Tax News, February 2023

In the March issue of tax news, we would like to inform you about the upcoming issue of the first batch of Informative Tax Calculation for year 2022. In addition, we summarized one Judgement of the European Court of Justice (ECJ) in which it ruled on a preliminary question referred by the Supreme Court of the Republic of Slovenia on the compatibility of EU and national law with respect to the submission of new evidence during administrative proceedings at first instance. On Wednesday, 22 March 2023, the National Assembly approved the new Act on the Cross-Border Provision of Services.

First batch of Informative Tax Calculation for year 2022

Slovenian Tax Authorities will issue the first batch of Informative Tax Calculation for year 2022 on 31 March 2023.

The Informative Tax Calculation is assembled according to the information available to the Tax Authorities based on official records, data on the income and dependent family members, which were reported to the Tax Authorities by payers of the income and individuals during the year.

The individual must carefully review the Informative Tax Calculation. If the individual does not agree with the calculation or finds that the given data is incorrect or incomplete, he/she must file an objection against Informative Tax Calculation and submit it to the competent office that issued the calculation no later than 30 days (15 days from received Informative Tax Calculation which is considered received after 15 days from when The Informative Tax Calculation was dispatched) from the date the calculation was issued. If the individual agrees with the data included in the calculation and finds that it is correct, no further action is needed. In such case, after the expiry of the deadline for filing an objection, the Informative Tax Calculation is considered as his/her final Annual income tax assessment for tax year.

Second batch of Informative Tax Calculation is planned to be issued at the end of May 2023.

Tax Authorities not obliged to consider additional evidence submitted after a tax inspection to apply the VAT exemption for intra-Community supplies

On 2 March 2023, the European Court of Justice (ECJ) issued its judgment in Case C-664/21 Nec Plus Ultra Cosmetics AG, in which it ruled on a preliminary question referred by the Supreme Court of the Republic of Slovenia on the compatibility of EU and national law, that prohibits the submission and gathering of new evidence during administrative proceedings at first instance, more specifically after the issuance of a tax inspection report.

In the case at issue, the Swiss supplier NEC Plus Ultra Cosmetics AG (hereinafter as: “NEC”), registered for VAT purposes in Slovenia, supplied cosmetics to customers in Croatia and Romania. The goods were transported from a warehouse in Slovenia to another Member State. NEC treated these supplies as exempt intra-community supplies of goods in accordance with the provisions of the Value Added Tax Act (ZDDV-1).

In the context of a tax inspection concerning the VAT due for 2017, the Financial Administration of the Republic of Slovenia ("Tax Authority") requested from the taxpayer, NEC, to provide evidence that the goods had actually been dispatched to another Member State in order for the company to prove that the conditions for claiming the VAT exemption for intra-Community supplies of goods were fulfilled. By decision dated 14 February 2019, NEC was requested to submit all the documentation relating to the supplies in question. Meanwhile NEC was collecting the necessary documentation to justify the VAT exemption, the Slovenian Tax Authority had already issued a tax inspection report, on the basis of which a tax assessment decision was issued. Evidence submitted subsequently was therefore not considered.

NEC disagreed with the first-instance authority's failure to take account of the new evidence and took the case to the Supreme Court for revision, which stayed the proceedings and referred to the European Court of Justice for a preliminary ruling on the question whether the preclusion of the production of evidence in tax proceedings after the issue of the tax inspection report referred to in Article 140(2) of the Tax Procedure Act can prevail over the EU principle of neutrality of the VAT system. The dispute thus concerned the date by which evidence may be presented in administrative proceedings.

The ECJ has repeatedly held that the right to deduct and to a refund is an integral part of the VAT scheme and in principle should not be limited. Referring to the judgement in the GE Auto Service Leasing case, the Court further emphasized that, the enactment of measures under which evidence is not to be taken into account, where it is produced after a decision rejecting a refund application has been adopted, is a matter for the national law of each Member State, by virtue of the principle of the procedural autonomy of Member States, provided that those measures are not less favorable than those governing similar domestic situations (principle of equivalence) and do not make it impossible in practice or excessively difficult to exercise rights conferred by EU law.

The European Court of Justice therefore concluded that, in conjunction with the principles of tax neutrality, effectiveness and proportionality, EU law must be interpreted as not precluding national legislation which prohibits the production and gathering of new evidence during the administrative procedure which resulted in the adoption of the tax assessment notice, in particular after the tax inspection stage but before the adoption of that decision, provided that the principles of equivalence and effectiveness have been complied with.

New Act on the Cross-Boarder Provision of Services confirmed

In February Tax news we have already written about the draft Act on the Cross-Border Provision of Services. On Wednesday, 22 March 2023, the National Assembly approved the new Act on the Cross-Border Provision of Services.

Depending on the time frame, the solutions of the law adopted could be divided into two major groups; i.) solutions which will enter into force 15 days after its publication in the Official Gazette of the Republic of Slovenia and ii.) those that only enter into force on 1 January 2024.

i.)                  Novelties that will come into force on 15th day after its publication in the Official Gazette are:

►   New distinction between competent supervisory authorities. Supervision of employers within the limits of its powers should be carried out by the Inspectorate of the Republic of Slovenia for Work (“IRSD”). The cross-border implementation of the activities of self-employed persons and economic operators will be supervised by Financial Office of Republic of Slovenia (“FURS”).

►   In case of doubt as to the legality and compliance with the rules on cross-border provision of services, IRSD or FURS may carry out controls independently. Based on the previous arrangement this was only possible if the Health Insurance Institute of Slovenia (“ZZZS”) received a notice of doubt about legality and compliance. Posted worker has also the possibility to express doubt about legality and compliance.

►   New provisions concerning the obligations of the foreign employer and posted worker or driver. An offence provision is also added in the context of international transport.

ii.)                Novelties that will enter into force on 1 January 2024, are:

►   Second paragraph of Article 144 of Pension and Disability Insurance Act (“ZPIZ-2”) will be deleted, thus abolishing the lower basis for calculating contributions.

►   The A1 certificate procedure has been changed as, for example, the application is no longer submitted to the “e-VEM” portal, but through the “SPOT” portal. Some new mandatory information is also added, such as the type of service or activity.

►   Applications for an A1 certificate for the purpose of cross-border provision of a service in another EU Member State, submitted before 1 January 2024, will be decided under the law previously in force.

►   Applications for an A1 certificate for the purpose of cross-border provision of services in at least two EU Member States, submitted before 1 January 2024, shall be decided in accordance with European Union rules on the coordination of social security systems.