of mail order sale
The mail order sale is a sale of goods that a foreign subject from another Member State transfers or ensures a transfer on its account to inland to a buyer who does not have a VAT identification number assigned.
A foreign subject from another Member State that would supply goods subject to excise duty and such goods would be intended for personal consumption of an individual person, it shall be obliged to apply for registration irrespective of the limit that would be achieved by sale in inland prior to its supply. In case of a supply of the goods subject to excise duty, the supply of goods is the mail order sale only if the goods are supplied to natural persons for personal consumption.
Invoicing and use of exchange rates in mail order sale
A foreign e-commerce operator cannot issue a simplified invoice under the VAT Act in case of a mail order sale. This means that the issued invoice shall, among others, include also details of the recipient of the goods, tax base excluding VAT in EUR, tax rate and a total tax amount in EUR. In case the particular invoice was issued in a currency other than EUR, a rate determined and declared by ECB or NBS on the date preceding the occurrence of tax liability shall be used to convert to the EUR currency.
Another option is to use the rate valid under customs regulations, the use of which, however, must be reported to the relevant tax authority before it is first used. The advantage of the customs rate is that it is valid for the entire month after its publication and that the e-commerce operator does not have to follow the rate on a daily basis.
E-commerce as a provider of electronic services:
A separate area of an e-commerce in terms of VAT is a supply of electronic services to non-taxable subjects (in particular to citizens – non-entrepreneurs).
Electronic services under the VAT Act are as follows:
- provision of websites, webhosting, remote maintenance of programs and equipment,
- supply and updating of software,
- supply of images, text and information and accessing of databases,
- supply of music, movies and games including gambling and transmission of political, cultural, artistic, sporting, scientific and entertainment events,
- distance learning.
In order to simplify the administrative difficulty arising from the fact that the supplier of those services has the obligation to pay VAT in Member States of his customers, which is preceded by registration for VAT in those countries, a simplification has been adopted, represented by a specific concept Mini One-Stop-Shop (MOSS).
The obligation to declare and pay the tax that appertains to the Member State of consumption shall be fulfilled by suppliers applying this regulation through a single tax return filed via an electronic portal in the Member State, where they shall identify for the use of this regulation (so-called Member State of identification – single point of contact).
For example, if a Slovak payer supplies software to customers (non-taxable subjects) in different EU countries and provided that he has no business establishments in the EU territory, he may decide to use the special MOSS regulation so that he does not have to register in all EU countries where he supplies services. The Member State of identification may be only the Slovak Republic, where the operator has a registered office.
In order to apply the special MOSS regulation the operator must first register. The payer shall be obliged to file the MOSS electronic tax return in the Slovak Republic no later than on the 20th day of the calendar month following a calendar quarter, for which the MOSS tax return is being filed. In the MOSS tax return he shall provide separately the supplies of electronic services for each Member State of consumption, in which the tax is due.
Please do not hesitate to contact us in case of any additional queries or need of assistance in this issue.
