Correction of the tax deduction for non-payment of consideration for the supply of goods or services

As of 1 January 2023, the Slovak VAT Act introduced an obligation for customers to return the VAT deducted to the extent of the unpaid liability for the supply of goods or services if 100 days have passed since it became due. This measure is based on the principle of tax neutrality and aims, among other things, to improve the payment discipline in business relations as well as to reduce the VAT evasion.

Generally, the customer is obliged to correct the VAT deducted if he fails to pay all or part of the liability incurred, this correction is to be made in the VAT period in which 100 days from the due date of the liability expire. This obligation shall also apply to transactions carried out in 2022 if 100 days have elapsed from their due date on or after 1 January 2023. If the customer, after correcting the deducted VAT, subsequently pays (partly or fully) the supplier, thereby reducing or extinguishing the liability, he has the right to correct the corrected deducted VAT in the VAT period in which full or partial payment for the supply of goods or services was made.

Adjustment of the tax base on an unpaid receivable

Following the introduction of the obligation for customers to correct the VAT deducted, the provisions relating to the correction of the tax base of a supplier of goods or services and a partial simplification of the definition of bad debt have been amended as of 1 January 2023. A receivable becomes irrecoverable for the purposes of the VAT Act if 150 days have elapsed since the receivable for the supply of goods or services became due and the receivable:

• does not exceed EUR 1,000 including tax and the payer proves that they have taken any action to obtain payment of the receivable;
• exceeds EUR 1,000 including tax and the payer proves that they are seeking payment of the receivable by filing a lawsuit, except through arbitration court; or
• exceeds EUR 1,000 including tax and the payer proves that it is being recovered in enforcement proceedings.

The new rules apply to receivables that are 150 days past due after 31 December 2022. The taxpayer’s right to adjust the tax base for an irrecoverable receivable expires three years after the last day of the deadline for filing the tax return for the VAT period in which the goods or services were supplied.

Reduction of the VAT rate to support the sports and gastro sector

The amendment to the VAT Act in Slovakia also extended the range of services to which the reduced VAT rate of 10% applies. The reduced VAT rate also applies to passenger transport by cableway and ski lifts, to the access to indoor and outdoor sports facilities for the purpose of sport, to admission to artificial swimming pools, and to restaurant and catering services.

The aim of the Government of the Slovak Republic was to support tourism and sport, which was supposed to be a temporary measure to be applied within a defined period from 1 January 2023 to 31 March 2023. However, the amendment to Act No. 530/2011 Coll., on Excise Duty on Alcoholic Beverages also amended the VAT Act with the intention to apply a reduced VAT rate in the sport and gastro sector permanently. With effect from 1 April 2023, the list of services that are subject to the reduced VAT rate of 10% and are listed in Appendix 7a of the VAT Act, has been extended, with individual services being specified on the basis of the statistical classification of production (CPA).

Introduction of a second reduced VAT rate in connection with state support for rental housing

Following the adoption of Act No. 222/2022 Coll., on State Support for Rental Housing, a reduced VAT rate of 5% was introduced to be applied after the conditions defined under the Act on State Support for Rental Housing are met for:

• the delivery of the building / part of the building including the building land on which the building / part of the building stands; and
• the restoration and reconstruction of the building / part of the building, including the construction and installation works on the building.

In order to qualify for this reduced VAT rate, the building must meet the conditions of a state-supported rental housing building, and the recipient of the supply must be the landlord of the state-supported rental housing who has concluded a contract for the operation of a state-supported rental housing building in which the building is specified. The reduced VAT rate does not apply to non-residential premises.