Slovakia: The Tax Implications of E-Commerce Operation in terms of Value Added Tax (VAT)
The online store or “e-commerce“ is an increasingly popular form of supplying products or services via the Internet, i.e. “online”.
Selling over the Internet is characterized by being performed “online” regardless of national boundaries. However, certain restrictions may be associated with national regulations of the individual Member States. Pursuant to the Slovak legislation, a service provider is assessed under the law of the Member State in which it has been registered.
Brief overview of the obligations:
Obligations of a foreign e-commerce operator in the Slovak Republic:
If a foreign e-commerce operator supplies goods to inland in the form of mail order sale and the total taxable value excluding tax of the goods supplied in the calendar year reaches EUR 35,000, such foreign subject shall be obliged to register in the Slovak Republic under § 6 of the VAT Act.
A foreign subject may apply for registration also in case the value of goods supplied to inland in the calendar year did not exceed the limit of EUR 35,000.
Definition of mail order sale
The mail order sale is a sale of goods that a foreign subject from another Member State transfers or ensures a transfer on its account to inland to a buyer who does not have a VAT identification number assigned. The main obligations of foreign e-commerce operator in the Slovak Republic is to regularly submit VAT returns together with VAT control statement, to issue invoices and to comply with obligations set by the Value Added Tax Act.
A foreign e-commerce operator cannot issue a simplified invoice under § 74 par. 3 of the Value Added Tax Act in case of a mail order sale. This means that the issued invoice shall, among others, include also details of the recipient of the goods, tax base excluding VAT in EUR, tax rate and a total tax amount in EUR. In case the particular invoice was issued in a currency other than EUR, a rate determined and declared by ECB or NBS on the date preceding the occurrence of tax liability shall be used to convert to the EUR currency.
Another option is to use the rate valid under customs regulations, the use of which, however, must be reported to the relevant tax authority before it is first used. This rate is binding for the taxpayer throughout the year. The advantage of the customs rate is that it is valid for the entire month after its publication and that the e-commerce operator does not have to follow the rate on a daily basis.
Obligations of a Domestic E-Commerce Operator
Under the Value Added Tax Act the e-commerce operator as a domestic taxable person shall be obliged to register for value added tax if its turnover over a maximum of 12 previous consecutive calendar months exceeds EUR 49,790 (§ 4 of the Value Added Tax Act).
Such a taxable person becomes a taxpayer. A domestic e-commerce operator can voluntarily register as a VAT payer also if he does not meet the statutory turnover.
If an e-commerce operator supplies goods in the form of mail order sale to another Member State, he shall be obliged to register for VAT in another Member State, if he exceeds the specified limit determined in the national tax legislation of another Member State and to comply to other obligations resulting from the national tax legislation. If a domestic e-commerce operator performs transactions with persons from other Member States or from abroad (countries outside the European Union) and is not registered as a tax payer according to § 4 of the VAT Act yet (mandatory or voluntary registration), according to § 7 of the VAT Act shall be obliged to register for VAT, if the domestic e-commerce operator acquires goods from another Member State, or according to § 7a, if he becomes a recipient of the service delivered by a foreign person from other Member State.
Chargeability of VAT
When the goods are sold domestically, a major influence on determining the place of delivery has the fact, whether the goods were received directly in an e-commerce or a delivery is associated with transport or consignation. In case of a delivery associated with transport or consignation, the place of delivery shall be deemed to be the place, where the goods are located at the time of transport of consignation. If a customer chooses to pick up the goods at an e-commerce personally, the place of delivery shall be deemed to be the place, where the customer picks up the goods. If the delivery of the goods is performed in Slovakia, it is sold to a Slovak customer and the e-commerce is a VAT payer in Slovakia, the tax liability arises on the date of delivery of the goods or on the date of receipt of the payment for the goods.
Costs incurred that are related to the delivery of the goods (cash on delivery and shipping costs) are deemed to be the part of the tax base of the goods sold.
In case, that the domestic e-commerce operator sells goods only to private persons (non-taxable persons), he is not obligated to issue an invoice, but to pay value added tax and state the delivery in the VAT return and VAT control statement. If the domestic e-commerce operator decides to sell his goods to entrepreneurs, then, according to the VAT Act, he is obligated to issue an invoice.
In order to simplify the administrative burden for the e-service provider resulting from the obligations to pay VAT in the Member States of its customers, the simplified Mini-One-Stop-Shop (MOSS) has been introduced and adopted.
E-commerce as a provider of electronic services:
A separate area of an e-commerce in terms of VAT is a supply of electronic services to non-taxable subjects (in particular to citizens – non-entrepreneurs).
Electronic services under the VAT Act are as follows:
- provision of websites, webhosting, remote maintenance of programs and equipment,
- supply and updating of software,
- supply of images, text and information and accessing of databases,
- supply of music, movies and games including gambling and transmission of political, cultural, artistic, sporting, scientific and entertainment events,
- distance learning.
In order to simplify the administrative difficulty arising from the fact that the supplier of those services has the obligation to pay VAT in Member States of his customers, which is preceded by registration for VAT in those countries, a simplification has been adopted, represented by a specific concept Mini One-Stop-Shop (MOSS).
The obligation to declare and pay the tax that appertains to the Member State of consumption shall be fulfilled by suppliers applying this regulation through a single tax return filed via an electronic portal in the Member State, where they shall identify for the use of this regulation (so-called Member State of identification – single point of contact).
For example, if a Slovak payer supplies software to customers (non-taxable subjects) in different EU countries and provided that he has no business establishments in the EU territory, he may decide to use the special MOSS regulation so that he does not have to register in all EU countries where he supplies services. The Member State of identification may be only the Slovak Republic, where the operator has a registered office.
In order to apply the special MOSS regulation the operator must first register. The payer shall be obliged to file the MOSS electronic tax return in the Slovak Republic no later than on the 20th day of the calendar month following a calendar quarter, for which the MOSS tax return is being filed. In the MOSS tax return he shall provide separately the supplies of electronic services for each Member State of consumption, in which the tax is due.
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