Changes in the VAT Act

If you are interested in what changes this amendment to the VAT Act brings, when these changes will be effective, how and from when the taxpayer will be required to submit an application for VAT registration, you will find the answers in this article.

Introducing the definition of a small business. Special treatment for small businesses

With regard to the special regulation for small businesses with effect from January 2025, the Slovak Republic is obliged to transpose EU Directive 2020/285 in the current version into the VAT Act . The aim is to eliminate the administrative burden on small businesses and thus achieve equal treatment from the point of view of VAT, in the case of exemption from the exercise of economic activity, for settled and non-settled taxable persons who can be considered as a small enterprise for the purposes of the common VAT rules, as exemption from taxes only for small businesses that are established in the given member state.

The main goal of this amendment is the introduction of a special arrangement for a small business of a foreign person. In the VAT Act, the rights and obligations related to the application of the tax exemption of the economic activity of a small business not established in the country are established, as well as the special regulation for the small business of a domestic person, which establishes the rules for the application of the tax exemption of the economic activity. of a domestic taxable person in another member state.

The new tax exemption system is being introduced from 01.01.2025 on the territory of the European Union for domestic and foreign small businesses.

A foreign taxable person can use this special arrangement if his domestic turnover in the current calendar year does not exceed 62,500 euros and, at the same time, did not exceed 50,000 euros in the previous year; and at the same time its annual turnover in the Union did not exceed 100,000 euros. In the country, she will request the allocation of a VAT number with the suffix EX, which will be notified to her for the Slovak Republic.

The same conditions will apply abroad for domestic taxable persons. A domestic taxable person must not exceed an annual turnover in the European Union of 100,000 euros, and at the same time a domestic person in the member state in which he wants to apply a special arrangement cannot reach the specified local turnover. It also applies that in the country he must apply for the assignment of a VAT ID number with the suffix EX and indicate the member states in which he wants to use the arrangement.

The amendment thus introduces a new system of tax exemption in the territory of the European Union for domestic and foreign small businesses.Taxable persons who meet the established turnover conditions will not have to register for tax in other member states, in contrast to the previous situation, in which only in perform economic activity on a small scale. They will not be burdened with demanding administrative duties resulting from national legislation.

Changes in VAT registration

From 01.01.2025, perhaps one of the most important changes will take effect, namely the setting of new conditions for the registration of VAT payers .

The amendment changes the period for which the turnover is calculated, as well as changes the amount of turnover and also the purpose of mandatory registration of a domestic person. According to the amendment, the calendar year will be followed and not a period of 12 consecutive months as was the case before.

The amendment changed the amounts for tracking the turnover, when exceeding them, the taxable person will be obliged to register for VAT. Pursuant to § 4 of the VAT Act, a taxable person thus becomes a tax payer:

• on the first day of the calendar year following the calendar year for which the tax-free value of goods or services supplied by this personexceeded 50,000 euros ,
• after exceeding the turnover of 62.500 euros per calendar year, the taxable person becomes the payer on the day of exceeding this turnover.
• the day on which this person became the legal successor of the payer who disappeared without liquidation,
• the date of acquisition of the business or its part,
• on the effective date of the conversion in the event of a spin-off
• the day on which this person delivers the building, part of the building or building land, if the turnover is to be exceeded from the delivery, except for the delivery of the building, part of the building or building land, which are exempt from tax
• the day on which this person receives payment before the delivery of the goods according to letter f
• on the day of delivery of goods with a place of delivery in the country, if it is a taxable person who facilitates the delivery of goods on the territory of the European Union,
• by the supply of goods or services that are subject to tax, made by a taxable person who exclusively has an establishment in the country, if it is not a small business of a foreign person that applies tax exemption.

also a shortening of the deadline for submitting an application for registration to 5 days. Similarly, according to the new system, a taxable person becomes a VAT payer from the day when the fact on the basis of which the person became a payer occurred.

Example from 01.01.2025

The newly founded company AB will sell clothes in its brick-and-mortar store in Slovakia. On April 1, 2025, the turnover from such sales will exceed 50,000 euros. The question is from when will the company have the status of a VAT payer and when is this company obliged to submit an application for registration? And what if this company's turnover exceeds 62,500 euros by the end of 2025?

AB's obligation is to submit an application for VAT registration to the Tax Office no later than 05.05.2025. Subsequently, the Tax Office will check all the mentioned facts within 10 days from the delivery of the application, and the Tax Office will assign a VAT number to the company. The company will be registered by the Tax Office as a VAT payer from January 1, 2026.

In the event that by the end of the calendar year, after having submitted an application for registration when the turnover exceeds 50,000 euros, AB's turnover exceeds 62,500 euros by 31 December 2025, it is the obligation of this company to immediately notify the Tax Office of this fact and immediately becomes a VAT payer.

Changes in the VAT registration of foreign persons

From January 2025, a clear definition of when foreign persons are required to register also comes into force. A foreign person who does not have a registered office, place of business, place of business, place of residence in the country or does not usually stay in the country becomes a tax payer after starting an activity that is subject to VAT in Slovakia, i.e. regardless of the turnover achieved by the supply of goods or services, except exceptions established by the VAT Act, such as by supplying services and goods that are exempt from VAT in accordance with § 28 to § 42 of the VAT Act, or by supplying transport services.

Pursuant to §5 of the VAT Act, a foreign person thus becomes a payer:

• by supplying goods or services that are subject to tax
• by receiving payment before delivery of goods or services
• by the acquisition of goods in the country from another member state that is subject to tax, if it is not a small business of a foreign person that applies tax exemption and if it is not the acquisition of goods in the country from another member state that is considered taxed.

Businesses of foreign persons based in the EU, which are small businesses and have been assigned a VAT number with the suffix "EX" for Slovakia in the country of establishment, will therefore have the option "not to be a payer".

Similar to the registration of a domestic person, a foreign person will also be required to submit an application for tax registration within 5 working daysfrom the day when the fact occurred on the basis of which the foreign person became the payer.

After the Bratislava Tax Office checks the application, it will register the taxpayer and no later than 10 days from the date of delivery of the tax registration application, he will be assigned a tax identification number and a decision on tax registration will be issued no later than 10 days from the date of delivery of the tax registration application . According to the amendment, a foreign person must register after any of the facts mentioned above has occurred and thus does not have to register before the transaction is carried out.