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.
As of 15 November 2021, an amendment to the VAT Act regarding the obligation to report bank accounts to the tax authorities became effective. The amendment introduces an obligation for taxpayers to report to the Financial Directorate of the Slovak Republic all own bank accounts used for business activities subject to tax under the VAT Act. The Financial Directorate of the Slovak Republic will publish a list of all reported bank accounts on its website. Taxpayers who are registered for VAT as of 15 November 2021 shall be obliged to report their bank accounts by 30 November 2021.
Section 6(7) provides that if taxpayers report a bank account owned by another person, such account shall be deemed to be their own for the purposes of the VAT Act.
The reporting obligation arises immediately on the date on which the taxpayer became VAT payer or on the date on which the taxpayer opened such a bank account. If the customer pays the invoiced amount to the supplier’s account that was not listed in the published report on the website of the Financial Administration of the Slovak Republic on the day of the provision of service, the customer shall be liable for the VAT stated on the invoice.
The amendment to the Tax Code brings changes to the tax reliability index, which should now emphasise its motivational character. The rating will be assigned to all taxpayers registered for income tax and the evaluation period for determining their rating will be one calendar half-year.
The criteria used to determine the taxpayers’ tax reliability index will be regulated in a decree of the Ministry of Finance. Taxpayers who achieve a “highly reliable” rating will:
- be granted extended deadlines for meeting the obligation arisen on the basis of a request from the tax administrator in connection with tax audits or local surveys (at least 15 days compared to an eight-day deadline for entities rated “unreliable”);
- have fees reduced by 50% for a binding opinion of the tax administrator;
- have a partial protocol drawn up within the scope of a tax audit to determine the validity of a claim for a refund of excess VAT deductions.
The approved amendment to the Tax Code intends to motivate taxpayers who will be deemed unreliable on the basis of the index to adopt a more responsible approach by granting them the so-called malus, i.e. shortening the deadline for fulfilling certain obligations in tax proceedings, tax adjustment procedures, or local surveys carried out by the tax administrator to eight days.
However, if such taxpayers submit a duly justified request to extend that period, the tax administrator may extend it accordingly.
As of 1 January 2022, three new or updated information lists will be published on the website of the Financial Administration, which will include:
- bank account numbers of VAT payers, which will be made available in the VAT payers’ information list;
- numbers of the tax administrator’s accounts held for taxpayers (the so-called taxpayers’ personal accounts) who are VAT payers, which will be made available in the VAT payers’ information list;
- a list of taxpayers together with their tax reliability index, resulting from the introduction of the so-called public tax reliability index. The Financial Administration shall publish this list by 30 June 2022 at the latest.
The approved amendment to the Tax Code introduces a change in the Income Tax Act, particularly in the amount of the deduction for eligible expenses. The approved amendment reduces the tax advantage in the form of the so-called super-deduction to only 100% of eligible expenses incurred for research and development activities. The reduction will be applied for the first time for the tax period starting on 1 January 2022 at the earliest.
As of 1 January 2022, taxpayers will be able to claim an additional deduction (15% to 55%) of investment expenses from the tax depreciation of the assets concerned. The amount of the deduction depends on the average amount of reinvestment in terms of percentage and euros, compared to the average over the previous three tax periods. The minimum investment amount is EUR 1 million and the minimum reinvested average value is 700%. This is a temporary instrument governed by the law aimed at supporting investments with higher added value, i.e. productive investments with links to Industry 4.0.
The law establishes the following conditions that have to be met by taxpayers in order to claim this deduction:
- A 4-year investment plan must be drawn up for the 2022–2025 tax period, declaring the period during which the investments will be made;
- The entrepreneur must invest in higher value-added assets, putting them into use or including them in business assets during the investment plan period;
- The entrepreneur must invest in aggregate at least 7 times the average value of the investments, which is the arithmetic average of the investments over the three tax periods preceding the one in which the investment plan period begins;
- The deduction may be claimed over the depreciation period of assets, but not more than for ten consecutive taxable periods;
- The entrepreneur must earn a profit in the taxable period in order to claim the deduction;
- The deduction cannot be claimed, for example, if the business is new and has been operating for less than 3 taxable periods.
Table 1: Deduction percentage depending on the amount invested
|Average value of investments invested expressed in percentage||Value of the projected amount of the average value of investments reinvested in millions of euros|
|more than 1 up to and including 20||more than 20 up to and including 50||more than 50|
|between 700% and 1,399.99%||15%||25%||50%|
|1,400% and more||20%||30%||55%|
Source: Self-processing of data
In practice, this means that the more you invest, the higher the additional deduction you can claim. For example, if you invest EUR 3 million during an investment period, you will be entitled to a 15% deduction. If you invest more than EUR 50 million, the deduction will be up to 50% of the tax depreciation of the assets concerned.
The issuance of so-called “cards”, i.e. certificates on the assignment of Tax ID number or VAT ID number, certifying the registration of taxpayers, will be abolished. The tax administrator will only issue a written decision on registration.
The fee for a binding opinion of the tax administrator is reduced to €1,000. As indicated above, taxpayers rated as “highly reliable” will only pay €500 for a binding opinion.
This institute is based on Section 13a of the Commercial Code and it is an instrument designed to combat the abuse of “straw men” (mostly in the field of VAT). The proposed amendment will enable the tax administrator to issue a decision on the natural person’s exclusion from acting as the statutory representative or a member of the statutory body or the supervisory body in a commercial company or a cooperative (taxpayer).
The exclusion does not apply to the taxpayer, but only to the natural person who acts on behalf of the taxpayer when the conditions laid down by law are met. Once the conditions for exclusion are met, the tax administrator may issue a decision to exclude the natural person (statutory representative) for three years from the possibility of acting on behalf of the company or cooperative, but such natural persons continue to be entitled to do business as self-employed persons and be partners, i.e. this institute does not exclude the natural person from ownership. The excluded natural person (excluded on the basis of a decision delivered to that natural person) may appeal against that decision but they cannot exercise extraordinary remedies.
With effect from 1 January 2022, the following additional changes will take place by the adopted amendment to the Tax Code:
- Abolition of the summary protocol;
- Time limit for inspection of files – taxpayers will be allowed to inspect files the following working day after they request it, and they may request it by phone, via electronic means, or in writing;
- Evidence – tax administrators may also carry out so-called joint actions for the purpose of evidence, such as oral hearings and questioning of witnesses;
- Witness examination – tax administrators will be able to examine witnesses and experts for the purposes of tax administration by video conference or other means of communication technology. Minutes shall be drawn up, recording such examinations.