We would like to draw your attention to several interesting news regarding the amendment to the Tax Code.  On 27 October 2021 the National Council of the Slovak Republic approved an amendment to Act No. 563/2009 Coll. on Tax Administration (Tax Code), as amended (hereinafter referred to as the “Tax Code”), the draft of which was submitted by the Ministry of Finance of the Slovak Republic in April 2021.

Information about this forthcoming amendment to the Tax Code was summarised in our article: PROPOSALS FOR LEGISLATIVE AMENDMENTS.

We would like to inform you that the changes adopted by this amendment concern not only the Tax Code but also the Income Tax Act No. 595/2003 Coll. and the Value Added Tax Act No. 222/2004 Coll., among others.

Dear Foreign Readers,

We have already informed you by email about the obligation to report bank accounts to the financial administration by 30.11.2021.

Now we bring you other interesting facts from the amendment to the VAT Act that might be of interest to you.

The extension of the liability for unpaid VAT – the addition of a presumption in relation to the notification obligation of bank accounts

A new presumption is being introduced which constitutes sufficient grounds for the tax authorities to conclude that the customer knew or could have known that the supplier would not pay the tax in whole or in part on the goods or services supplied to him/her. This is, for example, a situation where the customer has paid an equivalent to an undisclosed bank account of the supplier, where the supply are non-exempt goods and the person liable to pay tax on the goods is the supplier (so not a reverse charge) and the supplier has not paid the tax when it is due. For these purposes, the date of payment shall be deemed to be the date on which the instruction is given to the payment service provider.

If the presumption arises, the tax administrator (the supplier’s tax office) may require the customer to pay the tax shown on the invoice which the supplier has not paid in whole or in part. The tax to be paid by the customer on behalf of the supplier is payable within 8 days from the date of receipt of the decision (this is the amount of tax on the invoice).

The liability obligation shall arise on the basis of a decision which shall be enforceable upon expiry of 8 days from the moment of delivery to the customer. The guarantor shall have the right to appeal against this decision, which shall have no suspensive effect.

On appeal, the person who has been ordered to pay the unpaid tax is given the opportunity to rebut the presumption of knowledge that the tax will not be paid.

Note that sufficient grounds for liability for tax are defined in section 69(14)(a) and (c), and these are defined as rebuttable presumptions.

How can the customer avoid having to prove in tax proceedings that he/she did not know and could not have known that the supplier would not pay the tax?

The customer has the following two ways to do this:

1. The payer shall check the account number to which the supplier requests payment with the account numbers published on the website of the FR SR when making the payment (new reporting obligation of payers)
2. The payer can use the so-called “split payment”.

Split payment – a special way of paying VAT on an invoice directly to the tax authorities – avoiding liability

Following the extension of the institute of liability for unpaid VAT and changes in the reporting obligation of bank accounts, a special method of payment of VAT on invoices directly to the tax administratoris being introduced.

For example, if the supplier has an unrecognized bank account on the invoice, the customer can pay the invoice without VAT and transfer the tax directly to the supplier’s special account held with the tax administrator (hence the introduction of a new record listing the special taxpayer accounts (TPAs) of all VAT payers). This mechanism can be used in all cases where the customer is concerned about the application of the liability for tax or the fulfillment of the presumption that was added as part of the extension of the institute of liability for unpaid VAT. The customer is obliged to mark the payment as if it were paid by the supplier. The payment will also need to be marked with a variable symbol according to the current MFSR decree.

In addition to the above-mentioned changes, the amendment to the VAT Act also concerns the following areas:

• changes in the registration obligation – deletion of registration cards
• changes to special arrangements based on the OSS principle
• delivery of the beverage in a backed-up packaging
• specifying the correction of the accounted deduction
• changes to the VAT law triggered by the transposition of EU directives (EU Council Directive 2019/2235 and EU Council Directive 2021/1159)

If you have any questions, please do not hesitate to contact us.

We would like to inform you that in accordance with the adopted amendment to the VAT Act in Slovakia effective from 15.11.2021, all VAT payers in Slovakia are obliged to notify the Financial Directorate of the Slovak Republic of all their own bank accounts (payment, deposit) kept in the Slovak Republic or abroad used for businesses subjected to VAT. 

The VAT payer also has the opportunity to send the bank accounts detailsof a  person other than the taxpayer (within the holding company or within the group), and his or her account is considered to be the VAT payer’s own account. In this case, the VAT payer is obliged to announce the beneficial owner of the bank account at the same time, who will be jointly and severally liable for the tax stated on the invoice, which (part of it) the supplier did not pay within the tax due date and the consideration (or part thereof) has been paid into such a bank account. 

The reason for  bank account’s details disclosure is the fact, that with effect from 1 January 2022, if the taxpayer pays for the delivered goods / services to supplier to a bank account that  the tax office is not aware of, it is not the supplier who pays the tax but the customer.

If the taxpayer does not provide the account details, the tax administrator will return the excess VAT deduction within 10 days from the date of its notification. If the bank accounts details are not provided,  the excess VAT deduction might be not refunded or a fine by the financial administration in the amount of € 30 to € 3.000 can be imposed. 

In case that the taxpayer provides incorrect, false or incomplete information in the form, the tax administrator will impose a fine of up to € 10.000 depending on the severity and duration of the illegal situation. 

Registered VAT payers are also obliged to notify of any subsequent change or additions to the bank accounts without delay. 

If we represent you in electronic communication with the Financial Administration, please send us the numbers of all your bank accounts  in the Slovak Republic and abroad (please indicate the bank account to which you wish to return the excess VAT deduction)  you use for business subjected  to VAT in Slovakia and we will fulfill this obligation towards the Financial Administration of the Slovak Republic on your behalf. To fulfill this obligation, please send us the following information: 

• account number in IBAN format (Slovak payment service provider – bank account in Slovakia); 
• account number, account name, BIC / SWIFT, country of establishment, full name and address of the bank (foreign payment service provider – bank account kept abroad); 
• start of using your account (date), if you know it; 
• in the case of accounts belonging to a person other than the taxpayer, please send the information of the beneficial owner of this account too. 

If we do not represent you in electronic communication with the Financial Administration:

• you can find pre-filled forms on the financial administration portal in the Personal Internet Zone in the Forms Catalog under Tax Administration > Value Added Tax > Notification of accounts used for business (Katalóg formulárov > Správa daní > Daň z pridanej hodnoty > Oznámenie o účtoch používaných na podnikanie).
• OR you can contact us and we will be happy to help you with the notification.

 You  can find more details in our newsletter, which will be published on our website in the coming days

A short-time work scheme referred to as “Kurzarbeit” was introduced into Slovak legislation following the adoption of Act on Support during Short-time Work and on Amendments to Certain Acts (hereinafter referred to as “Act on Support for Short-time Work”). The purpose of this legislation is to provide a subsidy to employees and employers in emergency situations, which resulted in the employer’s inability to assign work to the employees. The newly adopted Act will enter into force on 1 January 2022.

Only employers who pay insurance premiums to finance subsidies during short-time work will be eligible for the short-time work scheme referred to as “Kurzarbeit”. However, the introduction of a new social insurance contribution does not increase the social security burden, as this type of insurance will form part of the unemployment insurance premium (i.e. the unemployment insurance premium at the rate of 1% paid by the employer will be divided into the unemployment insurance premium to finance the short-time work subsidy at a rate of 0.5% and the unemployment insurance premium at a rate of 0.5% of the assessment base).

In the event that an employer is unable to assign work to employees due to an obstacle caused by an external factor, the employer will be eligible to apply for short-time work subsidy from the “Kurzarbeit” scheme, which will be granted by the Social Insurance Agency through the Office of Labour, Social Affairs and Family. The subsidy will be paid directly to employers, who will then use it to pay wage compensation to employees.

Under the legislation, external factors are considered to be circumstances of a temporary nature which the employer could not influence nor prevent and which had a negative impact on the assignment of work to the employer’s employees, in particular:

• extraordinary event,
• state of emergency,
• extraordinary circumstance or occurrence of force majeure.

Under the legislation, an extraordinary circumstance refers to a circumstance that may be declared by the Government of the Slovak Republic:

• on the basis of information published by the Statistical Office of the Slovak Republic, where the gross domestic product for the preceding quarter at constant prices decreases year-on-year,
• and on the basis of a prognosis published by the Macroeconomic Forecasting Committee that follows immediately after, where the respective annual gross domestic product at constant prices decreases by at least 3% year-on-year.

War and state of war, seasonality of the activity performed, restructuring, planned shutdown, or reconstruction shall not be considered to be an external factor.

Who shall be eligible to receive the subsidy?

Employers, both natural and legal persons, may apply for the subsidy under Section 7 of Act No. 461/2003 Coll. On Social Insurance, as amended. For the purpose of receiving a subsidy from the “Kurzarbeit” scheme, the term employee refers to an employee who is:

• in an employment relationship or in a civil service employment relationship,
• in an employment relationship on the basis of a contract for the professional practice of sport.

What are the eligibility criteria for the subsidy?

The basic condition constitutes the employer’s inability to assign work to at least 1/3 of their employees at the extent of at least 10% of the prescribed weekly working time. Additional conditions that need to be met in order for the employer to be eligible for the subsidy:

• as of the date of submission of the application for the subsidy, the employer paid all required social security contributions and compulsory old-age pension contributions over the period of at least 24 calendar months preceding the month, for which the subsidy is requested;
• the employer did not breach the illegal employment legislation during the past two years preceding the submission of the subsidy application;
• the employer concluded a written agreement with the employee representatives or with the affected employees (in case there are no employee representatives at the employer’s), whereby the employer would apply for the subsidy, or the employer receives the consent of an arbitrator under the Labour Code to apply for the subsidy;
• the employer applies for the subsidy no later than at the end of the calendar month following the calendar month for which they apply for the subsidy.

In the event that the employer and the employee representatives or the affected employees fail to reach an agreement, the arbitrator, i.e. a person agreed upon by the parties to the dispute or a person appointed by the Ministry of Labour, Social Affairs and Family, shall resolve the dispute. The arbitrator shall decide within 10 days whether or not they agree with the submission of the application for the subsidy. The arbitrator shall receive a remuneration for the resolution of the dispute in the amount agreed upon with the employer. If no agreement is reached, the arbitrator shall be entitled to a fee of EUR 600. The remuneration shall be paid by the employer.

The subsidy shall be granted for employees:

• whose employment relationship has lasted for a period of at least one month as of the date of the subsidy application submission;
• who are not in the notice period;
• who have used their leave entitlement for the previous calendar year and have also used up their positive working time account balance and the employer cannot reassign them to another job position within the agreed type of work.

Amount of subsidy

The subsidy is granted to the employer in the amount of 60% of the employee’s average hourly wage for each hour of obstruction to work. The amount is capped at 60% of 1/174 of twice the average wage of an employee in the economy of the Slovak Republic. This amount shall be published by the Statistical Office of the Slovak Republic for the calendar year two years preceding the calendar year in which the subsidy is granted.

The use of the “Kurzarbeit” subsidy is conditional on an agreement between the employer and the employee representatives. This agreement entitles the employer to apply for the subsidy and also requires the employer to pay the employees compensation of at least 80% of their average wage for the duration of the obstacle to work, which is at least equal to the minimum wage.

Period of drawing of the subsidy

The employers shall be entitled to receive the subsidy in total for a maximum period of six months within any 24 consecutive months.  However, the employer shall be obliged to maintain the job for which they received a subsidy for at least 2 months following the month in which they experienced the obstacle to work.

Example:

An employer employing 15 employees experienced an obstacle to work as a result of flooding from March 13 to March 22. During this period the employer was unable to assign work to seven employees. The employees’ working time is 40 hours a week. The employees’ average hourly wage is EUR 5.

The employer was unable to assign work to more than one-third of the employees as a result of flooding. This obstacle is regarded to be an external factor under the legislation. The employees were unable to be assigned work to the full extent of their working time (at least 10%) for a period of ten days. For this period, the employer shall be entitled to receive a subsidy of 60% of the employees’ average hourly wage, which equals EUR 3 (60% of EUR 5), i.e. the employer shall receive EUR 240 per employee (EUR 3 × (10 × 8 hours)).

However, employees shall be entitled to a compensation of 80% of their average wage (under Section 134 of the Labour Code, this constitutes the average hourly wage). Therefore, the employer shall be obliged to pay the employees the remaining 20% of their average hourly wage. As a result, the employer shall pay EUR 4 per employee (80% of EUR 5) for each hour for which the employer was unable to assign work to the employees, which equals EUR 360 per employee for the entire period of the obstacle to work on the side of the employer.

In the event that the wage compensation of 80% of the employees’ average wage would be less than the amount of the minimum wage, the employees shall be entitled to wage compensation equal to the minimum wage.

Choice between meal vouchers and a financial contribution for meals

One of the most significant changes introduced by the amendment to the Labour Code is the possibility for an employee to choose between meal vouchers and a financial contribution for meals. This alternative is an addition to the three existing catering options (i.e. (1) own catering facility, (2) catering facility of another employer, and (3) meal vouchers).

The employee is bound by their selection for a period of 12 months from the date on which the selection is made. The details of the selection process and the implementation of the employer’s obligation to provide meals or a financial contribution for meals on the basis of the employees’ selection may be laid down by the employer in an internal regulation.

Entitlement to meals or a financial contribution for meals arises to employees who work for more than four hours per shift. If the working shift lasts more than 11 hours, the employer may provide the employee with additional meals or an additional financial contribution for meals. The amount of the financial contribution for meals shall constitute the amount which the employer contributes to the meals of other employees, but not less than 55% of the minimum value of the meal voucher. If the employer does not contribute to the meals of other employees, for example, due to not having other employees, the amount of the financial contribution for meals is at least 55% of the minimum value of the meal voucher and no more than 55% of the meal allowance provided for a business trip of 5 to 12 hours.

The employer may still provide the employees with a contribution for meals from the social fund. The financial contribution will be exempt from income tax, as well as social and health insurance contributions.

However, under transitional provisions, an employer who entered into a contract for the provision of meal vouchers with a legal entity or a natural person authorised to arrange catering services prior to 1 January 2022 is obliged to comply with the new legislation only after the end of said contract, but no later than on 1 January 2022. With effect from 1 January 2023, meal vouchers will be provided in electronic form in order to prepare both the companies and the employers for the introduction of the electronic form of meal vouchers.

Temporary assignment of employees

The amendment to the Labour Code also introduced a change in the assignment of employees between the controlling and controlled entity (parent company and subsidiary), whereby the assignment will not be subject to the condition of objective operational reasons on the part of the original employer or the 3-month duration of employment with the employee, after the expiry of which the assignment can be agreed upon, provided that such a temporary assignment is agreed free of charge. However, reimbursement of the costs of the employee’s wage, employer’s insurance contributions and other overhead costs related to the temporary assignment may be agreed upon between the employers, as well as in the event of a temporary assignment between employers who are not controlling and controlled entities.

Definition of an employee permanently caring for a child effective as of 1 January 2022

The Labour Code was amended to include a definition of an employee permanently caring for a child. The definition is important in determining the length of annual leave. The basic requirement is personally caring for a minor child entrusted under a court decision or one’s own minor child; this also includes alternative personal care.

This means, for example, that an employee is entitled to 5 weeks’ leave if they are personally caring for their own minor child, either alone or as part of the alternative personal care provided by both parents. In the case of a divorce, 5 weeks’ leave shall not be granted to an employee who is divorced and the court awarded custody of the child only to the other parent after the divorce. An employee who is cohabiting with a spouse/partner and the spouse’s/partner’s child and the child is neither the employee’s nor is the employee awarded custody of the child shall not be entitled to 5 weeks’ leave.

This role shall commence on the date on which the employee notifies the employer in writing that they are permanently caring for the child and shall cease on the date on which the employee ceases to permanently care for the child. This provision takes effect from 1 January 2022 in order to ensure that the calculation of leave is assessed over a full calendar year.

Domestic work and telework

The basic criterion for determining domestic work and telework is the regularity of performed work outside the employer’s workplace. Domestic work or telework refers to work that could be performed from the employer’s workplace but is instead performed from the employee’s household on a regular basis within the scope of the employee’s weekly working time or a part thereof. Home refers to the agreed place of work outside the employer’s workplace, which may be the place where the employee actually resides or a different place or places agreed upon with the employer. Domestic work or telework must be agreed upon in an employment agreement or in an addendum to the employment agreement.

The amendment to the Labour Code establishes the employees’ right to be offline, the principle of equal treatment of employees working from home and employees working at the employer’s workplace as well as the obligation to inform the employer in case of technical problems. The employer is obliged, inter alia, to provide the employee with compensation, under the conditions laid down in the collective agreement or employment agreement, for the employee’s demonstrable increased expenses associated with the use of the employee’s own tools, equipment, and items necessary for the performance of domestic work or telework.

Extension of the probationary period

Under the amendment to the Labour Code, the employee’s probationary period is extended by the time taken up by all-day obstacles to work on the side of the employee that arose during the probationary period. In the event the employee fails to complete the entire work shift, the probationary period is extended by one day.

New dismissal reason from the employer effective as of 1 January 2022

The employer is entitled to terminate the employment relationship even when the employee has reached the age of 65 years and has also reached the age eligible for a retirement allowance (both conditions have to be met concurrently).

More part-time opportunities for persons over the age of 15

With the permission of the Labour Inspectorate, employers will now also be able to employ persons over the age of 15 who have not yet completed compulsory schooling to perform light work. This measure provides opportunities for summer jobs to those who have completed their first year of secondary school.

Status of a secondary school student or a university student valid until 31 October

The amendment to the Labour Code also regulates the status of students. Under the amendment, the student status of secondary school students and university students will be valid until 31 October of the relevant calendar year in which they completed their studies. This measure introduces the possibility for students to work during the summer holidays on the basis of a student work agreement.

Dispute over the operation of a trade union with the employer

The operation of a trade union at a workplace is also to be amended. The employer is obliged to allow trade unions to operate at the workplace only if there are union members among the employees. Dispute over the operation of a trade union with the employer occurs when the employer or the trade union operating with the employer have doubts as to whether the trade union (which informed the employer in writing about their operation) has a presence among the employer’s employees.

Such a dispute shall be resolved by an arbitrator agreed upon by the employer and the trade union or appointed by the Ministry of Labour, Social Affairs and Family of the Slovak Republic. Both parties are obliged to provide the arbitrator with a list of employees or a list of members of the trade union who are employees of the relevant employer. The arbitrator must notify both parties of the outcome of the dispute within 30 days of the commencement of the dispute resolution.

On 4 May 2021, the National Council of the Slovak Republic adopted Act No. 215/2021 Coll. on Compensation for Reduced Working Hours and on amendments to certain acts with effect from 1 January 2022, which amends Sections 9 and 13 of Act No. 595/2003 Coll. on Income Tax, as amended.

Under this amendment, compensation for reduced working hours also falls under the tax-exempt income of natural persons.

Compensation paid to a legal entity for reduced working hours is also considered tax-exempt income.

Compensation for reduced working hours refers to the provision of a subsidy to partially compensate employer costs for employee wage compensation during the period of a restriction of the employer’s business activities caused by an external factor. Compensation for reduced working hours is to be granted to an employer who meets the conditions defined in the Act on Compensation for Reduced Working Hours and is to be provided by the Centre of Labour, Social Affairs and Family or the Office of Labour, Social Affairs and Family.

Under Section 2(c) of Act on Compensation for Reduced Working Hours, an external factor is of a temporary character, cannot be influenced or prevented by the employer and has a negative impact on the assignment of work to employees, for instance, state of emergency, extraordinary circumstances, or force majeure. However, it does not include war, state of war, seasonal work, restructuring, planned shutdown or reconstruction.

As the compensation for reduced working hours provided to the employer to partially reimburse the costs incurred to pay the employees’ wage is considered tax-exempt income, expenses (costs) incurred for income not included in the tax base are not considered tax expenses under Section 21(1)(j) of the Income Tax Act.

Below is a summary of the latest news on the upcoming amendments to the Labour Code (i.e. amendment to Act No. 311/2001 Coll.) and the Tax Code (i.e. amendment to Act No. 563/2009 Coll. on Tax Administration). In addition to the Tax Code, the amendment to the Tax Code should also amend the Income Tax Act (i.e. amendment to Act No. 595/2003 Coll.) and the Value Added Tax Act (i.e. amendment to Act No. 222/2004 Coll.).