The amendment of the VAT Act valid from 1 July 2021 introduces a number of significant new features and changes.
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.
- §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.
- §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;
- §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.firstname.lastname@example.org