Indirect Tax News - April 2022

New rules for VAT registration of nonresident suppliers, higher registration threshold and input VAT deduction

Slovenia has implemented the EU rules on nonresident VAT registration requirements into its domestic law and has received approval from the EU Council to continue to apply a higher VAT registration threshold. In addition, changes have been made to the right to deduct input VAT.

Nonresident registration requirements

In a law published 22 January 2022, Slovenia implemented article 194 of the EU VAT Directive into its domestic legislation. Article 194 allows EU member states to implement in their domestic law the reverse charge mechanism when the taxable supply of goods or services is made by a non-established business, which means that, in practice, the VAT liability of a domestic supply made by a nonresident supplier is shifted from the supplier to the customer, who will be responsible for accounting for the VAT on the transaction via the reverse charge (i.e., the recipient will account for VAT).

Article 194 provides that nonresident suppliers are not required to register for VAT purposes in Slovenia if the nonresident only makes supplies to Slovenian customers that are subject to reverse charge VAT and the nonresident does not engage in any other transactions that would require a Slovenian VAT number. As a result, under this simplification measure, nonresident suppliers do not need a Slovenian VAT number after 22 January 2022 if they only invoice supplies of goods or services in Slovenia to customers that have a Slovenian VAT number and the nonresident does not engage in other types of transactions, such as intra-EU acquisitions (purchases) of goods in Slovenia, intra-EU supplies of goods from Slovenia to other EU member states or supplies of goods or services to customers that do not have a Slovenian VAT number.

Nonresidents engaged in construction work in Slovenia or nonresidents making supplies involving an installation transaction do not have to register for VAT purposes if the above requirements are met.

Nonresidents that currently are registered for VAT in Slovenia should determine whether registration is still required. However, before making any VAT deregistration, the nonresident should consider whether it is entitled to a quick refund of VAT surplus, as opposed to using the normal VAT refund process, which generally takes four to five months.

Higher VAT registration threshold approved

Slovenia has been authorized by the EU Council to continue to apply a higher VAT registration threshold. In an implementing decision released on 21 March 2022, the council extended the period in which Slovenia may apply a EUR 50,000 in annual revenue threshold through 31 December 2024.

The EU VAT directive provides that member states may grant a VAT exemption for taxable persons with annual turnover that does not exceed EUR 25,000 (or the equivalent in a national currency). For several years, Slovenia has benefited from a derogation from the threshold amount, thus allowing more smaller businesses to benefit from VAT-exempt status and avoid VAT compliance and record-keeping obligations. Slovenia has received three authorisations to apply a higher threshold starting from 2015 and, most recently, through 31 December 2021. In October 2021, the country requested another authorisation to apply the EUR 50,000 threshold through 2024.

As from 1 January 2025, the EU threshold for a VAT exemption will increase to EUR 85,000 (or the equivalent in national currency), so Slovenia will not need to request any further authorisations (if the threshold remains at EUR 50,000).

Deduction of input VAT

A change has been made to the rules governing the timing of an input VAT deduction under Slovenian VAT law. Previously, input VAT (relating to Slovenian domestic invoices and import documents) could be deducted only in the month the invoice was received; for example, where an invoice was issued for goods or services supplied on 31 January and the invoice was received on 1 February, the VAT had to be deducted in the February VAT return.

As from 22 January, the VAT deduction may be taken in the month the taxable event occurs, provided the taxpayer receives an invoice (or other relevant document) and VAT is charged by the deadline for submitting the VAT return. Due to this change, the seller’s VAT obligation and the buyer’s right to deduct input VAT arise in the same period. 

Tanja Urbanija