On 27 December 2021, the National Assembly adopted the Act Amending the Value Added Tax Act (ZDDV-1M). The law is expected to be published in the Official Gazette earlier this month. Most of the provisions will enter into force on the fifteenth day after publication.
The following is a summary of the most important novelties brought by the changes.
- Transposition of the e-Commerce Directive
As of the date of entry into force of the Act Amending the Value Added Tax Act, the Rules on value added tax obligations with regard to directives of the Council (EU) applicable to supply of services and distance sales of goods will cease to apply. Provisions on e-commerce with which the directives regulating this area are transposed into Slovenian legislation will be contained in the amended act.
- Expanded possibility of using reverse charge mechanism and exception from mandatory VAT registration for foreign taxable persons
For a taxable person not established in Slovenia but supplying goods and services in connection to which it was designated as a person that has to pay tax, the amended legal provisions enable reverse charge mechanism in a way that such persons do not have to register for VAT purposes in Slovenia if they perform taxable supplies of goods and services only to taxable persons registered for VAT purposes in Slovenia. The recipients of goods and services are obliged to charge and pay VAT. However, the above does not apply when a taxable person not established in Slovenia has to identify himself for VAT purposes, for example, if it supplies goods and services to final consumers and it is not possible to use special VEM arrangements or whether supplies to final consumers and supplies to taxable persons identified for VAT purposes are made.
As in this case a taxable person who has no registered seat in Slovenia will not be able to claim a VAT deduction through the VAT return, the provisions regarding the conditions for VAT refund are also being adjusted in accordance with articles 74. and 74.i of VAT Act.
The amended provisions represent an administrative simplification mainly for foreign taxpayers who had to identify themselves for VAT in Slovenia only due to occasional local supplies of goods to VAT registered recipients. In these cases, foreign companies will no longer be obliged to register for VAT in Slovenia as VAT will be self-accounted by the recipient. In order to avoid misunderstandings and in order to ensure proper reporting, we recommend that both foreign suppliers and domestic recipients communicate in advance and harmonize their understanding of VAT treatment. However, when suppliers also have many of local purchases, we recommend checking on what such a decision means in terms of cash flow management before making a decision on (non) registration for VAT purposes.
- Simplifications and mitigation of administrative burdens for taxpayers
The amendment to the law additionally determines the mandatory contents of the VAT return in order to eliminate frequent dilemmas in filling in the fields in the VAT return. In addition, all data related to corrections of VAT returns are determined.
The obligation of taxpayers who propose a VAT return for the first time to submit a list of received and issued invoices to the first VAT return, which is the basis for compiling the VAT return, is canceled.
Customers who are final consumers are given a paper invoice only at their request (e.g. if they need an invoice to claim a guarantee).
- Exercising the right to deduct VAT
The exercise of the right to deduct VAT is changed in a manner that follows the current practice at acquisitions of goods within the Union and cases from Article 107 of the Rules on the Implementation of the Value Added Tax Act, so that a taxable person can exercise the right to deduct VAT in the tax period when the obligation to submit VAT return has arisen, if he also submits an invoice or other document determined by law by the deadline for submitting the VAT return for this tax period.
- Claiming a VAT deduction for passenger cars without carbon dioxide emissions
In order to encourage the purchase of electric passenger cars or vehicles without carbon dioxide emissions, the possibility is introduced to allow these vehicles, which are purchased for the purposes of performing the business activity, the right to deduct VAT, regardless of the type of the business activity for which the vehicle is used. VAT deduction is allowed in full for all vehicles that cumulatively meet the following conditions:
- the motor vehicle is free of carbon dioxide emissions, and
- the value of the motor vehicle, including VAT and other duties, does not exceed EUR 80,000.
The taxable person may also exercise the right to deduct VAT on the purchase of fuels, spare parts and closely related services in respect of those vehicles.
- Cancelation of the threshold for compulsory entry of farmers into the VAT system
In order to simplify the operation of the VAT system for farmers and to avoid the annual administrative obligations of verifying the amount of cadastral income and taxable subsidies and the consequent identification of farmers for VAT ex officio, the threshold for mandatory entry of farmers into the VAT system is canceled. The solution that such taxable persons can calculate part of their input VAT through a flat-rate compensation measure remains in force, and it will be also still possible to voluntarily join the VAT system.
Decree of the Government of the Republic of Slovenia on determining the list of goods to deal with the consequences of the outbreak of COVID-19 in 2022, which are temporarily exempt from import duties and value added tax on imports
We would also like to draw attention to the adoption of the Decree of the Government of the Republic of Slovenia on determining the list of goods to deal with the consequences of the COVID-19 outbreak in 2022, which are temporarily exempt from import duties and value added tax. This Decree entered into force on 1 January 2022 and shall remain in force until 30 June 2022, covering medical protective equipment, masks and vaccines. The detailed list of goods is contained in the annex to the decree together with the tariff codes of the goods.
How EY can help?
At EY, we regularly follow legislative changes in the tax and legal field. We can assist you with preparation on the changes and identification of the impacts of proposed changes. EY can also help you with tax optimization within the scope of the proposed legislation.
