Transpositioning of Directive (EU) 2018/957 of the European Parliament and of the Council of 28 June 2018 amending Directive 96/71/EC concerning the posting of workers in the framework of the provision of services into Slovak law. 

• The original scope, or ‘hard core’ of the directive composed of the minimum wage tariff is expanded to include the application of other mandatory wage components,
• Assurance of comparable working and wage conditions for foreign posted employees to a Slovak user employer:

The host (foreign) employer under §5 (2)(c) of the Labour Code is obliged during the posting of their employee in Slovakia to pay the employee a wage and other pertinent details in accordance with the Labour Code, other employment law regulations and higher-level collective bargaining agreements valid in Slovakia with respect to:

• the minimum wage,
• minimum wage entitlements,
• wage premium for overtime work,
• wage premium for work on holidays,
• wage premium for work on Saturday,
• wage premium for work on Sunday,
• wage premium for night work,
• wage compensation for difficult working conditions,
• other mandatory wage components (as determined under higher-level collective bargaining agreements),
• wage compensation for vacation time.

Determination of if the host employer provides the wage is conducted pursuant to §118 of the Labour Code.

The host employer is obliged to provide posted employees with reimbursement on business trips or trips to their standard workplace in Slovakia under Act No. 283/2002 Coll. on Travel Reimbursement or under the relevant higher level collective bargaining agreement, namely:

• reimbursement for travel costs,
• reimbursement for accommodations on business trips,
• meals.

For such obligation, it will be possible to calculate reimbursement for travel costs and reimbursement for accommodations and means or other comparable remuneration provided by the host employer under the laws of the country from which the employee is posted in the performance of services.

• Classification of posting by its duration:
  • short-term posting (12 or 18 months) – the ‘hard core’ conditions apply,
  • long-term posting (more than 12 or 18 months) – Slovak labour law applies in full, with the exception of rules for the establishment, formation, termination and expiration of employment and the prohibitions on performing other gainful activities during employment and on performing competing activities.

• Calculation of the posting period for chain postings,
• New information obligations on the part of the user employer to the temporary employer if an employee is posted by the user employer.

If you are interest in posting employees, our professional team of tax advisers and payroll consultants would be happy to answer any additional questions you may have.

Príspevok Posting of workers je zobrazený ako prvý na Moore BDR s. r. o..

Subsistence minimum

The subsistence minimum is increasing from EUR 205.07 in 2019 to EUR 210.20 in 2020.

Minimum wage

The government has approved an increase of EUR 60 in the minimum wage from EUR 520 to EUR 580. Together with the minimum wage, the minimum hourly wage has increased from EUR 2.989 to EUR 3.333 per hour.

Child tax bonus

Due to the change in the subsistence minimum, the monthly child tax bonus is set to rise from EUR 22.17 to EUR 22.72 per month per child over the age of 6. For children 6 and under, an increased child tax bonus in the amount of EUR 45.44 per month per child is provided throughout 2020.

The annual child tax bonus for a child 6 and under provides a EUR 545.28 reduction in tax obligations. The amount is EUR 272.64 for a child over the age 6.

Standard deduction

The amendment to the income tax act also modifies the calculation of the standard deduction. The standard deduction in 2020 is increasing as a result of the increase in the subsistence minimum and an increase in the calculation coefficient from EUR 328.12 per month to EUR 367.85 per month, an annual increase from EUR 3.937.35 to EUR 4,414.20. The annual increase in the standard deduction when applied in full provides a EUR 90.60 reduction in an individual taxpayer’s tax obligation.

Tax rates

15% – the amendment to the income tax act reduces the tax rate for natural persons reporting income under §6 (1) and (2) of the income tax of less than EUR 100,000 during the tax year in 2020.

19% – annual income of EUR 37,163.36 or less is subject to the 19% tax rate, which is a EUR 906.98 increase in this threshold over the previous year.

25% – any income over the amount of EUR 37,163.36 is subject to this higher tax rate in 2020.

Advance income tax payment obligations

The amendment to the income tax act raises the lower threshold for advance income tax payment obligations. The lower threshold is EUR 5,000 in 2020, compared to EUR 2,500 in 2019.

Statutory social insurance and health insurance deductions for trade license holders in 2020:

Minimum assessment basis

The assessment basis for health and social insurance has increased by EUR 29.50 from EUR 477.00 to EUR 506.50.

Maximum assessment basis

Social insurance – an increase from EUR 6,678 to EUR 7,091.

The maximum assessment basis for health insurance remains the same in 2020.

Contributions towards a child’s sports activities

A new contribution is being rolled out in 2020 for a child’s sports activities. An employee whose child is engaged in sports activities will be able to request that their employer cover 55% of eligible costs for such child’s sports activities, up to a maximum of EUR 275.

Eligibility conditions for the contribution

Employee:

• must be employed continuously for a minimum of 24 months,
• must file the request with their employer.

Employee’s child:

• must be under the age of 18,
• must have permanent residence in Slovakia (or residency status similar to permanent residence),
• must be a member of a sports organisation for a minimum of 6 months prior to the filing of the request for the contribution.

The sports organisation must be registered in the register of legal entities.

Self-employed persons may also use the contribution towards a child’s sports activities if they have performed such activities for a minimum of 24 continuous months.

Rental housing contribution

An employer may provide an employee with a rental housing contribution. The income tax act has permitted up to EUR 60 per month of such non-financial remuneration to be tax exempt if specific conditions are met. Beginning in 2020, the amendment of the income tax act increases this amount by EUR 40 per month. Therefore, a total of EUR 100 per month per employee may be completely exempt under specific conditions.

Príspevok What’s new in 2020 – employees and self-employed persons je zobrazený ako prvý na Moore BDR s. r. o..

Reduction in the income tax rate for selected taxpayers

The amendment will reduce the income tax rate from 21% to 15% for legal entities and natural persons with income classified under §6 (1) and (2) of the income tax act and with annual income (revenues) of up to EUR 100,000. This reduced rate will be applied to tax periods beginning on 1 January 2020 at the latest.

Increase in the non-taxable portion of the taxpayer’s tax base

The amount of the non-taxable portion of the taxpayer’s tax base is based on a multiple of the current subsistence minimum. This multiple of the subsistence minimum is set to increase from 19.2-times to 21-times beginning in 2020. Therefore, the non-taxable portion of the taxpayer’s tax base will be EUR 4,414.20 in 2020.

Change in the assessment base for social insurance premiums

In addition to the changes in the income tax act, the amounts of the minimum and maximum assessment bases used to calculate social insurance premiums will also be amended beginning in 2020. The new minimum assessment base for 2020 is EUR 506.50 with monthly insurance premiums for self-employed persons of EUR 167.89, while the maximum assessment base is EUR 7,091 with monthly insurance premiums for self-employed persons of EUR 2,350.66.

These new assessment bases apply to periods beginning in January 2020. Given that affected self-employed persons will first receive notification from the Social Insurance authority via letter or their electronic mailboxes in January 2020, the insurance premiums will be paid in the new amount beginning in February 2020.

Príspevok Tax news je zobrazený ako prvý na Moore BDR s. r. o..

Hendikepované deti sa aj vďaka našej pomoci mohli naučiť nové zručnosti na workšopoch ako latinoamerické zumba tance, maľovanie na tvár, ozdobovanie sádrových odliatkov, enkaustiku – maľovanie horúcim voskom na papier, pedig – prútikárstvo, streľbu z kuše a luku, razenie mincí, výrobu šperkov z kovu a doplnkov z kože.

Príspevok PODPORILI SME BENEFIČNÉ PODUJATIE OSMIDIV PRE MENTÁLNE POSTIHNUTÝCH je zobrazený ako prvý na Moore BDR s. r. o..

• Entities involved in tax administration – for reasons of legal certainty, a legislative text of the definition of a taxable person is specified in such a way so as to consider an organisational unit of an association – acting on its own behalf and being, therefore, a taxable person (Decision of the Supreme Court of the Slovak Republic, Case No. 3 Cdo 146/96) – to be a legal person;
• Use of languages in tax administration – for reasons of reducing administrative burdens, it is proposed that a tax authority may refrain from requiring a certified translation of documents submitted by a taxable person;
• Authority to act on one’s behalf – in the event a taxable person submits a power of attorney and subsequently submits another power of attorney, where the scope of the two powers overlaps, it is proposed that the new power of attorney replaces the existing one to the extent of their overlap. If a tax authority has doubts concerning the submitted power of attorney, the tax authority shall request a statement from the taxable person, and propose that the representative perform only necessary actions until the shortcomings are addressed in order for the representative not to perform an unrepeatable act. If a taxable person does not respond to such a request and does not remove the doubts, the tax authority shall consult the taxable person or a representative acting on the basis of a power of attorney, which the tax authority has no doubts about;
• Method of submission – it is proposed that in the event taxable persons – who are obliged to communicate by electronic means with the financial administration – deliver submissions with a prescribed structure by means other than via electronic submission at the Financial Administration Portal (g. in writing or through the Central Public Administration Portal ÚPVS), these persons shall be requested to deliver such submission in a proper way. Only if the taxable person fails to comply with such a request will such submission be deemed not to have been submitted;
• Tax Return – given the fact that the tax authority determines the tax by auxiliary calculations only when the taxable person fails to submit the tax return even after being delivered the request to do so by the tax authority, it is proposed to unambiguously establish that the taxable person may not submit the tax return for the tax year, for which the tax was determined by auxiliary calculations;
• Production of evidence – within the scope of providing evidence, it is proposed to establish that the taxable person shall prove the facts he/she was requested to prove in tax administration, not only in course of the tax audit or tax proceedings;
• Delivery by electronic means – it is proposed to clarify the provision concerning electronic delivery of documents in order to ensure the tax authority delivers documents by electronic means to the person who has access to electronic services, i.e. to the person, who is obliged to communicate with the authority by electronic means, or to the person who submitted a request to communicate by electronic means, as well as to the person who had no obligation to communicate by electronic means but has voluntarily registered on and was authorised by the Financial Administration Portal;
• Tax audit – it is proposed to remove indication of the reason for the commencement of the tax audit from the minutes on the commencement of the tax audit in order not to defeat its purpose in the event the audit is carried out on the initiative of a law enforcement authority. At the same time, it is established that the performed tax audit may be extended not only to another tax and tax year but also to an audit of another regulation, e.g. the Accounting Act; it is proposed to amend the provision on the delivery of protocol so that in the event the tax audit reveals a difference from the submitted tax return – where the protocol is delivered together with the request, – the request is part of the protocol;
• Procedure for determining the tax by auxiliary calculations – for reasons of legal certainty, it is proposed that the starting date for the determination of the tax by auxiliary means be the day following the date of delivery of the notice;
• Method of payment of tax – for reasons of efficiency, it is proposed that the tax authority send the notice of transfer of the payment only when the sum exceeds EUR 5. At the same time, it is proposed to refrain from sending notices when overpayment that is lower than EUR 5 is used;
• Tax deferral and payment by instalments – it is proposed that the decision granting the tax deferral and tax payment by instalments be repealed by law, i.e. without the decision of the tax authority in the event the decision by which the tax was assessed is revoked, e.g. by extraordinary remedies or court decisions, that is, if the original decision is revoked. In order to make this institute more appealing, it is proposed to shorten the period during which the tax deferral or tax payment by instalments is not permitted because the taxable person did not comply with the conditions laid down in the decision of the tax authority, i.e. shorten the period from five years to two years;
• Void decision – for reasons of legal certainty, it is proposed that a decision issued after the termination of the right to assess the tax shall also be considered void;
• Registration procedure – in the provision on the registration procedure it is proposed that the obligation of natural and legal persons to disclose the account numbers held with payment service providers is removed, seeing as such information is provided to the tax authority by the relevant providers;
• Tax assessment procedure – it is proposed to specify the provisions concerning the decision in the tax assessment procedure, which requires to issue a decision no later than three months from the period determined by the tax authority in the request to respond to the protocol. At the same time, it is proposed to establish that in the event the decision is repealed and the case is referred back by the appeal body for further proceedings, the same procedure is followed as in the tax assessment procedure carried out after the receipt of the protocol;
• Procedure of lodging an appeal by the first-instance bodies – due to the possibility of the taxable person to supplement his appeal until the period for lodging an appeal has expired, it is proposed that the period for referring the appeal to the second-instance body commence after the period for lodging an appeal has expired, and in case the tax authority requests the taxable person to supplement the appeal, the period for the referral of the appeal shall commence only when the taxable person supplements the appeal at the request of the tax authority;
• Tax overpayments and interest – a provision is proposed concerning tax overpayments, whereby the tax authority returns the overpayment to the account specified in the application by the taxable person. In the event the taxable person did not include the account number in the application, the tax authority shall return the overpayment to the account notified by the taxable person or a payment institution. In the event the tax authority does not have any record of the taxable person’s account number, the tax authority shall return the overpayment via a postal money order to the taxable person’s address, provided that the overpayment does not exceed EUR 15,000, i.e. the maximum amount that can be sent via a postal money order;
• Right of lien – it is proposed to amend the provision of the right of lien in order to unambiguously determine the moment the right of lien of the tax authority commences, i.e. when it becomes enforceable. It is proposed that the tax authority deliver the decision on the establishment of the right of lien to the debtor and to the cadastre or another register, i.e. the tax authority does not need to wait for the delivery to the debtor;
• Limitation and expiry of the right to recover tax arrears – it is proposed to amend the limitation period for the recovery of tax arrears following the period referred to in § 166 f of the Bankruptcy and Restructuring Act, according to which, upon cancellation of depth relief, the unsatisfied claims shall be fully restored to their original enforceability and due date. Such claims shall not be time-barred until at least ten years have passed since the cancellation of depth relief;
• Execution – it is proposed to provide that in the event where a taxable person or another entity initiates court proceedings in order to exclude property from tax execution, the tax authority shall postpone the tax execution regarding the property in question until the court has reached its final decision;
• it is proposed to communicate with the bank by electronic means in the event the execution is extended to another bank account, thus making the entire decision-making process more effective;
• it is proposed to expand the reasons for postponing tax execution; in the event the tax debtor or another person brings an action before the court in order to exclude property from tax execution;
• it is proposed to introduce a new type of tax execution – tax execution by withholding a driver’s license. In the event of this type of tax execution, the taxable person is indirectly compelled to fulfil his/her obligation in order to have the driver’s licence returned. The execution shall not apply to non-payers who are professional drivers.
• where the movable property is sold as part of the execution process, it is proposed to specify precisely the motor vehicle’s time of arrival in order not to obstruct the execution process, e.g. by the taxpayer arriving with the vehicle on a specified day, but in the evening hours;
• for reasons of legal certainty, it is proposed that the tax debtor’s time period for paying the enforcement costs shall commence on the date of the delivery of the tax authority’s decision;
• Penalties – it is proposed to reduce the lower limit of the penalty in the events where the taxable person does not fulfil his/her obligation imposed by the tax authority’s decision, and in the events where the taxable person does not fulfil one of the non-monetary obligations;
• a method of calculating the penalty is provided, where the tax has been assessed by an assessment order;
• it is proposed to provide that a penalty shall not be assessed in the event where the taxable person submits a supplementary tax return, which reduces the claimed tax refund or brought claim according to a separate regulation against the claim included in the “proper” tax return, and such tax or claim has not yet been refunded.

Príspevok AMENDMENT TO THE TAX ADMINISTRATION ACT (TAX PROCEDURE CODE) je zobrazený ako prvý na Moore BDR s. r. o..

Does your company provide fuel cards to its subsidiaries or other companies within the same group? In this special newsletter, we would like to inform you on

Let us demonstrate the considerations of the Court on the following example:

A parent company provides fuel cards to its subsidiaries on the basis of an Agreement with a fuel supplier. Subsidiaries use the cards to refuel vehicles which are in their property. The company receives monthly invoices for all transactions carried out by means of fuel cards. The company recovers input VAT from the fuel and reinvoices the costs of the fuel together with a surcharge of 2% to its subsidiaries.

Tax assessment of individual transactions:

1. The parent company applies input VAT from the invoice issued by the fuel supplier

According to the ruling of the Court, the parent company is not entitled to claim reimbursement of  VAT, as the company does not dispose of the fuel in respect of the purchase of which it seeks reimbursement of VAT as if it were the owner.

The fuel is purchased directly by the subsidiary from fuel suppliers and only the subsidiary can decide on the arrangement of purchase – i.e. which service station to refuel at and may freely decide on the quality and quantity of fuel, the type of fuel, as well as the date of purchase and means of use.

2. The parent company reinvoices the costs of the fuel together with a surcharge of 2% to its subsidiaries

The ruling says that reinvoicing of fuel to subsidiaries is not considered the sales of fuel, as the supply of fuel was not carried out for the benefit of the parent company. The parent company plays no more than an intermediary role by means of fuel cards. Consequently, the parent company provides its subsidiaries with a financial service, which is similar to granting credit, which is exempt from VAT.

Príspevok Fuel re-invoicing in the group je zobrazený ako prvý na Moore BDR s. r. o..

I.

The National Council of the Slovak Republic had its first reading on 26 June 2019 for the approved a parliamentary motion to promulgate the law amending Act No. 222/2004 Coll. on Value Added Tax, as amended (“VAT act”). The draft amendment proposes reducing the VAT rate to 10% on all foodstuffs, with exceptions specified by law (beverages, sweets, food additives, aromas, nutritional supplements and confectionery products). The amendment is expected to be approved and should take effect on 1 January 2020.

II.

On the same day, and also in its first reading, a proposal to promulgate a law to add Annex 7 to the VAT act was also approved, and which would define the list of products eligible for the reduced tax rate. This parliamentary motion proposes the introduction of a reduced tax rate on newspapers, magazines and periodicals, including those that are illustrated or that contain advertising materials. The justification report for the draft law also contains specific negating restrictions and therefore that the reduced tax rate will not be applied to newspapers, magazines and periodicals in which advertising materials, either individually or collectively, account for more than 50% of the total content. The given reduced tax rate is also not applied to newspapers, magazines and periodicals in which erotic content, either individually or collectively, account for more than 10% of the total content. The amendment is expected to be approved and should take effect on 1 January 2020.

III.

The government’s draft amendment of the VAT act is in the inter-departmental commenting process and is intended to introduce a number of changes. One of them is the introduction of the new CALL-OFF STOCK tax regime with respect to the delivery of goods.

• CALL-OFF STOCK regime

The CALL-OFF STOCK regime is intended to cover the relocation of a domestic taxable person’s taxable goods to another member state for their subsequent delivery to a customer known in advance. The CALL-OFF STOCK regime is applied upon the cumulative fulfilment of specified conditions, specifically:

• goods are dispatched or transported by a VAT payer or third party on its behalf from a domestic location to another member state to which the goods will be delivered at a later time and after completion of transport to a taxpayer who will be authorise to take over title to such goods pursuant to an agreement between taxable persons;
• the VAT payer who dispatches or transports the goods under the previous subsection does not maintain its registered office or a permanent establishment in the member state to which the goods are dispatched or transported;
• the taxable person to whom the goods are to be delivered is registered and has a VAT identification number in the member state to which the goods are dispatched or transported, and the dispatching or transporting VAT payer knows their business name and VAT identification number assigned by the given member state at the time such dispatch or transport begins;
• the VAT payer specified the relocation of the goods in its records;
• the VAT payer specified the VAT identification number of the taxable person who acquired the goods and assigned by the member state to which the goods are dispatched or transported in its summary reporting statement.

• If the conditions specified above are met, the relocation of the goods to another member state will not be considered relocation under §8 (4) of the VAT act.

Differentiation between the CALL-OFF STOCK regime and standard deliveries of goods

The amendment to the VAT act resolves the conditions for differentiation to ensure the relocation of goods to another member state by a VAT payer (using the CALL-OFF STOCK regime) is not considered delivery of the goods, and therefore to avoid interchanging these tax regimes. One of the conditions is the requirement that the relocated goods be turned over to the buyer (or the obligation of the seller to transfer title to dispose of the goods as their owner) within 12 months of completion of transport.

If the goods are not delivered to the taxable person within 12 months from the completion of transport, such relocation of the goods to another member state would be considered a taxable transaction on the date following the expiration of this 12-month period.

No such taxable transaction occurs in such case if the goods were returned back to their domestic point of origin within this 12-month period and the supplier recorded such fact in its records.

After fulfilment of the conditions for the CALL-OFF STOCK regime and the transfer of title to dispose of the goods as the owner occurs within a 12-month period after the completion of transport, then delivery of the goods occurs at the moment the title to dispose of the goods as their owner transfers to the party acquiring to the goods.

The essence of the CALL-OFF STOCK regime is that the goods relocated from a domestic point of origin to another member state are considered delivered by the supplier and exempt from VAT until such moment that the customer acquires title to dispose of such goods as their owner.

Record keeping duty under the CALL-OFF STOCK regime

In connection with the CALL-OFF STOCK regime, the VAT payer will have the obligation to maintain a record for all relocated goods, returned goods or replacement of the taxable person under the CALL-OFF STOCK regime to contain the following information:

• the member state from which the goods were dispatched or transported and the date of dispatch or transport of the goods,
• the VAT identification number for the taxable person to whom the goods are to be delivered as assigned by the member state to which the goods are dispatched or transported,
• the member state to which the goods are dispatched or transported, the VAT identification number of the owner of the warehouse, the address of the warehouse where the goods are stored after arrival and date of arrival of the goods at the warehouse,
• the value, a description and the quantity of the goods that arrived at the warehouse,
• the VAT identification number for the taxable person replacing the person identified in the second subsection (change from the original to a new customer),
• the tax base, a description and the quantity of the delivered goods and the date at which delivery of the goods was completed and the VAT identification number for the customer,
• the tax base, a description and the quantity of the delivered goods and the date of the occurrence of any conditions and the corresponding reason for which the relocation of the goods no longer fulfils the conditions for CALL-OFF STOCK,
• the value, a description and the quantity of returned goods and the date of the return of the goods back to the member state from which they were dispatched or transported.

The VAT payer (identified as the customer in the CALL-OFF STOCK regime), the person registered for VAT under §7 or §7a of the VAT act, shall maintain a record for all goods dispatched or transported to it domestically from another member state within this regime containing:

• the VAT identification number of the taxable person whose goods were relocated within the stipulated CALL-OFF STOCK regime,
• a description and the quantity of goods to be delivered,
• the date on which the goods to be delivered arrived at the warehouse,
• the tax base, a description and the quantity of goods delivered to it and the date on which the acquisition of title to the goods within the European Union was completed,
• a description and the quantity of goods and the date on which the goods were removed from the warehouse based on an order from the taxable person specified in the first point,
• a description and the quantity of any destroyed or missing goods and the date of destruction, loss or theft of the goods that were previously delivered to the warehouse or the date on which it was determined that goods were destroyed or missing.

The summary reporting statement under the CALL-OFF STOCK regime

In connection with the application of the CALL-OFF STOCK regime, the VAT payer will be obliged to submit a summary reporting statement per calendar month (or quarter) in which:

• it dispatched or transported goods in the CALL-OFF STOCK regime;
• the taxable person for whom the goods were dispatched or transported under the CALL-OFF STOCK regime if replaced by another taxable person (change in customer).

Given that the delivery of the goods within the CALL-OFF STOCK regime does not have to occur in the same period in which such goods were dispatched or transported, the VAT payer may be required in practice to file a summary reporting statement for such goods twice – the first time when the goods are dispatched and the second upon delivery of the goods.

• Assignment of transport in a chain of deliveries within the EU:

The amendment of the VAT act shall also specify to whom the dispatch or transport of goods is assigned within a chain of deliveries involving the same goods transported directly from the supplier to the customer within the European Union, which has an influence on the VAT regime that is applied. If the same goods are involved in multiple consecutive deliveries and such goods are dispatched or transported from one member state to another member state directly from the initial supplier to the final customer within a chain of deliveries, such dispatch or transport is only assigned for delivery completed for the intermediate person. If the intermediate person reports their VAT identification number to their supplier as assigned by the member state from which the goods were dispatched or transported, such dispatch or transport is only assigned for the delivery of goods completed by the intermediate person. Any other supplier within a chain of deliveries other than the initial supplier within the chain of deliveries is defined as an intermediate person.

• Reduction in VAT for free-of-charge transfer of assets valued at up to EUR 1,700

The amendment of the VAT act contains a proposal to consider the age of a non-depreciated asset within the delivery of goods for personal consumption, free-of-charge or for any purpose other than business use. Beginning in 2020, the tax base for goods with an acquisition cost not to exceed EUR 1,700 and a service life of greater than one year should have a “hypothetical” residual value, that would be calculated in the same manner as for assets that would be depreciated for tax purposes using the straight-line method over a four-year period. This means that if, for instance, a VAT payer provided a five-year-old computer with an original value of VAT 1,500 at no charge, he would not have to pay the tax on such donation.

• Change in conditions for VAT exemption for deliveries of goods to the European Union

The amendment of the VAT act proposes, with a reference to Article 45a of Council Implementing Regulation (EU) 2018/1912, specifies the specific documents demonstrating that the supplier dispatched or transported goods to another member state. Under the draft amendment, a supplier must have a minimum of two documents that function as non-conflicting evidence and confirmation of the dispatch or transport of goods to another member state to apply the VAT exemption.

A condition for exempting the deliveries of goods to another EU member state will include the supplier filing a summary reporting statement for the given period with accurate, complete and correct data for the given period. The tax office will no longer recognise the VAT exemption for deliveries of goods to other member states beginning in 2020 if the supplier fails to file the summary reporting form for the given period or if the data in a submitted summary reporting form is inaccurate, incomplete or incorrect. This above does not apply if the supplier is able to sufficiently justify the inaccuracy or incompleteness of such data, which was not the result of intentional action.

• Adjustment of the tax deduction from services rendered on fixed assets

The amendment proposes that a VAT payer be obliged to adjust the VAT deducted from services rendered on fixed assets for which no VAT deduction was applied during their acquisition under the assumption that such services resulted in a permanent increase in the value of such fixed asset. The VAT payer must adjust the VAT deducted from such services if the fixed asset is delivered for their personal use, the personal use of their employees or if the fixed asset is delivered at no charge. Adjustment of the VAT deducted from services shall be performed:

• for a period of no more than 60 calendar months (after considering the period during which the fixed asset was used for business purposes after the services were rendered) from application of the VAT deduction for an fixed asset that is a moveable asset with a value of EUR 3,319.39 and higher and with a service life of greater than on year;
• for a period of no more than 240 calendar months (after considering the period during which the fixed asset was used for business purposes after the services were rendered) from application of the VAT deduction for fixed assets which are structures, building lots, flats and non-residential premises.

• Adjustment of the VAT deduction for moveable fixed assets sold within 5 years from their acquisition

The amendment of the VAT act should introduce a stipulation whereby if in a five-year period for adjustment of the VAT deduction, a VAT payer delivering a moveable fixed asset:

• with VAT or with the tax exemption and eligible to deduct such tax, this asset shall be treated as if it was used exclusively for business purposes until the end of the five-year period for adjustment of the tax deduction;
• with the tax exemption but ineligible deduct such tax, this asset shall be treated as if it was used exclusively for purposes other than business usage until the end of the five-year period for adjustment of the tax deduction;

Príspevok AMENDMENT OF THE VALUE ADDED TAX ACT je zobrazený ako prvý na Moore BDR s. r. o..

business woman holding tear paper with 2019, new year concept

The draft amendment to the income tax act modifies several aspects. This newsletter covers the most significant changes including:

1. introduction of the term micro taxpayer and related changes to the taxation of this group of taxpayers

Under the draft amendment to the income tax act, the new term micro taxpayer is used to define a natural person or legal entity those income or revenues in a given tax period do not exceed the amount laid down in the VAT Act of EUR 49,790 (the threshold for mandatory VAT registration). Significant changes in connection with the introduction of this new term in the income tax act concern the depreciation of rented tangible assets, where micro taxpayers are permitted to include such depreciation allowances in their tax-deductible expenses regardless of the amount of accrued rental income (revenue).

Another advantage for micro taxpayers is the ability to depreciate tangible assets classified into depreciation groups 0 to 4 during their depreciation period (up to a maximum of the entry price, except for passenger cars with an entry price of more than EUR 48,000), i.e. the amount of tax depreciation of tangible assets is at the discretion of the micro taxpayer. On the other hand, the draft amendment of the income tax act proposes that a micro taxpayer applying this preferential regime of depreciating tangible assets be ineligible for any interruption in their depreciation.

Likewise, a micro taxpayer choosing to dispose of such property prior to the expiration of the depreciation period shall be obliged to increase their tax base by the positive difference between the total of previously applied depreciation in tax deductible expenditures and the amount of depreciation under the standard depreciation period, i.e. under §27 or §28 of the income tax act.

The introduction of the ability for micro taxpayers to create tax deductible adjustments for receivables per their accounting:

Micro taxpayers utilising the double-entry bookkeeping system will be able to include adjustments for receivables in their tax deductible expenses if there is a risk that the debtor will not complete full or partial payment in the amount in which it has recorded such amount in its accounting records.

2. depreciation of electric vehicles

Given in the increased popularity of electric vehicles, the draft amendment introduces a new depreciation group 0 with a depreciation period of 2 years. Such depreciated assets include personal electric vehicles with BEV (Battery Electric Vehicles) or PHEV (Plug in Hybrid Electric Vehicle) as their officially recognised fuel type or power source.

3. changes in deduction of tax losses

Another proposed change is an extension of the ability to deduct tax losses from four to five consecutive and subsequent tax periods. The flip side here is the limit on the maximum amount that a taxpayer will be able to deduct in tax losses from the tax base, which is capped at 50% of the tax base. This limit does not apply to micro taxpayers who will be able to deduct a tax loss up to the full amount of their defined tax base.

4. payroll changes for employees and employers

The draft amendment should also simplify the application of the non-taxable allowance for employees by the employer whereby employees would no longer be required to file an annual declaration; instead, they would file a declaration when starting a new job and then only to report changes with an impact on the application of such non-taxable allowance for the employee.

The employee’s obligation to demonstrate the fulfilment of the conditions for recognition of the tax bonus to the employer is unaffected by this amendment.

Employees will be able to file this declaration in paper form if they do not agree on electronic communication with their employer.

5. changes in expenses becoming tax deductible after payment

Proposed changes in the area of expenses that become tax deductible after payment are manifold. The most significant of these is the condition that payment must not always be followed for expenditures if they become included in the acquisition cost or are incorporated in the production costs of assets. The amendment likewise plans to cancel the limit on the recognition of tax-deductible expenditures after payment of up to 20% of the value of an intermediated transaction. However, new expenditures that may be recognised as tax deductible after payment shall include expenditures on consulting services in the field of business management and expenditures for company management as well as the lump sum compensation for costs associated with the enforcement of receivables, contractual fines, default-related fees and interest for debtors and severance payments for authorised parties, which are currently classified as non-tax deductible expenditures.

The amendment also stipulates that taxpayers will not have to follow the condition of payment for expenditures (costs) to obtain standards and certificates or otherwise gradually include them in expenditures over their valid term.

6. obligation to pay advance tax payments.

Another proposed change is to modify the threshold for payment of advance income tax payments, which should change from EUR 2,500 to EUR 5,000 for natural persons and legal entities. This means that only those natural persons whose tax liability was more than EUR 5,000 and those legal entities whose tax exceeded EUR 5,000 will be required to pay advance tax payments.

7. introduction of a lump sum employer contribution towards travel costs

The amendment in §5 (7)(m) of the law stipulates that non-financial benefits provided by an employer to an employee to secure their transport to and from the workplace under §19 (2)(s)(1) is capped at a maximum of EUR 60 per month.  Under the stipulated conditions, employees would only be taxed on amounts above EUR 60.

8. determination of the non-time-barred status of debts

The income tax act only permits a tax deductible adjustment to be created for a specific debt if it was included in taxable income and so long as such debt is not time-barred  with certain exceptions (including principal on outstanding loans to banks and taxpayers who carry out business activities in the provisioning of consumer loans).

The fact that a debt is not time-barred is also used to determine eligibility to apply a tax-deductible expense upon the write-off or assignment of such debt. Given the practical problems involved in applying a tax deductible expense upon the write-off of a debt or the creation of an adjustment for a specific debt, the amendment involves determination of the time-barred status of such debt not at the date of creation of the adjustment, or the date of the write-off or assignment of the debt, but rather by the final day of the tax period in which the adjustment is created, the debt is assigned or the debt is written off.

Under the amendment, a debt in such case would be considered not time barred if was not time barred for a minimum of 1 calendar day in the given tax period

9. change in the application of the super deduction of research and development expenditures

For taxpayers conducting research and development activities, the tax advantages involved in deducting research and development expenditures (costs) and their impact on the tax base, referred to as the super deduction, are increasing. This deduction may be used by taxpayers engaged in research and development projects and who incur related expenses (costs) that impact their earnings, and which are eligible for a deduction from the tax base less the deduction of any tax loss in the amount of 200%.

10. introduction of new provisions concerning hybrid discrepancies.

In addition to the above areas, the income tax act introduces the completely new provisions of §17i with the name of hybrid discrepancies, which concern modification of the tax base in situations arising between a taxpayer and dependent entities if such situation could result in an unjustified tax advantage.

11. changes to income sourced from Slovakia for taxpayers with limited tax liability

Sources of income sourced from Slovakia are amended to include income from the reallocation of a capital fund created from contributions. Such income is considered income sourced from a reduction in the registered capital of a company if it was previously increased using funds from a capital fund created from the contributions of its partners.

For taxpayers with limited tax liability, this income will be taxed as a withholding tax, while the income paid may be reduced by the value of the contribution to the capital fund from contributions paid directly by the taxpayer.

Increase in the catering allowance after 1 July 2019:

Act No. 283/2002 Coll. on Travel Reimbursement stipulates the following:

§1 Catering allowances are defined for specific time bands, specifically:

• a) EUR 5.10 for the 5 to 12-hour time band,
• b) EUR 7.60 for the 12+ to 18-hour time band,
• c) EUR 11.60 for the 18+ hour time band.

§ 2 Ministry of Labour, Social Affairs and Family Measure No. 148/2018 Coll. on Catering Allowance Amounts is cancelled.

§ 3 The measure enters into force on 1 July 2019.

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US Individual income tax return. Accountant working with US tax forms

ACCOUNTING ACT

The draft amendment of the accounting act set to take effect on 1 January 2020 primarily involves changes to the conditions under which audits become mandatory for ordinary and extraordinary individual financial statements. The proposal is to increase the financial limit for an accounting unit’s total assets from EUR 1,000,000 to EUR 2,000,000 and in the case of net turnover from EUR 2,000,000 to EUR 4,000,000. Parliament anticipates that such change will have a positive impact on the administrative burden faced by business entities.

eKasa

Effective 1 July 2019, the Financial Authority has rolled out the new “eKasa” system, to which all businesses are required to connect. Electronic cash registers, referred to locally as “ERP” are set to become online cash registers, or “ORP”. In connection with such change, the term cash register no longer is limited to the classic electronic cash register; rather, it now includes devices from mobile phones and computers to tablets and virtual cash registers (VRP).

Online cash registers may be original electronic cash registers of fiscal electronic cash registers. These will require an on-line connection to the Financial Administration for use after 1 July 2019.

A virtual cash register is a service established by the Financial Directorate that communicates via a terminal device and that is provided exclusively through a mobile application owned by the Financial Directorate and a client environment established by the Financial Directorate on its website.

All entrepreneurs are required to have an online connection to the new system, meaning the option for voluntary connection to the Financial Administration’s system via a virtual cash register has expired as of July 2019. Entities were required to register the new system from 1 April 2019 to 30 June 2019.

Roll-out schedule:

Virtual cash register users will continue to use virtual cash registers. Entrepreneurs are permitted to use electronic cash registers from 1 January 2019 to 1 July 2019.

The transitional period is from 1 April 2019 to 1 July 2019 and full transition to online cash registers takes place effective 1 July 2019.

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According to the current EU Council Directive No. 2018/1910 and the EU Council Implementing Regulation No. 2018/1912 (the “European Legislation”), QUICK FIXES apply to the following areas:

1. consignment stocks (“call-off stock”);
2. assigning transport to chain stores;
3. verification of the customer tax ID via VIES;
4. proofing of VAT exemption for intra-community supplies of goods.

Below I present a comparison of the current situation, which will apply at least until 31 December 2019, and the situation as of 1 January 2020.

According to current practice, even if the implementation of QUICK FIXES in the Czech VAT Act will be delayed, Czech taxpayers will have the opportunity to use the direct effects of the European Legislation.

Ad a) Call-off stock

There is only one brief paragraph dealing with this issue in the current version of the VAT Act. The interpretation of this provision and administrative practice was agreed by the representatives of tax advisors and financial management at the regular Coordination Committee meeting in 2004.

According to this interpretation (simplified):

• this regime will only be used if the customer of the relocated goods is known beforehand and this customer has a Czech VAT ID for the purposes of intra-community trade in relation to VAT;
• the fiction of the acquisition of goods from another Member State occurs as soon as the goods are stored in the Czech warehouse;
• the subsequent withdrawal of goods from the Czech warehouse by this customer is no longer considered a taxable supply in terms of VAT;
• the moment of the chargeable event when acquiring goods from the EU is governed by the general principles, i.e. (a) on the date of issue of the invoice (i.e. the transfer document), or (b) on the 15th day of the month following the month in which the goods were moved, if the invoice was issued after that date;
• a credit note is issued for returned goods to the same EU country from which the goods were originally moved.

The above interpretation will cease to apply from 1 January 2020. According to the forthcoming amendment to the VAT Act, from the New Year, the European Legislation on this issue should begin to apply unchanged.

Again very briefly (in detail here):

• this regime will be used by the VAT-registered supplier for intra-community transactions abroad only if the Czech customer of the transferred goods is known in advance and this customer has a VAT ID for the purposes of intra-community trading;
• relocation in the call-off stock will be reported by the supplier in the summary report; the supplier and the customer will have to keep VAT records according to the European Legislation;
• acquisition of goods from another EU Member State will be reported by the given customer in the Czech VAT return as of the date of removal of the goods from the warehouse, but no later than in the 12-month period from the storage;
• in the event of a breach of conditions (removal of goods by another customer, return to a Member State other than the original one, destruction, non-removal of the goods by the given customer within the specified period), the foreign supplier transfers the goods in the Czech Republic.

Ad b) Assignment of transport at chain stores

The current wording of the VAT Act does not contain any provision specifying the allocation of transport to chain stores.

This status records both the financial administration in questionable cases, and fraudsters in confusing resale of goods within a single shipment. The main guidance is provided only by the case law of the Court of Justice of the European Union (C-245/04 EMAG, C-430/09 Euro Tyre, C-386/16 Toridas, etc.). In disputable cases, however, many years of litigation is conducted, in which the property of Czech VAT payers is also secured.

According to the proposed amendment to the VAT Act, the rules provided by the European Legislation should be applied from 1 January 2020.

Carriage within chain stores will be assigned to the transaction between the supplier and the intermediary. The shipment may be assigned to that intermediary only if it communicates to the supplier its VAT ID assigned by the Member State of departure or shipment. An intermediary is a person who is not the first supplier and who dispatches or transports the goods by itself or via a third party which it has authorised.

Ad c) Verifying VAT number through VIES

Since the Czech Republic’s accession to the EU (2004), the Czech VAT Act permits suppliers to exempt intra-community supplies of goods from the Czech Republic only for persons registered for tax in another EU Member State.

It follows that the verification of customer IDs via the VIES application is currently a material and legal condition in the Czech Republic.

It is possible to derogate from this obligation only in exceptional cases that coincide with the case law of the Court of Justice of the EU (e.g. C-24/15 Ploecki or C-587/10 VSTR) . However, such a derogation would only be confirmed in court proceedings.

Nothing will change in the Czech VAT Act in this regard from 1 January 2020.

Ad d) Proof of VAT exemption for intra-community supplies of goods

The current administrative practice consists mainly of Czech case law. In the current wording of the VAT Act, we only find mention that the intra-community delivery of goods can be proven by the buyer’s statutory declaration. According to Czech case law, however, this statutory declaration serves only as supporting evidence.

Internationally recognised transport documents, such as a CMR document, are the most commonly accepted evidence by the financial administration.

In case of riskier intra-community supplies, i.e.

• own transport by the supplier for “long” delivery terms, and
• own transport by the customer for “short” delivery terms

it is recommended to exercise great caution. Unfortunately, neither the practice of the Czech courts nor the financial administration provides a methodology for how to proceed or what documents suffice to enforce the exemption. But one thing is certain: In case of insufficient defence of the fact that the goods were indeed transported across the border, this exemption will be retroactively rejected, and Czech VAT will be charged, including related sanctions.

From 1 January 2020, the Czech financial administration will accept the documents listed in the European Legislation for demonstrating transport (more details here).

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