Effective 1 January 2020, the provisions of §44 of the VAT Act have been amended to include a new letter c), which is used to clarify the tax exempt status of goods acquired domestically from another member state if the party acquiring such goods would be entitled to a VAT refund in the full amount.
Who is affected by this change?
Foreign entities that do not have a permanent establishment in Slovakia for VAT purposes (i.e. registration pursuant to §5) and who meet the tax refund conditions in their full scope.
Does such a foreign entity need to file a tax return?
Yes, under the amended §78 (2) of the VAT Act, a foreign entity must file a tax return in the case of tax exempt acquisition.
What effect does such exempt status have on the foreign entity’s tax return?
Prior to 2020, a foreign entity reported their tax obligation when acquiring goods from another member state in rows 7 and 8 of the tax return (at the basic tax rate) and their entitlement to a VAT deduction on row 21. Effective 1 January 2020, such exempt acquisition shall be reported on row 15 of the tax return as an exempt delivery.
The overall impact on the foreign entity’s tax obligation is and remains neutral.
Example:
A foreign entity from another member state registered under §5 of the VAT Act transfers goods to Slovakia after 1 January 2020 that it will then domestically deliver exclusively to Slovak taxable entities. No other deliveries to Slovakia are performed.
Given that these deliveries shall be subject to a reverse charge under §69 (2) of the VAT Act, the foreign entity fulfils the conditions for a tax refund in the full scope under §55a of the VAT Act and the acquisition of the transferred goods by the foreign entity shall be tax exempt. The foreign entity shall report the transfer of the goods on row 15 of the tax return.
