mailingLeitner Slovakia | VAT changes you should know about

Dear clients and partners,

In the latest edition of the LeitnerLeitner newsletter, we provide an overview of significant VAT changes, including changes to VAT rates, that have been approved by Parliament as part of the financial consolidation efforts.

In the next edition, we will focus on further changes introduced by the consolidation package. Keep an eye out to learn how these developments will impact your business.

Please also mark November 27, 2024, on your calendar – we’re preparing our traditional WinterMeetUp with LeitnerLeitner, focusing on tax news. We look forward to your participation.

We would be happy to assist if you need more information.

We for you,

Anna Fábryová & Martin Michalides

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VAT changes you should know about

VAT rates “earthquake”

From January 1, 2025, there will be substantial changes to the current VAT rates as follows:

• the standard VAT rate will be increased from 20 % to 23 % and will apply to all goods and services except:
  • other food products, non-alcoholic beverages served in restaurants and electricity, for which a new reduced VAT rate of 19 % is introduced;
  • and basic food products, medicines, books, accommodation services, selected catering services, where the VAT rate of 10 % will be reduced to 5 %. The 5 % rate will continue to apply to the supply and reconstruction of buildings under state-supported rental housing, and to the supply of goods and services by social enterprises.

Registration requirements

Domestic taxable persons will be required to register as VAT payers upon exceeding a turnover threshold of EUR 50,000. If a domestic taxable person reaches this turnover within the calendar year, they will become a VAT payer on the first day of the following calendar year, unless the turnover in the current year exceeds EUR 62,500, which would trigger an immediate registration obligation. They will then be required to register for VAT within 5 days following the day, on which the reason for registration arises. The tax authority shall issue a decision on the VAT registration within 10 days and will be obliged to confirm the registration (i.e., from the day on which the reason for the registration arose). The conditions for voluntary VAT registration will remain unchanged.

A foreign taxpayer (without any registered office or fixed establishment in Slovakia) will become a registered VAT-payer by conducting a taxable transaction, which is subject to VAT in Slovakia, except for certain transactions as stipulated by law. Taxpayers must register for VAT within 5 days from the date they become a VAT payer. The tax authority is obligated to process the registration and assign a VAT number within 10 days upon receiving the application.

If a taxable person applies for late VAT registration, he must submit a comprehensive VAT return that includes all transactions for the entire period during which they should have been a VAT payer. The new regulations introduce a requirement to file monthly VAT returns and Control Statements for this period. Higher penalties will be imposed for late VAT registration.

The VAT Act implements a special scheme for small enterprises of foreign persons with a low turnover. The aim of this regulation is to simplify the administrative burden for small businesses (registration and application of VAT only after exceeding a turnover of EUR 50,000 or EUR 62,500 respectively) and thus to ensure equal treatment of both domestic and foreign entities.

Financial leasing

According to the new regulation, the tax treatment of financial leasing will change. While, until now, financial leasing has mostly been considered as a supply of services, the amended law considers it as a supply of goods. In particular, where the lease agreement contains a negotiated option to purchase goods and the exercise of that option represents the only economically rational choice for the lessee, such an agreement will be considered a delivery of goods.

The transitional provisions in the amendment to the law specify that the new tax treatment will not apply to lease agreements entered into before 1 January 2025. For more information, please refer to our Mailing from August 2023.

Further changes effective from January 2025

• VAT deduction from IC acquisitions without invoice: A taxpayer acquiring goods from another EU Member State will be entitled to deduct input VAT in the period when the VAT becomes chargeable, even if it has no invoice from the supplier. In this case, the taxpayer is required to prove the right to deduct VAT by providing other relevant documents that show the acquisition of goods and the amount of VAT liability to be reported.
• Cut of the threshold for issuing simplified invoices: Currently, a simplified invoice may be issued for the supply of goods or services up to EUR 1,000 (excluding VAT). The amendment reduces this threshold to EUR 400 (excluding VAT).
• Revision of the place of supply of services for virtual events: The rules governing the place of supply of services relating to virtual events are also being amended. In the case of a virtual event (e.g. the provision of the right to participate in an online swimming event), the place of supply will be determined according to the establishment/residence of the recipient.

Reverse-charge on imports from July 2025

One of the most significant changes is the introduction of the possibility to apply for VAT deduction at the time of importation, provided that specific conditions are met, which will simplify and speed up the entire process for importers. From July 2025, domestic taxable persons registered for VAT will be able to utilize the reverse charge mechanism upon the release of goods into free circulation or under certain specified customs regimes. Foreign taxable persons registered for VAT will be able to apply the reverse charge on imports starting January 2026 within the framework of centralized customs procedure.

Proposal of new VAT Act amendment

The Ministry of Finance is preparing another amendment to the VAT Act, which proposes also the introduction of the following changes:

• Free of charge supply of goods: The tax base for the free of charge supply of goods will be determined based on the purchase price at the time of supply (i.e., not based on the acquisition price).
• VAT deduction on fuel purchase: It is proposed to eliminate the option to claim VAT deductions on fuel purchases based on a lump sum of 80 %. VAT payers will only be able to deduct VAT up to the actual use of fuel for business purposes, which must be proved (e.g., through a mileage log).
• Introduction of a new term – „Initial Use”: This refers to the first actual use of goods and services by the taxpayer for his own supply of goods and services, which gives rise to the right to deduct VAT. Initial use represents a new criterion for the start of the input VAT adjustment period tax as well as for the standard mechanism of VAT correcting.

Taxation of sweetened non-alcoholic beverages

Slovakia is introducing a tax on sweetened non-alcoholic beverages, which will apply to drinks sweetened with sugar or other sweeteners. Starting January 2025, these beverages will be taxed at several rates, with the basic rate set at 0,15 EUR/liter of sweetened non-alcoholic beverage. This new tax will not be calculated as a percentage of the product’s price but rather as a fixed amount per unit (liter or kilogram) upon its first delivery within Slovakia. The implementation of this tax aims not only to increase state budget revenues but also to contribute to public health improvement by encouraging the population to reduce their consumption of sweetened beverages.