In this article we bring you the latest information on the amendment to VAT Act which has been approved by parliament with effect from 1.1.2019.

1 Supply of Goods and Services using a Voucher

The amendment introduces a distinction between two types of vouchers single-purpose and multi-purpose.

If the place of delivery of the goods or services covered by this voucher is known at the time of issue of the voucher and the amount of tax due on the goods or service in question is known, it is a single-purpose voucher. Under the new regime, any provision of a single purpose voucher to a customer is considered to be the supply of the goods or service to which it relates, while the actual handing over of the goods or the supply of the service to their vendor in exchange for the voucher will no longer be considered a separate transaction for VAT purposes.

All other vouchers will be considered to be multi-purpose. The VAT position of these vouchers remains unchanged.

The above regulations will relate to vouchers issued after 30 September 2019.

2 Place of Supply of Digital Services

Under the current wording of the VAT Act, so far, the place of delivery of telecommunication services, radio and television broadcasting services, electronic services to a person other than a taxable person is the place where the customer (the person other than a taxable person) has its registered office, place of residence or place of usual abode.

The amendment introduces a simplifying rule for small providers of the above-mentioned digital services in that the place of delivery of the services to a person other than a taxable person will be the place where the supplier is established (for example, the location of its registered office, place of business or branch). However, one of several conditions will be that the total value of services, excluding tax does not exceed 10 000 euros in the calendar year, and this amount did not exceed 10 000 euros in the previous calendar year.

3 Supply and Letting of Real Estate

Supply of Real Estate

The amendment to the VAT Act introduces a limit for suppliers of residential structures, who will no longer be able to decide 5 years after supplying the real estate that it will not be exempt from VAT and they will therefore have to apply VAT exemption.

At the same time the term first building approval is defined in more detail, as:

• First building approval or use of the structure,

• Building approval for construction work leading to a change in the purpose of use of the structure. The costs for construction work must be at least 40 % of the value of the structure prior to the change in purpose,

• Building approval after renovation of structures. Costs for renovation must be at least 40 % of the value of the structure before renovation.

These changes are to relate to construction work begun after 31 December 2018.

Letting of Real Estate

Another important change is the limitation in the right to choose taxation of real estate designated as residential. Without regard for whether the tenant is or is not a taxable person, the landlord is obliged to apply an exemption from tax on rent if the subject of the lease is designated as residential.

These changes are to relate to contracts for rental of real estate concluded after 31 December 2018, on the basis of which the real estate is handed over for use after December 2018.

4 Abolition of VAT Bonds

With effect from 1.1.2019 the VAT Bond paid upon registration for VAT is abolished. VAT bonds paid before 31.12.2018, which have not been used to pay tax arrears of parts thereof are also being abolished and will be returned by 28.2.2019.

5 Reduced VAT rate for Hotel, Tourist and Accommodation Services 

From 1.1.2019 the rate of VAT is reduced from 20 % to 10 % on the following selected services:

• Hotel and other accommodation services,
• Tourist and other short-term accommodation services,
• Operation of campsites and recreational and holiday camps,
• Other accommodation services (for example accommodation services in student homes, halls of residence, and workers’ hostels).

6 Change to VAT Refunds for Travellers Exporting Goods

In connection with the ongoing trend of digitization of the Slovak Republic's Financial Administration, it is proposed to simplify the process of tax refunds for passengers exporting goods by enabling electronic means to be used and to entrust another person to arrange a tax refund on behalf of the passenger if that person has a refund agreement with by the Financial Directorate. In addition, under the new rules VAT will be refunded if the total value including the tax on the goods exported on the purchase receipt is higher than 100 euros (the current threshold is 175 euros).

7 Transfer of Tax Liability for Supply of Selected Agricultural Crops and Selected Metals

The amendment effective from 1 January 2018 introduced a mandatory transfer of tax liability to the purchaser upon the delivery of selected agricultural crops and selected metals regardless of the invoiced amount, which in practice caused problems with the purchases of these goods in retail chains. In order to eliminate these problems, the transfer of tax liability for the supply of these commodities is avoided if a simplified invoice, such as a receipt from an electronic cash register, is drawn up during the sale.

8 Cross-border Financial Leasing

On the basis of the jurisprudence of the European Court of Justice the amendment aims to unify the application of VAT to cross-border financial leasing, whereby it cancels reciprocity in assessing whether financial leasing constitutes supply of services or delivery of goods. Experts, however, are discussing the real impact of this change on financial leases under which the lessee has the right to purchase the subject of the lease and therefore the right of ownership is not automatically transferred upon the payment of the final instalment. If you are interested, we will be pleased to inform you about these changes in more detail.