With effect from 1 January 2022, the parliament passed several amendments to tax legislation. Below, we summarize the changes with highest relevance for companies.
Amendment to the Income Tax Act
Reduction of the R&D expenditures deduction
The amount of the so-called super-deduction of research and development expenses (costs) shall be reduced from 200% to 100% of expenses (costs) incurred.
Deduction of investment expenses (costs)
One of the new features is the possibility of additional claim for a deduction of expenses (costs) reaching 15% to 55% of the tax depreciation applied from the investment in assets listed in Annex no. 3 to the Income Tax Act in the applicable tax period.
The actual percentage of the deduction will depend on 2 factors:
- the planned percentage of your investment spending calculated from the average value of investments for the three most recent tax periods preceding the investment plan
- the value of the investment of this planned average investment value set out in the investment plan for a period of 4 years in mil. euro.
The term investment shall be defined as an investment in a production and logistics system consisting of equipment, machinery, ancillary equipment, automation technology and communication technology (listed in Annex 3 to the Act), including software for management of the production and logistics process capable of real-time exchange, processing and archiving of digitalized data with the objective to optimize this process. Deduction of investment expenses (costs) can be applied during the depreciation period of the relevant assets, however, for a maximum of 10 immediately consecutive tax periods.
Conditions for applying the deduction of investment expenses (costs):
- the investment must be put in the use by the entity or in its business assets (in the case of a natural person) during the period of the investment plan,
- the entity's tax period during the period of the investment plan lasts continuously for 12 consecutive calendar months,
- it is an investment in assets that meet the provisioned conditions (listed in Annex No. 3 to the Income Tax Act),
The entity shall not apply for suspension of depreciation of the assets to which the deduction is applied.
We have prepared a practical example for you:
The taxpayer (legal entity) acquired and put into use the following assets:
The average value of investments = (300,000 + 200,000 + 100,000) / 3 = 200,000 (arithmetic average).
At the same time, during the period of the investment plan 2022-2025, the taxpayer must put into use the investment amounting to the total of the planned investment expenditure, i.e. 700% of the average value of the entity's investments.
As the average value of investments is € 200,000, the taxpayer must make investments of at least (€ 200,000 x 700%) = € 1,400,000. Otherwise, the entity would not be eligible to claim the deduction in the relevant tax period and, at the same time, it would be obliged to file an additional tax return for each tax period in which it claimed the deduction.
The taxpayer (a legal entity) has decided to make investments in productive assets. The investment plan for the years 2022 – 2025 was prepared. The plan set the amount of the investment at 700%. In January 2022, the taxpayer acquired by purchase a new, previously undepreciated metal forming machine and put it into use. The machine is included in depreciation category 2 with a depreciation period of 6 years in the amount of € 540,000. The asset is listed in Annex no. 3 of the ITA and features a software equipment focused on ensuring and monitoring of product quality and the quality of production process with evaluation of possible production failure rate. Since the taxpayer chose the amount of investment reaching 700% and made an investment in 2022 which it put into use, in the taxation period 2022 – 2027, it can claim a deduction of investment expenses in the amount of 15% of tax expenditure – tax write-off from these assets (540 000/6 = € 90,000) x 15% = € 13,500. Tax write-off in 2022 = € 90,000 - deduction under Section 30e in 2022 = € 13,500.
The amount of the tax exemption is adjusted to 55% of the value of the meal allowance provided on the business trip, i.e. a maximum of € 2.81.
Non-monetary consideration provided to an employee in the aggregate amount of a maximum of € 500 for the relevant tax period from all employers shall be exempt from tax if the employer does not use the funds thus incurred as expenses (costs) to achieve, secure and maintain taxable income.
Reverse hybrid mismatches
With effect from 1 January 2022, a notification obligation is introduced in connection to reverse hybrid mismatches for foreign partners of public companies and limited partnerships (Section 49a par. 9 and Section 52zzk of the Income Tax Act).
APA fee reduction
The amount of the fee for issuing a decision on the approval of the valuation method in transfer pricing for tax entities that are considered highly reliable according to the tax reliability index is reduced to one half.
- Unilateral APA: from € 10,000 to € 5,000
- Bilateral / multilateral APA: from € 30,000 to € 15,000.
Tax bonus per child
For the month of January 2022 and the following months, the amount of the tax bonus shall be as follows:
- € 22.17 per month,
- twice the amount referred to under item (a) per month where the dependent child has not reached the age of six, applicable for the last time in the calendar month in which the dependent child reaches the age of six, or
- 1.85 times the amount referred to under item (a) per month where the dependent child has reached the age of six and has not reached the age of 15, applicable for the last time in the calendar month in which the dependent child reaches the age of 15.
Amendment to the VAT Act
Bank account (BA) reporting obligation for VAT payers
VAT payers registered before 15 November 2021 are obliged to notify the Financial Administration by 30 November 2021 of each of their own bank accounts, which they use for business purposes (receiving and sending payments). New taxpayers notify the authorities about their bank accounts without delay. All bank accounts must be reported to the authorities for the VAT group as a whole.
Where a VAT payer provides incorrect, false, or incomplete information, the Tax Office shall impose a fine of up to € 10,000. Failure to notify the authorities about an entity's bank account may result in a fine of between €30 and € 3,000.
The institute of tax guaranty
Where the customer pays VAT to its supplier to another bank account than the reported account, which is published in the official list on the financial administration web page on the day of entering the payment order, this customer shall be liable in cases where the supplier fails to settle the corresponding VAT to the tax authorities. The Financial Administration will publish a list of all reported bank accounts.
It is necessary to set up your internal verification processes so that the supplier's bank account is checked against the official list of the Financial Administration before the payment is processed. The liable party (‘guaranty provider’) shall be obliged to settle the unpaid tax within eight days of delivery of the decision.
Specific method of VAT payment (the so-called split-payment)
The amendment also introduces a novelty: the possibility for the customer to pay VAT directly to the Tax Office where the customer knows or suspects that the supplier will not pay VAT to the authorities. In this case, the customer pays to the supplier only the amount constituting the tax base without the applicable VAT. Using this step, the customer avoids the liability for non-payment of VAT by the supplier.
However, once the customer pays the VAT liability to the Tax Office on behalf of the supplier, it will not be possible to refund this overpayment to the customer, even if the supplier also pays its tax liability.
The designation of a split payment for the supply of goods or services carries a specific payment ID (known as variabilný symbol, or 'VS' in Slovak). For example, for the tax period June 2022, the VAT on the invoice at the supplier's specific taxpayers account (abbreviated as ‘OÚD’) would be designated with the VS as follows:
Correction of adjusted deduced tax on fixed assets (uncollectible receivables)
A new provision sets out an obligation for the customer (VAT payer) to adjust the deductible tax due to a change and/or extent of use of these fixed assets and to take these adjustments into account when calculating the additionally deductible or additionally non-deductible tax.
- A refundable deposit is not included in the tax base when a beverage is supplied in a one-time deposit-eligible packaging.
- Goods in relation to COVID-19 shall be exempt on import or exempt in domestic purchases of goods by the EC, EU institutions or EU agencies, if the goods are supplied free of charge (already as of 1 January 2021).
- The expiry of the right to levy tax has been unified in connection with taxable transactions subject to some of the special provisions under Section 68a - 68c (5 years from the end of the year in which the obligation to file a tax return arose when applying the special provision).
Amendment to the Tax Code
Termination of sending and return of registration certificates
The issuing of registration certificates is abolished for both income tax and VAT, as well as in the case of changes to identification data with the purpose of performing the official record of changes.
Ex officio registration
From 1 January 2022, the tax administrator registers a tax entity by virtue of its authority within 30 days from the date of entry in the register of legal entities, entrepreneurs and public authorities. If the entity is not entered in the register, the tax administrator will register such entity within 30 days from the date of filing the first tax return.
Tax reliability index
The practice of granting the tax reliability index in Slovakia has been running since 2018. The most recent change introduces granting of an index of compliance with tax obligations to each taxpayer who is registered for income tax. On the basis of this index, the entity may receive additional benefits. Taxpayers will be classified into three categories: highly reliable, reliable, and unreliable.
Cessation of the right to levy tax
The last sentence of the wording of the relevant Act is omitted: "Where the tax entity claims a tax loss deduction, neither tax nor the tax difference can be levied after seven years from the end of the year in which the obligation to file a tax return arose in which this tax loss was recognized."
Institute of natural person exclusion
The tax administrator may issue a decision to exclude a natural person for a period of 3 years. The excluded natural person will be able to appeal against the decision on exclusion, but he/she may not file an appeal for review of the decision outside the appellate proceedings nor a proposal for reopening of the proceedings. The exclusion decision shall be subject to review by courts.
- Cancellation of the summary protocol.
- The summoned person must also provide evidence that, for serious reasons, he or she was unable to take part in the requested tax administration procedure.
- The time limit for viewing the files is 10 days from the submission of the application, while the application may be submitted by telephone, electronically or in writing.
- Harmonization of the delivery of the tax assessment protocol using auxiliary mechanism, which is now identical to the tax audit protocol, where the official request is part of said protocol.
- Reduction of the fee for a binding opinion of € 1,000.
Two-way electronic communication with the Financial Administration (FS)
Starting from 1 January 2022, the Financial Administration will not communicate via the FS portal, but via the ÚPVS portal (slovensko.sk) in accordance with the e-Government Act. The owner of the electronic mailbox has the option of setting up notifications when a new message is delivered to the mailbox folder, either by e-mail or by text message (SMS). For entities that will not have an active mailbox at the ÚPVS, delivery will be ensured via the "Central Official Delivery" service, i.e. by postal service.