5 minute read 21 Jun 2021
Tax and Legal News 5-6/2021

Tax and Legal News 5-6/2021

EY in Slovak Republic
By EY in Slovak Republic

Multidisciplinary professional services organization

EY has been present in the Slovak professional services market since 1991 and currently has 400 employees, operating from offices in Bratislava, Žilina and Košice.

5 minute read 21 Jun 2021
Related topics Tax
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Value Added Tax

Proposed amendment to the VAT Act

The first draft of the proposed amendment to the VAT Act was published at the beginning of May 2021 as part of the amendment to the Act on Tax Administration. It should become effective as of 1 January 2022, although some obligations will already apply to VAT payers at the end of 2021. The major changes proposed concern registered bank accounts and split payment, details of which we informed you briefly in the most recent edition of our Tax News

The amendment introduces a list of VAT payers’ registered bank accounts, which will be regularly updated and published on the web site of the Slovak tax authorities. If the VAT payer deducts input VAT from a supply of goods or services, paid for using any other bank account than that registered by their supplier, this will result in the legitimate assumption that they knew, or should have known that the supplier would not settle the output VAT with the state treasury.

Joint and several liability will be applied if the VAT payer makes payments for purchases of goods and services using a bank account other than that registered by their supplier or if the payable is settled to the bank account of a person other than their supplier, even if this account is registered with the Slovak tax authorities.

All VAT payers registered as of 15 November 2021 will be required to notify the tax authorities of all their bank accounts used for business activities by 30 November 2021. It will also be necessary to disclose to the tax authorities any changes to bank accounts, for example, details of a new bank account should be notified before it is used for business purposes. It is also proposed that an excess VAT position is refunded only to registered bank accounts.

Additionally, the proposed draft introduces the split payment option and provides more details on how these payments will be treated. If the customer splits the payment for a purchase of goods or services and sends the corresponding amount of VAT directly to the personal bank account of their supplier held with the tax authorities, the risk of being held liable for VAT unpaid by the supplier should be mitigated. The payment order should be made in the same way as if placed by the suppliers themself, using their personal bank account held with the tax authorities, using proper variable symbols, etc.

Another proposed change is cancellation of the current option to appeal against VAT registration refusal, which would affect all VAT registrations after January 2022. Subsequently, the only option for those denied VAT registration requests appears to be to file these requests repeatedly.

Cancellation of VAT registration certificates is also proposed. When de-registering for VAT, or when changing specific data about a VAT payer (such as change of registered seat or business name), it will no longer be necessary to submit hard copies of the certificates to the tax authorities.

The draft of the amendment further specifies that when correcting deducted VAT in connection with bad debt relief, the customer will also be obliged to reflect capital goods scheme corrections of input VAT deduction (change of purpose, change in scope of their use - private vs. business use). It is also proposed that when making subsequent corrections of the input VAT deduction (after the debt is additionally settled and the supplier has corrected the output VAT) it will be necessary to reflect the capital goods scheme and the pro-rata deduction, if applicable.

Should you require further information, do not hesitate to contact me.

Jana Ontkovičová

  • Corporate and Personal Taxation

    Financial contribution to meals

    An amendment to Act no. 311/2001 Coll. Labor Code (“the Amendment”), which came into effect as of 1 March 2021, introduces a choice of meal vouchers or a financial contribution to meals for employees whose employers do not provide meals in either their own, or contracted catering facilities.

    According to the Slovak Financial Directorate’s latest guideline, these options have different personal income tax treatment.

    • Detailed discussion

    In general, Slovak labor law requires employers to provide meals for their employees. Based on the previous legislation, this obligation could be fulfilled through canteen facilities owned directly by the employer, meals from independent service providers or, in the absence of both these alternatives, the provision of meal vouchers.

    Meal vouchers were generally exempt from personal income tax and social security contributions, assuming they were provided within the minimum statutory limit. In practice, there were also arguments for considering even the amount of the meal vouchers exceeding the statutory limit as exempt from personal income tax.

    The Amendment has introduced an additional alternative in the form of employers’ financial contributions to meals. Under the new wording of the legislation, employees can choose meal vouchers or a financial contribution, assuming the conditions for obtaining meal vouchers are met. The financial contribution must be granted under the same conditions as meal vouchers, in terms of the employer's contribution and its payment. In general the employee cannot be favored or disadvantaged in comparison to the provision of meal vouchers. The employee’s choice remains valid for 12 consecutive months.

    From the tax point of view, introduction of the financial contribution has raised questions regarding its tax treatment in comparison to the meal vouchers, which were addressed in the guideline issued by the Slovak Financial Directorate.

    According to the guideline, financial contributions should also be exempt from personal income taxation, assuming they are provided within the statutory limit. More importantly, the amount of financial contribution which exceeds statutory limits can be considered tax exempt if it is paid out from the employer’s social fund. Otherwise, any additional financial contribution is considered a taxable benefit for the employee, which is subsequently tax deductible for the employer.

    However, such treatment of financial contributions provided above the statutory level may prove less beneficial in comparison to meal vouchers, personal income tax exemption of which is not conditional on provision from the employer’s social fund.

    • Next steps

    Considering that the Slovak Financial Directorate’s guideline covers several old and new issues related to the provision of employees’ meals, we recommend reviewing any internal policies covering these areas to confirm compliance with the tax authorities’ current requirements. Furthermore, given the tax exemption conditions for financial contributions provided above the statutory limit, use of the employer’s social fund should be reassessed in light of the new information. In addition, please note that another amendment of the current tax regime is currently in the legislative process. We will be closely following the parliamentary discussion of this proposed draft and will inform you of further developments.

    If you have any questions or would like to obtain more information regarding this topic, please do not hesitate to contact me.

    Peter Bobčík

  • Legal News

    New Act on the Protection of Competition

    The Slovak parliament approved a new Act on the Protection of Competition (“the Act”) on 11 May 2021, which came into force on 1 June 2021. The new draft Act was required to transpose the Directive (EU) 2019/1 of the European Parliament and of the Council of 11 December 2018 to empower the competition authorities of the Member States to be more effective enforcers and to ensure the proper functioning of the internal market. The directive concerned several areas and the current Act had been amended several times, so the Antimonopoly Office of the Slovak Republic (AMO) decided to submit an entirely new draft Act to the legislative process.

    We consider the following changes within the new Act to be the most significant, compared to the current Act on the Protection of Competition:

    • New definition of undertaking

    The new definition of an undertaking could be perceived as groundbreaking, as it is significantly wider. Pursuant to the new Act, an undertaking is also an entity without legal personality that carries out an economic activity, regardless of whether it is aimed at making a profit. An entire holding group can be considered as one undertaking, as can an association of entrepreneurs or associations of such associations. Such a definition allows the AMO, inter alia, to sanction an entire holding company in a single decision and consider the sum of the turnover of several undertakings when determining a fine.

    • Cancellation of the notification criterion for concentrations in the event of establishing a joint venture

    A specific criterion is removed from the turnover criteria for the notification of concentration in establishing a joint venture. It is no longer necessary in Slovakia to announce the establishment of such a joint venture, where only one of the participants creating a jointly controlled venture has achieved a turnover of €14 mil. or more in the Slovak Republic. The AMO reached the conclusion that such a criterion did not capture significant concentrations.

    • Relevant turnover in a declared state of emergency

    The new Act stipulates that if undertakings, in assessing the fulfillment of turnover criteria for notification of concentration, calculate their turnover for the period that was affected by the declared state of emergency, and according to those figures do not meet the turnover criteria, they must also review their turnover for the recent period not impacted by the state of emergency. If during such a period, the turnover criteria were met, they must notify the concentration. With this provision, the AMO seeks to capture concentrations in sectors, where as a result of the crisis, turnovers fell significantly only temporarily and concentrations that would otherwise be subject to AMO approval, could have passed without oversight.

    • Changes in the area of sanctions

    The changes in the area of sanctions are extensive. According to the new Act, in addition to fines, the AMO will be able to award penalties and ban participation in public procurement for up to three years. The AMO will be able to impose fines and penalties within 10 years of the date of violation of the Act.

    If you have any questions regarding this topic, please do not hesitate to contact me.

    Katarína Segečová

    COVID-19 vaccination incentives for employees

    The COVID-19 pandemic has resulted in significant changes to workplaces worldwide and employers’ management of them. Currently, the number of infected people is declining, and governments are seeking to maximize vaccination of their countries’ citizens against the virus. However, concerns over vaccine side-effects and doubts over its necessity among some people are causing reticence, or outright refusal to be vaccinated.

    Any future COVID-19 infections among unvaccinated employees could affect companies’ regular functioning, especially those with smaller staffs. The long-term absence of a certain number of employees due to COVID-19 can in some cases have devastating consequences.

    To prevent such a situation and maximize health and safety at work, there are increasing instances of employers encouraging, or otherwise incentivizing the vaccination of their employees.

    This can take the form of a financial contribution or a waiver of certain internal safety measures, such as the obligation to present a negative test upon entering the workplace.

    • Legislative conditions for vaccination incentives

    The Labor Code does not explicitly regulate the scenario described above. In order to maintain health and safety at work, the employer should create working conditions that minimize the impact of hazardous and harmful factors in the work process and the working environment on the health of employees.1  At the same time, in accordance with the general principles of prevention set out in the Occupational Safety and Health Protection Act, the employer is obliged to proceed in such a way as to exclude danger and risk.2 Such risk can certainly include possible infection with COVID-19.

    To this end, the employer is entitled to adopt measures to maintain health and safety at work3, which may include payment of an incentive, vaccination bonus or provision of other non-monetary benefits. For example, vaccinated employees might not have to present a negative test upon entry to the workplace or undergo regular testing by the employer. Specific arrangements may vary, depending on internal documents or occupational health and safety directives. When applying this type of incentive or bonus, the employer is obliged to ensure that there is no discrimination, for example against those who cannot be vaccinated. Furthermore, the conditions for obtaining a bonus must be such that they are equally achievable and available for all employees.

    • Procedure for applying a vaccination incentive scheme

    Labor inspectorates recommend that before establishing any form of vaccination incentive, the employer should consult either their employee representative body, or employees directly, if no such body exists.4 These negotiations should produce a clear picture of the benefit that presents the most effective motivation.

    Subsequently, employers should adjust internal documents to reflect the new procedures. In accordance with the recommendations of labor inspectorates, an internal regulation or collective agreement should stipulate the conditions for receipt and payment of benefits. These conditions should be clear and their communication to employees should allow sufficient time for them to be met.

    The form of remuneration and the timing of its payment is at the discretion of the employer. For example, the bonus may be paid directly upon presentation of a vaccination certificate (either after a first or second dose) or included with the salary for the appropriate month.

    • Conclusion

    Increasing vaccination uptake presents some reassurance for employers that any future increases in COVID-19 infections will not lead to the significant employee absences and business closures previously experienced. This article covers only some aspects of the complex issue of vaccination incentives for employees. If you would like assistance in arranging a remuneration model and drafting internal employment documentation for a vaccination incentive scheme, we would be happy to help you.

    Katarína Cangárová

    [1] Section 146 (2) of act no. 311/2001 Coll. Labour Code as amended

    [2] Section 5 (2) let. a) of act no. 124/2006 Coll. Occupational Safety and Health Protection Act as amended

    [3] Section 6 (1) let. a) of act no. 124/2006 Coll. Occupational Safety and Health Protection Act as amended

    [4] Section 7 (1) of act no. Occupational Safety and Health Protection Act as amended

  • Brief News

    Late filing of monthly payroll reports may not be subject to penalties

    On 26 April 2021, an amendment to Act no. 563/2009 Coll. on Tax Administration (the Tax Code) was referred to the legislative process. Although focused primarily on supporting the business environment, this amendment also has an indirect effect on the scope of the Slovak Income Tax Act. In this respect, its draft wording introduces waiving of tax sanctions for late filing of payroll reports, assuming certain conditions are met.

    Currently, Slovak employers are obliged to file monthly payroll reports which, inter-alia, contain information on employees’ income and withheld tax prepayments. The reports are required to be filed with the Slovak tax authorities by the end of the month following that in which reported salaries were paid. 

    According to the wording of the amendment, the tax authorities will not impose penalties in cases where a monthly payroll report is filed within five days of the statutory deadline. Although this does not change the regular filing deadlines, it could prevent sanctions being applied to otherwise compliant taxpayers, who are unable to file payroll reports on time due to tight deadlines.

    This amendment is expected to take effect on 1 January 2022.

Summary

Tax and Legal News 5-6/2021

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About this article

EY in Slovak Republic
By EY in Slovak Republic

Multidisciplinary professional services organization

EY has been present in the Slovak professional services market since 1991 and currently has 400 employees, operating from offices in Bratislava, Žilina and Košice.

Related topics Tax
Upvote