Slovak tax news 3/2014

1. Approved Amendment to the Act on Income Tax

On 30 October 2014 the Slovak Parliament approved an amendment to Act no. 595/2003 Coll. on Income Tax, as amended, amending and supplementing certain laws (hereinafter as “Amendment to the Income Tax Act”). We informed you about the proposed changes in the previous issue. Please note that the Amendment to the Income Tax Act was not signed by the President of the Slovak republic yet, nor published in the Collection of Laws.

2. The approved amendment to the excise duty on mineral oil

As we informed you in the previous issue, prepared amendment to the Act no. 98/2004 Coll. on excise duty on mineral oil as amended, supplementing the certain laws, namely the Act no. 530/2011 Coll. on excise duty on alcoholic beverages, as amended, and Act no. 609/2004 Coll. on the excise duty on coal, electricity and natural gas, as amended, was on 22 October 2014 also approved by the Parliament of the Slovak Republic. The amendment has not yet been published in the Collection of Laws.

3. Methodical guideline for mini one stop shop

By Act no. 218/2014 Coll., amending and supplementing the Act no. 222/2004 Coll. on value added tax, as amended, and amending and supplementing certain Acts (hereinafter “Amendment to the VAT Act”), were, inter alia,  with effect from 1 October 2014 and from 1 January 2015 transposed special tax arrangements for telecommunications services, radio broadcasting and television broadcasting services and electronic services (hereinafter the “digital services”) provided by taxable persons established in the European Union, but not in the Member State of consumption (hereinafter the ” MOSS special arrangement “).

Financial Directorate of the Slovak Republic issued a methodical guideline that explains in more detail this special arrangement. Please note that a special arrangement of MOSS relates exclusively to commercial transactions B2C (in the system of value added tax business to customer transactions shall indicate the supply of goods and services supplied by taxable persons registered for tax to the end-customers, consumers, i.e. for non-taxable persons) and therefore it can be used only in cases where the taxable person supplies digital services to the non-taxable person who is established, has its seat or permanent residence within the territory of the European Union.

4. Increase of meal allowances

On 31 October 2014 came into effect the Regulation of the Ministry of Labour, Social Affairs and Family of the Slovak Republic, which increases the amounts of meal allowances, as follows:

a) 4.20 euro for the time period from 5 to 12 hours,
b) 6.30 euro for the time period from 12 to 18 hours,
c) 9.80 euro for the time period over 18 hours.

5. Regulations and Guidelines issued by the MFSR

• Regulation stipulating the details of the arrangement, description and content of items stated in the individual financial statement and scope of data from individual financial statements for publication of the entrepreneurs using double-entry bookkeeping, of micro accounting entities.Since the regulations come into force on 31 December 2014, given standard forms will be used by those entities that prepare financial statements as at 31 December 2014.
• Instructions for filling in the EC Sales List.
• Methodical guidance of the Ministry of Finance of the Slovak Republic to the Act no. 582/2004 Coll. on local taxes and fees for municipal waste and minor construction waste, as amended.
• Methodical guidance of the Ministry of Finance of the Slovak Republic to the application of certain provisions of the Art. 44o of the Act no. 106/2004 Coll. on the excise duty on tobacco products, as amended.

6. Methodical guidelines published by FRSR

From the published methodical guidelines of the Financial Directorate of the Slovak Republic (further referred as “FR SR”) , we selected the most relevant:

• Guidance on termination of VAT guarantee in case of the payment of the VAT by guarantor on supplier´s special account, in case the supplier is listed in the register published on the website of the tax administrator pursuant to Art. 69 Section 15 of the VAT Act.,
• Information on the VAT guarantee and payment of VAT by the customers,
• Information on identification of possible errors in the filed VAT control statement and on the way of their correction

FR SR further issued Overview of existing Double Tax Avoidance Treaties (hereinafter “DTAT”), Overview of tax rates for the taxation of interest, dividends, royalties according to the relevant DTAT and Overview of the types of permanent establishments as defined in Article 5 of the relevant DTAT.

7. Judgment of the Court of Justice C-605/12

On October 16, 2014 was issued the judgment of the Court of Justice of the European Union (the “ECJ”) concerning the application of value added tax (‘VAT’) for services provided by the Polish company Welmory sp.z o.o. (hereinafter the “Polish company”) to another company having a place of business in another Member State. It relates particularly to the determination of the place of service provision in relation to the constitution of the fixed establishment.

Welmory LTD with the seat in Cyprus (hereinafter referred to as “Cypriot company”) organizes sales by auctions via Internet. Cypriot company and the Polish company concluded a cooperation agreement, under which the Cypriot company agreed to provide the Polish company with service of making available the website for operating the auctions under the domain, including also the supply of associated services (leasing the servers, presentation of products offered in the auction). Polish company was committed mainly to the sale of goods on this website.

During the cooperation Cypriot company acquired all the shares in the Polish company. Before that acquisition, the Polish company issued invoices for services supplied to Cypriot company (advertising, servicing, provision of information and data processing).

Polish company did not invoice the VAT, while indicating that VAT was payable by the recipient of the services, i.e. Cypriot company. However, the tax administrator in Poland considered that these were supplies of services to a fixed establishment of the Cypriot company in Polish territory and that they should consequently be taxed in Poland, due to fact that the Cypriot company used  in the Polish territory technical and human resources of the Polish company. Therefore the Polish company brought an action in this case to the Administrative Court.

Administrative Court referred a question to the Court of Justice for a preliminary ruling, whether in case the Cypriot company carries out its economic activity by making use of the Polish company´s infrastructure, is the place where the fixed establishment of the Cypriot company is situated, i.e. in Poland. The key issue is therefore the determination of the place of supply of services by the Polish company to the Cypriot company, specifically the question of determination the criteria to prove whether the Cypriot company has the fixed establishment in Poland.

The place of supply of services to a taxable person acting as such is the place where that person has established his business. However, if those services are provided to a fixed establishment of the taxable person located in a place other than the place where that person has established his business, the place of supply of those services is the place where that fixed establishment is located. In the absence of such a place of business or fixed establishment, the place of supply of services is the place where the taxable person who receives such services has his permanent address or usually resides.

According to the general definition, fixed establishment means a place that is characterized by a sufficient degree of permanence and a suitable structure in terms of human and technical resources to enable it to receive and use the services, which are provided to it for its own needs.

The Court of Justice considers that the national court has exclusive jurisdiction to verify such factors in order to assess whether the Cypriot company has the necessary human and technical resources in Poland (informatics equipment, servers and adapted software) enabling it to receive services provided by the Polish company and to use them for the purposes of its own economic activity, which is the operation and maintenance of the auction sales website, as well as for the issuance and sale of auction units on the market.