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The individual amendments to Act No. 563/2009 Coll. on Tax Administration (Tax Code), which were approved by Parliament at the end of 2021, are effective as of November 15, 2021, January 1, 2022, and July 2022. In this article, we provide an overview of the changes introduced by the amendment to the Tax Code, which affect not only the Tax Code itself but also the VAT Act and the Income Tax Act.

Combating tax fraud as the primary objective of the amendment

According to the explanatory memorandum, the fundamental objective of the amendment to the Tax Code is to create new, effective tools to combat tax fraud. The amendment also aims to encourage taxpayers to voluntarily fulfill their tax obligations.

Introduction of new information lists

New or updated information lists will be published on the Financial Administration’s website. These will include:

1. Bank account numbers of VAT payers - According to the explanatory memorandum to the amendment, its key measure is the introduction of an obligation for both new and existing taxpayers to report to the Financial Directorate of the Slovak Republic (hereinafter “FR SR”) the numbers of all their own bank accounts that taxpayers use to carry out economic activities subject to VAT. Lists of taxpayers’ bank accounts will be published and continuously updated on the FR SR website. This list will be made available in the VAT taxpayers’ information directory. The obligation to report bank account numbers for existing accounts of taxpayers registered by November 15, 2021, arose for taxpayers as early as November 15, 2021, and the numbers of existing bank accounts had to be reported by November 30, 2021.

Do not forget to fulfill the obligation to report bank accounts even in cases where you are a registered VAT payer and, for business purposes:

• you open a new bank account (in this case, the reporting obligation arises on the date of its opening), or
• you decide to start using an account other than the one previously reported (in this case, the reporting obligation arises even before you begin using it for business purposes).

The Financial Administration has also issued a methodological guideline regarding this reporting obligation, which can be found here. The Financial Administration is also publishing a sample form titled “Notification of Accounts Used for the Taxpayer’s Business Pursuant to Sections 6 and 85kk of Act No. 222/2004 Coll. on Value Added Tax, as amended ”, which is available on the Financial Administration’s website www.financnasprava.sk in the Form Catalog under Tax Administration > Value Added Tax > Notification of Accounts Used for Business Purposes. VAT payers may use this form to fulfill their reporting obligations regarding bank accounts.

If a taxpayer provides incorrect, false, or incomplete information on the form used to report bank accounts, they may be subject to a fine of up to 10,000 euros. When determining the amount of the fine, the severity and duration of the violation are taken into account. Failure to report, or late reporting of, a bank account is considered a failure to fulfill a non-monetary obligation, for which the tax administrator will impose a fine for an administrative offensepursuant to Section 154(1)(j) of the Tax Code.

1. Account numbers maintained by the tax administrator for taxpayers who are VAT payers – the so-called taxpayer’s personal account. This list will be made available in the information list of VAT payers
2. of Taxpayers together with their tax reliability index – this list will be made available in connection with the changes regarding the tax reliability index, which we discussed above. The Financial Administration will publish this list no later than June 30, 2022.

The amendment to the Tax Code also amends Act No. 222/2004 Coll. on Value Added Tax, as amended (hereinafter the “VAT Act”), with the aim of improving VAT collection. The amendment anticipates that the introduction of a new condition for the application of the institution of tax liability will have a direct impact on improving VAT collection—namely, a payment to the supplier’s bank account that was not published on the website of the Financial Administration of the Slovak Republic on the date of payment —i.e., a payment to an account other than the published one. The risk associated with the application of the tax guarantee mechanism can be eliminated on the part of the customer. The newly proposed special method of tax payment consists of the following: if the customer is concerned that the tax authority might hold them liable, they will be able to split the payment (so-called split -payment) and pay the relevant VAT amount directly into the tax administrator’s account maintained for the supplier of goods or services. Subsequently, the tax administrator will no longer demand from the customer the VAT amount that their supplier has not paid.

In practice, this legislative change imposes an additional bureaucratic obligation on taxpayers seeking to avoid the risk of liability for unpaid tax, as they must verify—before making a payment to their supplier—that the payment is being made to the supplier’s registered bank account.

Tax Reliability Index – Bonuses and Penalties for Taxpayers

Based on the amendment to the Tax Code, there has also been a change in the assessment of taxpayers, the so-called tax reliability index, also known as the public index, with the transition from a non-public form of assessment to a public one. This index is intended to serve as a motivational tool. The tax reliability index rating will reflect how a taxpayer (an entrepreneur registered for income tax) fulfills their obligations under the Tax Code and other specific regulations.

The precise criteria on which the tax reliability index will be determined are set forth in Decree of the Ministry of Finance of the Slovak Republic No. 544/2021 Coll. on the criteria for determining the tax reliability index. These include, in particular, the filing of tax returns, the payment of taxes, compliance with obligations during tax audits, the ability to be reached at the registered office address, and others.

Notifications regarding the assigned index will be sent to taxpayers for the first time by the end of February 2022. The list will be published for the first time by the end of June 2022. If a taxpayer’s tax reliability index changes, the tax office will send a notification with an explanation by the end of the month following the end of the evaluation period, which is a calendar half-year. If there is no change in the index, the tax office will not send a notification.

If a taxpayer disagrees with the evaluation, they may file an objection. Filing an objection has suspensive effect. If the objection is unsuccessful, the taxpayer may assert their rights in court through an administrative lawsuit. The taxpayer will be included in the public list related to the tax reliability index only after all remedies have been exhausted.

Taxpayers who approach their tax obligations responsibly and are designated as reliable (e.g., timely filing of tax returns) will be rewarded with benefits. These will be listed on the website of the Financial Administration of the Slovak Republic. Entities deemed highly reliable based on the tax reliability index will receive:

• the issuance of a partial report as part of a tax audit—the tax administrator is required to issue this for such an entity; previously, this was voluntary on the part of the administrator,
• a deadline of at least 15 days in the notice to fulfill obligations sent to the taxpayer or included in the minutes (in connection with a tax audit or on-site inspection)—a longer period than the statutory deadline will apply (other taxpayers have an 8-day deadline),
• another benefit for highly reliable taxpayers is, for example, the fact that when requesting a binding opinion, they pay only half the fee for that binding opinion,
• a reduction in the fee for issuing a decision approving the use of a specific method for determining the tax base of a permanent establishment pursuant to Section 17(7) and a decision approving the use of a valuation method pursuant to Section 18(4) of Act No. 595/2003 Coll. on Income Tax, as amended, by half.

On the other hand, entrepreneurs who are assessed as unreliable are to be encouraged to adopt a more responsible approach through the imposition of a so-called penalty, which is the opposite of a bonus—such taxpayers will, for example, be given a minimum period of 8 days to fulfill a specific obligation, e.g., in connection with a tax audit or assessment proceedings = shortening the deadline for performing the action.

Reducing the administrative burden – abolition of registration cards as well as certain reporting obligations

The amendment also aims to reduce the administrative burden, and in connection with this goal, registration certificates – the so-called cards – are being abolished. The tax administrator will no longer send registration certificates to taxpayers. The cards had to be submitted to the tax administrator whenever changes were made so they could be recorded in the certificate, and upon cessation of business, they had to be returned to the tax administrator. Registration cards were abolished as of January 1, 2022, and the tax administrator now sends only registration decisions to taxpayers.

As part of efforts to reduce the administrative burden, the amendment also affected reporting obligations. Data that the tax administration receives, or data it can obtain from other sources, such as various public and non-public registers, will no longer need to be reported by taxpayers. This includes, for example, notifications of a change of surname or a change of registered office, and the like.

Institution of the exclusion of a natural person – statutory representative

The new Section 157a of the Tax Code introduces a decision to exclude a natural person who is a statutory representative of a taxpayer in connection with the amendment regarding the disqualification of persons in the Commercial Code (Section 13a of the Commercial Code as a tool to combat the abuse of “front men”), as well as in the Courts Act. The exclusion applies only to the natural person acting on behalf of the entity; it does not apply to the tax entity itself. In accordance with the new Section 157a of the Tax Code, the tax administrator may decide to exclude a natural person in the following two cases:

if the natural person

who is a statutory body or a member of the statutory body of a taxpayer for whom a tax audit was concluded on the date the right to a refund of excess input tax expired, and who simultaneously has a tax arrears and arrears on other monetary payments totaling at least EUR 5,000 more than one year past due,in the case of a natural person who was a statutory body or a member of a statutory body at the time the taxpayer filed a value-added tax return for the tax period for which the tax audit of the eligibility of the claim under a special regulation was concluded on the date of the claim for a refund of excess input tax.

If the tax administrator decides to exclude a natural person, that person is excluded from the date the decision on exclusion becomes final. The period of exclusion is three years from the date the tax administrator’s decision on exclusion becomes final. During this period, the excluded natural person may not serve as a statutory representative, a member of a statutory body, or a member of a supervisory body in a business corporation or cooperative. However, the excluded natural person retains the right to conduct business as a sole proprietor and to be a partner in a business.At the same time, the disqualified individual may not file a motion for review of the disqualification decision outside of the appeal proceedings, nor may they file a motion for reinstatement of proceedings (i.e., extraordinary remedies are not admissible). An appeal against such a decision is, however, admissible, just as the decision on exclusion is reviewable by a court (filing an administrative lawsuit).A decision on exclusion cannot be issued if, with respect to the taxpayer whose managing director is to be excluded, enforcement proceedings are pending for an arrears that remains unpaid even one year after its due date, or if bankruptcy or restructuring proceedings are pending against it, or if this taxpayer has been granted a deferral of tax or tax arrears payment, or has been granted an installment plan.The exclusion provision is effective as of January 1, 2022.Example 1:A taxpayer has completed a tax audit pursuant to Section 46(9)(c) and has:- a tax arrears of EUR 5,000 for 13 months past due, and at the same time has- arrears on another monetary obligation in the amount of EUR 0.A natural person who is a statutory body or a member of a statutory body of such a taxpayer will be excluded because the amount of at least one of the aforementioned arrears reaches EUR 5,000 and this arrears is more than one year past due.Example 2:

The taxpayer has completed a tax audit pursuant to Section 46(9)(c) and has:

- a tax arrears of 3,000 euros that have been overdue for 5 months, and at the same time has

- arrears on other monetary payments in the amount of 2,000 euros that have been overdue for 14 months.

A natural person who is a statutory body or a member of a statutory body of such a taxpayer will not be excluded because, although the arrears total at least €5,000, they did not exist at that amount for the entire year following their due date.

Reduced Tax Incentive for Taxpayers Engaged in Research and Development

For taxpayers engaged in research and development, the tax incentive—which consists of deducting research and development expenses from the tax base, known as the “super deduction”—is being reduced. Prior to the amendment to the Tax Code taking effect, a taxpayer could deduct 200% of eligible expenses incurred for research and development activities from the tax base. As of January 1, 2022, the tax incentive in the form of this super deduction is reduced to just100% of eligible expenses incurred for research and development activities.

The fee for a binding opinion will be reduced to EUR 1,000

The amendment also reduces, effective January 1, 2022, the fee for the issuance of a binding opinion provided to a taxpayer by the Financial Administration. The fee for the issuance of binding opinions will be reduced to EUR 1,000. This reduction aims to make binding opinions accessible to a larger group of taxpayers. The fee is tied to the issuance of an opinion regarding a single business transaction and a single legal provision. As we mentioned in the section on benefits for highly reliable taxpayers, such taxpayers will pay only half of this amount when requesting a binding opinion. The fee is paid without a request and is due upon submission of the application for a binding opinion.

Deduction of expenses for investments supporting Industry 4.0

The amendment also introduced changes to Act No. 595/2003 Coll. on Income Tax, as amended (hereinafter the “Income Tax Act”), with the new provision of Section 30e of the Income Tax Act introducing a deduction for investment expenses (costs). This is a temporary measure introduced to support investments with higher added value—that is, productive investments linked to Industry 4.0.

This change is intended to support taxpayers who decide to invest in assets with higher added value and, at the same time, reinvest a total of at least 700% or 1,400% of the average value of their investments. Support for Industry 4.0 takes the form of an additional deduction of investment expenses (costs) for investments equal to a specified percentage of the tax depreciation on such assets claimed as tax expenses, depending on the planned percentage of reinvestment of the average investment value and the amount of reinvestment of this planned average investment value as set forth in the investment plan, as follows:

Reinvested average value of investments in % Value of the planned reinvestment percentage of the average value of investments in millions of euros

from 1 to 20 (inclusive) from 20 to 50 (inclusive) more than 50

from 700% to 1399.99% 15% 25% 50%

1,400% and above 20% 30% 55%

For example, if a taxpayer actually reinvested 800% and the value of the reinvested amount is 6 million EUR, then the percentage amount of the possible deduction for investment expenses will be:

- tied to the reinvestment rate of the average value of 700%–1,399.99% and

- the value of this reinvestment in euros, i.e., 15%.

The amendment establishes the following rules for the deduction of investment expenses:

• the taxpayer may claim this deduction throughout the entire depreciation period of this asset, but for a maximum of 10 consecutive tax periods,
• the deduction may only be claimed for an investment defined by law—specifically, an investment in a production system or a logistics system, which may involve an investment in tangible assets listed in Annex No. 3 of the Income Tax Act, as well as other assets or a computer program,
• the investment deduction may only be claimed after the conditions set forth by law have been met, such as the preparation of an investment plan.

Submission of the summary of withheld advance payments within 5 days after the deadline without penalty

An amendment to the Tax Code also approved a change to the Income Tax Act aimed at supporting the business environment. The amendment allows an employer who is a tax payer and who was required to file a statement of withheld and remitted advance payments for income tax on employment for the previous calendar month but failed to do so within the deadline

 

to submit this report retroactively within 5 days after the deadline for filing the report has expired, without incurring a penalty.

Tax Assessment Based on Auxiliary Data

The obligation to assess tax based on auxiliary data in cases where the taxpayer has not filed a tax return even after being requested to do so by the tax administrator is changed to an option available to the tax administrator.

At the same time, the amendment also regulates the delivery of the tax assessment report based on auxiliary data in the same manner as for a tax audit report; thus, the request for comments will be part of the tax assessment report based on auxiliary data. This change is intended to ensure a more efficient method of delivery.

Further changes introduced by the amendment to the Tax Code effective January 1, 2022

Effective January 1, 2022, the following changes also took effect in connection with the adopted amendment to the Tax Code:

• Access to the File – a taxpayer or their representative is entitled to access the taxpayer’s file regarding their tax obligations on the next business day following the day on which they requested access to the file (upon receipt of the access request by the tax administrator). Taxpayers may request access to the file by phone, electronically, or in writing.
• Evidence – Conducting Joint Proceedings – As of January 1, 2022, tax administrators may also conduct so-called joint proceedings for evidentiary purposes – these primarily include oral hearings, witness examinations, expert examinations, and similar proceedings. A joint action is not only an action involving multiple tax administrators but also an action by a single tax administrator involving multiple taxpayers simultaneously. The aim of this change is to shorten the duration of tax audits, as well as to increase efficiency and reduce the burden on taxpayers, who in practice often had to participate in the same proceedings.
• Hearing of Witnesses and Experts via Videoconference – The amendment also introduced a new option for tax administrators to conduct hearings of witnesses and experts for tax administration purposes via videoconference or other means of communication technology, with minutes being taken of such proceedings. This provision is introduced primarily to increase efficiency and cost-effectiveness.
• Summoning and Compulsory Appearance – a provision was added to Section 20 of the Tax Code stipulating that a summoned person must, along with an excuse, also submit evidence that they were unable to participate in the required tax administration procedure for serious reasons or due to circumstances worthy of special consideration; otherwise, they face compulsory appearance.
• The institution of the summary report under Section 19a of the Tax Code has been abolished—this report could be issued by the Financial Administration of the Slovak Republic regarding interconnected transactions of taxpayers in which a violation of tax regulations or circumvention of tax regulations was detected, or even upon request by the Organ of Criminal Investigation, the Financial Police Service of the Police Force, or the Criminal Police Service of the Police Force. This provision concerning the summary report has been completely removed from the Tax Code.
• Expiration of the right to assess tax – in Section 69(1), the amendment deleted the last sentence: “In the case of a taxpayer claiming a tax loss deduction, no tax or tax difference may be assessed after the expiration of seven years from the end of the year in which the obligation to file the tax return in which this tax loss was reported arose.” This change follows an amendment to the Income Tax Act concerning the application of tax losses.
• Enforcement Costs and Out-of-Pocket Expenses – The provision regarding the allocation of payments from enforcement proceedings has been amended to include the already established enforcement by driver’s license suspension. Thus, the tax administrator will not determine enforcement costs even in the case of tax enforcement by driver’s license suspension.