Amendment to the VAT Act Introduces an Extension of the Domestic Reverse Charge Mechanism to Selected Services
A parliamentary proposal for an amendment to Act No. Act No. 222/2004 Coll. on Value Added Tax (VAT) The parliamentary proposal for an amendment to Act No. 222/2004 Coll. on Value Added Tax (VAT), which has already passed its first reading in the National Council of the Slovak Republic, addresses the risk of tax fraud in relation to selected services supplied between VAT-registered persons within Slovakia. The proposal extends the existing reverse charge mechanism to an additional, specifically defined category of supplies.
The amendment targets three categories of services classified according to the Statistical Classification of Products by Activity (CPA):
• Information technology services (falling within Division 62 and Class 63.11 of the CPA classification),
• Advertising services (Classes 73.11, 73.12 and 73.20 of the CPA classification),
• Business and management consulting services (Class 70.22 of the CPA classification).
All three categories of services share common characteristics that make them particularly vulnerable to tax fraud. The extension is intended to reduce unjustified VAT refund claims and strengthen the effective collection of VAT in these high-risk sectors.
The proposal also aims to reduce practical disputes regarding the classification of services, similarly to the approach already applied to the supply of construction services under the current VAT rules. The objective is to reduce interpretative disputes in situations where the supplier classifies the transaction as being subject to the reverse charge mechanism and accordingly indicates on the invoice that the VAT liability is to be accounted for by the recipient of the supply. The measure is intended to eliminate practical uncertainties in the VAT treatment of mixed and complex services, thereby reducing tax uncertainty and the risk of penalties.
The proposed effective date is the date of publication of the amendment; however, its practical application will also depend on the adoption of the relevant legislation at the EU level.
