The tax authorities may automatically register several companies as a single VAT group. Anyone wishing to avoid this must meet a number of conditions

From 1 January 2026, the tax authority may, by virtue of its official powers, register economically linked entities as a single VAT group. This is a tool in the fight against tax evasion, aimed at curbing schemes designed to avoid compulsory VAT registration by formally dividing business activities amongst several entities. In practice, there are already several typical cases where the Tax Administration routinely takes this step.

In this article, we explain

• when this might happen
• what criteria are assessed
• what risks this poses for businesses
• how this measure ‘fits’ into the action plan to combat tax evasion

 

Action Plan to Combat Tax Evasion

The Ministry of Finance of the Slovak Republic, together with the Financial Administration of the Slovak Republic, presented the Action Plan to Combat Tax Evasion at the end of 2024. This is a concrete implementation of a commitment set out in the Slovak Government’s Programme Statement for 2023–2027, which concerns making the fight against tax evasion more effective and improving tax collection. According to the Ministry of Finance, the aim of the action plan is to introduce measures that will contribute to more effective tax collection and the elimination of tax evasion.

Within this strategy, three basic types of measures are implemented in practice.

• The first category comprises facilitative measures, which include, for example, the introduction of QR payments or the eKasa software project.
• The second group consists of incentive measures designed to encourage voluntary compliance with tax obligations. These include, for example, the forthcoming electronic invoicing system (eFaktúra) planned for January 2027, the flat-rate deduction for private motor vehicles introduced as early as January 2026, and measures aimed at preventing circumvention of the threshold for compulsory VAT registration (group VAT registration).
• The third category comprises so-called support measures, which include, for example, the introduction of ‘soft warnings’ (notices issued upon a first breach of obligations), targeted tax audits, and efforts to make the activities of the tax administration more visible and effective.

The most recent measure is the reintroduction of a security deposit for voluntary VAT registration, which had already existed in Slovakia until 2019. An inter-ministerial consultation process, which concluded on 16 June 2026, is currently being evaluated. According to the Ministry, this measure is intended primarily to target entities where risky tax behaviour has been identified. These include, for example, individuals who have outstanding tax arrears on record, have committed a serious breach of tax regulations, or whose VAT registration has been revoked by the authorities in the past. Risk may also be identified in relation to persons linked by ownership or personnel ties.

 

Cancellation of registration

The Financial Administration states that, over the last two years, 7,709 VAT registrations have been revoked by the authorities, representing only approximately 3.5 % of the total number of taxpayers for the period in question.

The forthcoming amendment to the VAT Act, drafted by the Ministry of Finance of the Slovak Republic, expands the circumstances under which the tax authority may revoke a taxpayer’s registration ex officio. This includes, for example, the following situation:

• where a VAT payer with its registered office in Slovakia has failed to notify the tax authority of its place of business even after being requested to do so (an address where there is only a postbox is not sufficient);
• where a VAT payer established in Slovakia cannot be contacted on repeated occasions at the address of their place of business, even after being requested to do so;
• where a VAT payer (whether domestic or foreign) has submitted zero VAT returns for a period of 12 months or has not reported any data on taxable transactions or on input tax.

 

New provision: registration of a group by the tax authority

The essence of the new provision in Section 4c of the VAT Act is to grant the tax authority the power to register, ex officio, several formally separate entities as a single group, provided that they act in economic concert and their formal separation is primarily intended to facilitate abusive conduct in the form of circumventing the obligation to register for VAT purposes.

The new concept of ex officio group registration for VAT purposes may have significant implications for part of the business community. Group registration is likely to have a significant impact on entities that have in the past sought ways to avoid VAT registration. They often operated in a grey area, formally complying with the law, but their real aim was to avoid the obligation to pay VAT on the sale of goods or the provision of services, thereby gaining an unfair advantage in the competitive arena. In practice, there were a significant number of such entities.

A typical example is a situation where an entrepreneur achieves a turnover approaching the threshold for compulsory VAT registration and subsequently sets up a new company through which they continue the same business activity. When assessing such cases, the Financial Administration adheres to the principle that ‘substance takes precedence over form’ and to the indicators for assessing links between entities (set out in Section 4a of the VAT Act), specifically:

1. Financial links - Financially linked taxable persons are persons, one or more of whom are controlled by the same controlling person.
2. Economic links - Persons are economically linked if their main activities are interdependent, they have a common economic objective, or one person carries out activities for the benefit of another member of the group.
3. Organisational links - Persons are organisationally linked if at least one common person is involved in their management or control.

It must be said that the tax authority is not bound solely by these criteria and, as in the wider field of tax administration, in practice it applies the principle that the actual economic substance of transactions and acts takes precedence over their formal designation. The tax authority therefore assesses the actual nature of business relationships, and not merely their legal form.

For the Financial Administration to conclude that the division of the companies constituted an abusive practice, two basic conditions must be met:

1. The entrepreneur has gained a tax advantage through their actions
2. The main objective of the action was to secure this tax advantage.

However, if the tax authorities are unable in practice to establish that both conditions have been met, and the entrepreneur’s actions pursue other legitimate economic objectives, this cannot be regarded as an abuse of rights.

This principle is also confirmed by the case law of the Court of Justice of the European Union, for example in cases C-255/02 Halifax, C-131/13 Italmoda and C-171/23 UP CAFFE d.o.o.. The Court of Justice of the EU has repeatedly emphasised that the registration threshold system is intended to relieve small businesses of administrative burdens and, at the same time, to reduce the costs of tax administration when auditing entities with low tax revenue. However, if this mechanism is misused, the tax authorities may refuse to grant such an exemption.

 

Typical practical examples

 

If the tax authority concludes that the sole aim was to keep each company’s turnover below the 50,000-euro threshold, this constitutes conduct aimed at obtaining an unjustified tax advantage, and the authority will treat these entities as a single group for VAT purposes.

If there is no other economic reason for such a division and its main result is that the individual entities do not reach the turnover threshold for compulsory VAT registration, the tax authority may regard these entities as economically linked persons acting in concert.

 

When there is no deliberate intent (and therefore group registration is not appropriate)

On the other hand, it should be emphasised that not every division of business activities amongst several companies automatically constitutes an abusive practice. If, for example, over time and through natural development, these entities were to become genuine competitors operating independently, with their own customers, business strategy and no cooperation in the provision of services, such a division would have a legitimate economic justification. Such a division of business may also occur for the purposes of managing business risk or the entry of a new investor.

Similarly, there may be situations where entrepreneurs are required to set up separate companies due to a different legal or regulatory framework. For example, this typically involves the separation of different types of activities, or may be driven by licensing requirements or liability risks. In such a case, the mere existence of multiple companies would not automatically constitute grounds for ex officio group registration, provided that the separation pursues a legitimate economic objective and is not primarily aimed at obtaining a tax advantage.

 

Procedure for ex officio group registration

1. If the tax administrator identifies grounds for ex officio group registration, the Banská Bystrica Tax Office will invite the presumed group members to appoint a joint representative for the purposes of the registration procedure within 8 days.
2. If they fail to do so, the tax office itself will appoint a representative and notify all affected parties of this fact. The legislator has anticipated possible delays, and no appeal may be lodged against this decision.
3. Once a representative has been appointed, the tax office will invite the group’s representative to comment on the grounds for registration within a period of not less than 15 days.
4. If the grounds for registration are not refuted or if the representative fails to respond to the invitation, the tax office will decide on the registration of the group ex officio and assign it a VAT identification number. An appeal may be lodged against this decision within 8 days, and the appeal has suspensive effect.

The burden of proof initially lies with the tax authority, as it must identify the presumed members ex officio and state the reasons for doing so. Subsequently, the burden of proof shifts to the taxable persons, as they must rebut the tax authority’s claims as to why they were identified as members of the group.

The group becomes a VAT payer on the day following the date on which the decision becomes final, at which point the individual VAT registration numbers of the group’s members, if they had any, cease to be valid. The whole process tends to be relatively quick – in practice, it can be completed within approximately one month.

 

Registration is handled by the Banská Bystrica Tax Office

As with standard VAT groups, in this case too, all members of the group are jointly and severally liable for the group’s tax obligations.

When a group is registered ex officio, the Banská Bystrica Tax Office will have jurisdiction over the matter; this is part of the legislator’s effort to distribute the administrative burden more evenly amongst the individual tax offices. This is because approximately one-third of all business entities fall within the local jurisdiction of the Bratislava Tax Office.

Once the registration process is complete, local jurisdiction will transfer to the tax office corresponding to the registered office of the group’s representative.

 

Reporting obligations and penalties

The group representative is also obliged to report changes relating to the group without delay, for example:

• the accession of a new member to the group,
• the withdrawal of a group member,
• a situation where a member ceases to meet the conditions for membership (e.g. upon the sale of the company).

In the event of a breach of this notification obligation, the tax authority may impose a fine of up to 10,000 euros.

 

What this means for businesses in practice

In practice, we are already seeing that when dividing business activities amongst several entities, it is necessary to consider the future need to demonstrate the genuine economic reasons for this decision. The mere existence of multiple companies or business forms is not a problem, provided that the division of activities is justified, for example, by business strategy, business risk management or the natural development of the business.

On the other hand, if the main objective of such a division is to obtain a tax advantage in the form of avoiding VAT registration, the tax authority may proceed to register the group ex officio. In such a case, the entities concerned will be treated as a single VAT payer, whilst at the same time bearing joint and several liability for the group’s tax obligations.

In business practice, companies must be prepared for the fact that the structure of their business will increasingly be assessed not only from a legal perspective, but also from a tax and economic perspective. If they assess all their business decisions proactively from these perspectives, they will avoid disputes with the tax authorities or problems with additional tax liabilities.