The domestic reverse charge will be extended to foreign entities in Slovakia under section 69 of the 222/2004 Slovakian VAT act as from 1 January 2016.
The reverse charge mechanism applies with regard to goods and services (other than the distance sale of goods) supplied by a foreign person to a taxable entity established in Slovakia.
The extension results in the following:
- Foreign companies that only carry out local supplies in Slovakia subject to the local reverse charge mechanism are not be obliged to register for Slovak VAT.
- If they are already registered for Slovak VAT, they are not entitled to deduct input VAT via a Slovak VAT return, if this input VAT relates only to the supplies where the reverse-charge mechanism applies.
- Foreign companies would be able to claim input VAT using the VAT refund procedure, providing they meet certain conditions.
The extension of the domestic reverse charge in Slovakia is a welcome change for foreign entities. It simplifies their business activity in the country, and reduces the administrative burden that they have faced to-date.
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