Distance selling of goods (currently referred to as “mail order sales”)

The amendment of the VAT Act no longer uses the term “mail order sales”, replacing it with “distance selling of goods in the European Union” or “distance selling of goods imported from third countries”.

In the amendment, the law now defines the terms distance selling of goods in the European Union and distance selling of goods imported from third countries, and stipulates the rules for designating the place of delivery for distance selling of goods (§14) given the currently valid version of the VAT Act does not comply in full with the principles of taxation at the place of consumption within the EU.

Given the elimination of §6 of the VAT Act effective 1 July 2021 and based on which foreign entities completing mail order sales were registered in Slovakia, it was proposed that the VAT ID numbers assigned to such foreign entities under §6 in effect until 30 June 2021 be considered VAT ID numbers assigned under §5 of the Act after this date. Given the above, these foreign entities will continue to be registered taxpayers even after the elimination of §6 of the Act.

The amendment also defined the specific place of delivery for distance selling of goods in the European Union and the specific place of delivery for specific services delivered to anyone other than a taxable person (§16a) if the total value delivered in a calendar year (the current and the previous) does not exceed EUR 10,000. In this case, the specific place of delivery is the place where the dispatch or shipment of the goods commences or the place where the supplier of services maintains their registered office or permanent establishment.

Streamlining delivery of goods via distance selling of goods in the European Union

In connection with the European Union’s efforts to eliminate barriers to cross-border commerce, the current rules for mail order sale of goods were completely re-examined. If an entrepreneur located in one Member State delivered goods to another Member State in the form of mail order sales, they were required to register for tax in all Member States, which represented a tremendous administrative burden and hindered the development of cross-border commerce.

The amendment of the act led to the elimination of existing threshold values for mail order sales, which have now been reclassified as distance selling of goods. A single, uniform threshold value of EUR 10,000 was therefore defined for all Member States.

Special regulations – §68

The obligation to pay VAT from the delivery of a good or service by a taxable person is in the Member State where the place of delivery of the good or service is located (for imported goods, then in the Member State where the site of importation of the good is located). So that a taxable person is not required to register for VAT in every Member State in which they establish a tax obligation from the delivery of a good or service to a non-taxable person, they may choose to apply specific regulations concerning a single point of contact, which significantly reduces the administrative burdens for taxable persons.

Special regulations

1. §68a Mini One Stop Shop (MOSS) – services provided by taxable persons not located in the EU to non-taxable persons located in the EU. A special regulation under subjection 1 (§68a) is an expansion upon the special regulations concerning the Mini One Stop Shop (MOSS) system, which currently exists, and currently only applies to telecommunications services, radio broadcasting services, and television broadcasting and electronic services delivered by taxable persons not located in the EU to non-taxable persons located in the EU.
2. §68b One Stop Shop (OSS) – distance selling of goods in the EU and providing services to taxable persons located in the EU but not in the Member State of consumption, non-taxable persons and specific domestic sales of goods. Under subsection 2, the expanded OSS system will likewise apply to services that a taxable person located in the EU provides to non-taxable persons located in the EU (§68b).

This subsection 2 includes the distance selling of goods in the EU. If a supplier decides to apply the voluntary special regulations, they will file a special tax return in the Member State of identification in which they declare the deliveries of all goods within the EU to non-taxable persons and pay VAT related to the sales of such goods to this Member State;

3. §68c Import One Stop Shop (IOSS) – this statute permits the declaration and payment of VAT through a special scheme when goods are imported for final customers and the value of imported consignments does not exceed EUR 150, so long as the imported goods are not subject to excise duty. Part of this system is the responsibility of online platforms to collect tax in the distance selling of goods.

In case of question, please feel free to contact our tax department: Kristina.bakovkova@bdrbb.sk

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Modification of the tax base for complete or partial non-payment of considerations for delivery of a good or service – §25a

Under the new legislation, a payer may modify their tax base for the delivery of a good or service (for which they were obliged to pay tax) if their customer does not pay for the delivery of such good or service in part or in full after the establishment of such tax liability and its receivable becomes unenforceable. The payer may then reduce their tax base by a maximum of an amount equal to the unpaid considerations for the delivery of the given good or service. The difference between the original and the modified tax base and the tax shall be reported by the payer in the tax period in which the receivable becomes unenforceable.

A receivable is considered unenforceable under §25a (2) based on an exhaustive list of legal circumstances, which effectively means that not all receivables will be eligible; specifically this includes, for instance, receivables in collections within distraint proceedings, receivables declared within bankruptcy proceedings, receivables involving debtors in restructuring, debtors who have been dissolved without a legal successor and the like.

Modification of deducted tax in the case of an unenforceable receivable – §53b

Modification of the deducted tax in the case of an unenforceable receivable is related to the newly created §25a.

Under the assumption that a receivable becomes unenforceable and the payer exercises its right to reduce its tax base under §25a, the customer who failed to pay for the delivery of a good or service and exercised its right to a tax deduction is obliged to modify their tax deduction. The customer shall then modify their tax in the tax period in which they receive evidence of tax base modification from their supplier.

New template for the VAT return and new return for the control statement

A new template for the VAT return enters into force on 1 January 2021.

Given the amendment of VAT legislation to include the ability to modify the tax base related to unenforceable receivables, the currently valid control statement should be modified so as to permit the reporting in the control statement of modification of the tax base under §25a and modification of the deducted tax under §53b. The new template of the control statement should first be used for the tax period beginning on 1 January 2021 at the earliest.

In case of question, please feel free to contact our tax department: Kristina.bakovkova@bdrbb.sk

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The call aimed at supporting the development of entrepreneurship of micro, small and medium-sized enterprises within the framework of the European Commission initiative aimed at catching up regions and endogenous potential of tourism development in selected districts of Banská Bystrica and Prešov regions. The goal is to increase the competitiveness of SMEs in order to increase the potential of tourism in the eligible region.
Projects aimed at bringing new or innovative products, processes or services to the tourism
market will be supported.

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The aim of the call is to support projects aimed at investing in construction, reconstruction and modernisation of equipment using renewables and energy sources for self-consumption or distribution to consumers.
Companies can purchase machinery, equipment related to the operation of renewable energy sources.

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The call aimed at supporting the development of entrepreneurship of micro, small and medium-sized enterprises within the framework of the European Commission initiative on transformation of the coal region Horná Nitra. Companies can buy CAPEX – production technologies, software.
Projects aimed at bringing new or innovative products, processes or services to the market will be supported.

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Grant %: Max. 50 %

The objective of the call is to support projects aimed at the deployment of intelligent solutions to existing production technologies, as well as the acquisition of new technologies necessary for the implementation of intelligent solutions and the creation of intelligent, interconnected autonomous systems. The call supports the principles of the Industry 4.0 and offers to make innovative “smart” investments and to be active in the introduction of intelligently managed technologies and systems in their production facilities.

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THURSDAY 16TH JULY: 15:00 – 16:00 BST

Join us for the first Moore Intelligence virtual event where we discuss how businesses can reset and look to grow again after the COVID lockdown.

The webcast will begin here, on this page, at 1500BST on Thursday. Use the register link and enter the email address you registered with in the registered viewer box.

Effects of the pandemic will linger but every economic disruption in history has also brought opportunities, more efficient ways of working and even completely new business models.

This event is open to you and your clients. Register now and hear from our distinguished panel on the global economic prospects for the next 12 months and how different regions are overcoming the challenges of driving growth while being alert to the ongoing health threat.

This is an interactive event and we welcome your questions. We want to hear from you and your clients, so join the debate.

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Download the full brief here.

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There is a significant increase of cybersecurity risk with more individuals working from home. While global effort is driven to tackle health and economic threats caused by the COVID-19 outbreak, cyber criminals are exploiting the current world disruption through additional flood of COVID-19 related scams in the form of phishing malware, ransomware and password hacking. It is important to realise the cybersecurity challenges we face during this special period and take corresponding actions to alleviate the emerging risks.

The challenges

Getting connected remotely
For many years, all of us are accustomed to working in a physical office, with local networked machines and local IT support. Face-to-face meetings was often preferred. The current social distance situation is a massive change to the norm of such operation, which there are plenty of hurdles for businesses to overcome in order to equip and enable all staff to work from home effectively. The basics would be implementing VPN to connect with corporate networks and video conferencing applications for meetings. For some organisations that were already operating with a remote-enabled culture, this transition is a lot more seamless than for others that have to invest extensively on IT equipment such as laptops, video conferencing licenses, and configure their networks to operate in this way at scale. Although business productivity being imperative, security and resilience of the new operating model should not be treated as a second priority.

Secure remote working
Although the COVID-19 epidemic situation seems to have stabilised, many companies are still encouraging staff to work from home. Larger companies are also utilising the situation to explore remote working as a crisis management plan. The unfortunate global disruption has shredded lights for companies to rethink the priority of ensuring business to continue operating securely and resiliently. From a security perspective, this is a very different environment to the existing security practice where measures such as network penetration tests, Internet gateways and firewalls, policy frameworks, and DLP (Data Loss Prevention) needed to be enhanced. In recent years, adoption to digital transformation programmes such as adoption of cloud computing as well as moving towards more remote working with the use of video and document sharing technologies have gathered pace steadily. With current events, these digital transformation initiatives would be greatly accelerated, and once productivity established, together with the ability to cut costs and made them work effectively by doing away with the previous working practises including onsite approaches to technology, such changes would likely be staying beyond current events as investments have been made. Many of these changes are positive and progressive, though they come with a new set of risks.

Risks of a remote workforce:

• Insecure home network: Enterprises invest a lot to secure their IT infrastructure to limit cyber risks, this includes solutions from enterprise-grade firewall to the extent of use of security operation centre which monitor the network environment to limit attack vectors. In contrast, home computers are more vulnerable to cyber-attacks as they are probably running on consumer-grade firewall and antivirus software which are not reliably updated.
• Isolated IT Assets: With many employees using personal devices to connect to the company’s network, IT are unlikely to be able to access those devices to harden cybersecurity or standardise settings. Without specific calibration with the company’s security policy and parameters, IT are not able to effectively address and manage vulnerabilities on each of these personal devices contains.
• Accidental data exposure: With thousands of new, remote workers accessing data outside of the secure office network, it comes with the risk that company’s data ending up in the open, especially through the use of cloud storage and other third party services. That data could include customer information, credentials, or other sensitive and confidential information critical to the company.
• Expanded attack vectors: With increasing reliance on internet connectivity to enable remote working, employees are more likely to expose to threats that target web services and applications. There is an exponential growth of phishing and adware attacks during the pandemic, with attackers exploiting COVID-19 hysteria through malicious domains, social profiles and campaigns. With millions of people attending video conferences, attackers have devised ways to hijack the administrative privileges granted to conferences to remotely execute malicious code, not to mention the unwanted or uninvited attendees to video calls.
• Limited remediation opportunities: Infected machines tend to require direct attention of technicians to restore. That would be easy to accomplish by the IT department in an office environment, but become very challenging with a remote working environment. If a remote working computer becomes infected, it would be very difficult for IT department to respond and resolve the issue. And as a result, the attack would possibly last longer and causing even more damages.

The advice
After examining the potential risks associated with the COVID-19 crisis and working remotely, we would like to recommend the following security measures to decision-makers for implementation to decrease the organisation’s overall cyber-security risk level.

• Advanced endpoint protection: Having large amount of externally connected devices connecting to the corporate network opens up more paths for hackers to access corporate and customer information. With remote working being a norm, endpoint protection becomes more important than ever. Next generation Endpoint Detection and Response (EDR) protection incorporates real time response and continuously monitors within the environment. The new capabilities significantly aid in the detection and response of any threats.
• Encrypted connection: Implementing VPN solutions have been heavily discussed during current crisis as VPNs is one of the best tools for organisations to maintain productivity of workers for remote working. As a result, it is important to ensure the protection of VPNs. In order to mitigate man-in-the-middle (MITM) attacks, it is highly recommended to use VPNs with an always-on model, which user’s device must be connected to the designated VPN to access any resource that requires an Internet connection.
• Increased identity and access management: It is necessary to enhance access control to eliminate risks of losing credentials and unauthorised access to systems. Multi-factor authentication should be used to add an additional layer of security when accessing corporate resource. At the same time, continuous monitoring and visibility of access is also very useful in detecting abnormal behaviour. Management should grant staff only the rights to access they need to perform the required duties to avoid attackers gaining the access to sensitive information.
• Email, instant messaging, and browsing protection: Malicious emails and URLs are usually the major threat vectors. Companies should deploy advanced and specific solutions to protect users. Those services are expected to be used widely, given the nature of remote working, as they are heavily targeted by threat actors.
• User security awareness: New tools and solutions are used to provide an effective remote working environment during the contingency period. Users may not be familiar with these newly adopted tools or solutions tailored for remote working. To mitigate increased risk, companies should provide extensive user education and training on the risks of remote working and the different types of threats they may encounter.

Despite the recent surge caused by the COVID-19 outbreak, the global workforce is increasingly moving towards a remote working environment. As such, organisations should be planning ahead and applying security controls and creating threat models for its particular environment now, as well as when things go back to normal.

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