Indirect Tax News - January 2023

Changes to VAT Act reduce administrative burdens and VAT rate on certain supplies

Several changes to the Slovak VAT Act apply as from 1 January 2023, including the introduction of a reduced VAT rate for certain supplies, a requirement that customers correct deducted VAT if payment has not been made for the supply, new rules for determining when a VAT debt is irrecoverable and a VAT registration waiver for certain taxable persons. In addition, the EU payment service providers directive has been implemented into Slovak law; as from 1 January 2024, new recordkeeping and reporting requirements will apply to payment service providers with respect to cross-border payments, which will be shared among the tax authorities in the EU member states.

Reduction of VAT rate

To provide support to the tourism and catering sectors, a reduced VAT rate of 10% applies as from 1 January 2023 for (i) the transportation of persons via cable car and ski lifts; (ii) access to indoor and outdoor sports facilities; (iii) access to swimming pools; and (iv) restaurant and certain catering services.

Correction of deducted VAT on unpaid liabilities

A customer is now required to correct deducted VAT relating to purchased goods or services to the extent of any unpaid liability if the supplier has not been paid within 100 days of the due date. If the customer eventually pays all or part of the liability, it will be able to deduct the corresponding input VAT. Based on transitional provisions, this rule also applies to supplies of goods and services made before 1 January 2023 if 100 days have elapsed by that date.

Bad debt relief for suppliers

Changes have been made to the bad debt relief rules where VAT has not been paid on a supply and the claim is not recoverable. Specifically, the rule that a VAT debt will be deemed to be irrecoverable only if it has been outstanding for more than 12 months and  the receivable is valued at up to EUR 300 is abolished. Instead, a debt is now considered irrecoverable if it is overdue for 150 days and the claim:

  • Does not exceed EUR 1,000, including tax, and the supplier can demonstrate that it took steps to obtain payment; or
  • Is for more than EUR 1,000, including tax, and the supplier has filed a lawsuit in a court other than an arbitration court or the payer proves that the claim is being enforced through execution proceedings.

A VAT debt will be considered irrecoverable if the 150-day period ends after 1 January 2023.

Waiver of VAT registration requirement

The VAT registration requirement will be waived where a taxable person only carries out exempt activities (e.g., insurance services, financial services or the supply and leasing of immovable property) where turnover from such activities exceeds EUR 49,790 in a 12-month period.

Lucia Bellanova

Petra Huzovicova