Reduced VAT rate for accommodation services

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As we informed you in the last issue of the newsletter, an amendment to Act No. 222/2004 Coll., on Value-Added Tax, effective as of 1 January 2019, has introduced a reduced VAT rate for accommodation services at the rate of 10%. This reduced VAT rate applies to accommodation services with code 55 in the statistical classification of products by activity (CPA).

In view of the ambiguity of this provision in connection with the transition of the years, the advances received and paid for accommodation services and other services relating to accommodation, the Financial Directorate of the Slovak Republic has issued two guidelines on the issue in question.

One of the guidelines of the Financial Directorate clarifies the procedure for applying the reduced VAT rate in the event that accommodation began in 2018 and ends in 2019. The guideline further clarifies what a taxpayer should do in the case of a (partial or full) advance payment received in 2018, but intended for accommodation services provided in 2019, when the 10% reduction of the VAT rate takes effect.

The second guideline clarifies application of the VAT rate for accommodation in relation to whether, aside from the accommodation itself, the taxpayer provides a range of other services such as breakfast, parking, wellness, half board, etc. The main influence for assessing the VAT rate to be applied is whether (i) there is a complex service that is subject to the reduced VAT rate as a whole, or (ii) the matter involves distinct services, i.e., accommodation taxed at the rate of 10% VAT and additional services which are not included in the price of the accommodation and are subject to the basic VAT rate of 20%.

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