VAT stands for Value Added Tax. VAT is a general tax, meaning it applies to all goods and services. However, there are exceptions to this rule, and some goods and services are exempt from VAT. VAT is an indirect or neutral tax, collected and remitted to the state budget by a person other than the one who actually pays it. Ultimately, the final consumer of the service or goods pays the VAT.
The reduced VAT rate of 10% applies to, for example, the sale of books, selected food items, selected medical devices, accommodation services, and goods and services within social economy activities.
For a better understanding of who benefits from being a VAT payer, it's good to understand the mechanism of how value-added tax works. Therefore, we will briefly explain how VAT works. As we have already explained above, VAT is a neutral or indirect tax, meaning that the person (entity) who collects and remits this tax to the state budget (i.e., the VAT payer) and the person (entity) who actually pays this tax are not the same person. This is because the person who collects and remits this tax is a business (VAT payer), and the person who actually pays this tax is the final consumer (customer), who pays VAT as part of the price of the goods or services.
This example of how VAT works applies to domestic transactions. For international transactions, the conditions for VAT operation are different and more complex. When dealing with the VAT mechanism, you may encounter the terms Input VAT and Output VAT.
If you are a business registered as a VAT payer, then your Input VAT will be part of the price when purchasing goods, services, or materials from another business also registered as a VAT payer. You pay input tax as part of the price for goods, services, or materials from another business that is a VAT payer. That's why the term 'input tax' is used, because it refers to the input of goods, services, etc., into your company. You can deduct input tax from these supplied cost items. This means that you can claim input tax back from the tax office as an excess VAT deduction.
If you are a business registered as a VAT payer, then on the other hand, you sell your products and services to your clients or customers. When selling your goods and services, customers pay you the price including VAT, and in this case, it is output VAT. The term output VAT is used because it refers to the sale of goods or services that go out from your company, towards clients.
The principle of how VAT works is as follows: You deduct the input VAT, which you pay in the cost of expenses (goods or services), from the output VAT, which you invoice to your clients and customers, but which your clients have paid along with the price of your goods or services. From your perspective, you only remit the VAT where output VAT exceeded input VAT. Alternatively, if input VAT exceeded output VAT, you can apply for an excess VAT refund.
Being a VAT payer is particularly beneficial for you in these cases:
Registering for VAT is generally not beneficial for you in the following situations:
There are several ways to register for VAT. The most common reasons for registration include voluntary VAT registration and mandatory VAT registration. If it is beneficial for you to be VAT registered, it's advisable to familiarize yourself with these types of VAT registration.
According to Section 4 of the VAT Act, there are two types of VAT registration:
You are obliged to register as a VAT payer according to Section 4, Paragraph 1 of the VAT Act if you are a domestic taxable person and have achieved a turnover of €49,790 or more in the last maximum of 12 consecutive calendar months. It is essential that you have a registered office or a permanent establishment in the Slovak Republic. If you are a natural person and do not meet this condition, it is sufficient to have a residence in the Slovak Republic or habitually reside here. If you meet the above conditions, you are obliged to register as a VAT payer no later than the 20th day of the calendar month following the month in which you achieved the turnover.
If you have not reached the turnover for mandatory VAT registration, and you know that it is beneficial for you to be a VAT payer, you can submit an application for tax registration according to Section 4, Paragraph 2 of the VAT Act. You have the right to apply for VAT payer registration even if you have not exceeded the turnover for mandatory registration. However, this does not mean that you have a legal entitlement to be registered as a VAT payer. First, you must meet the legal conditions for voluntary registration. You can also apply for voluntary registration even if you have not yet conducted any business, and due to future economic activities, it is necessary for you to have the status of a tax payer.
If it is beneficial for you to be a VAT payer and you wish to register as one, it is important to realize that this can sometimes be a lengthy and complicated process, as you must prove your status as a so-called taxable person to the tax office. Each type of registration has its own procedure. We will discuss each of them below.
To submit an application for voluntary VAT registration, you must submit the form on the Financial Administration portal. If you are an entrepreneur, the application can only be submitted electronically. In the catalog of electronic forms, under the "Register" section, you will fill out the "Application for registration, notification of changes, application for cancellation of registration for income tax, value-added tax, and insurance tax." You must send the properly completed application to the tax office, which will assess it. Ideally, you should also attach documents to the application proving that you meet the conditions for VAT registration. This means providing all documents demonstrating the performance of economic activity and your status as a taxable person (bank statements, bank account agreements, received invoices, issued invoices, contracts, etc.).
The tax office will register you, issue you a tax registration certificate, and assign you a tax identification number if you meet the specified conditions for a positive assessment of your voluntary registration application. The tax office will complete the registration within 21 days at the latest from the date of receipt of the tax registration application.. On the date specified in the tax registration certificate, you become a VAT payer.
If you, as a taxable person have met all conditions for mandatory VAT registration, you are obliged to submit an application for VAT payer registration to the tax office no later than the twentieth day of the month following the month in which you reached the specified turnover.
For mandatory VAT registration, you must submit the application via the Financial Administration portal. If you are an entrepreneur, the application can only be submitted electronically. In the catalog of electronic forms, under the Register section, you will fill out the "Application for registration, notification of changes, application for cancellation of registration for income tax, value added tax, and insurance tax". You will send the duly completed application to the tax office, which will assess the application. Ideally, you should also attach documents to the application proving that you meet the conditions for mandatory VAT registration. This means providing all documents proving the performance of economic activity up to the required turnover and your status as a taxable person (bank statements, bank account agreement, issued invoices, etc.).
A tax office employee will review your application and may additionally request further documents to examine whether you should have registered for VAT earlier. If the tax office, based on the submitted documents, determines that you have met the conditions for mandatory VAT registration, it will register you as a taxable person within 21 days from the date of application submission and will issue you a tax registration certificate and will assign you tax identification number (VAT ID).
ADVISON s.r.o. provides VAT registration service and representation by a tax advisor, so you don't have to visit the tax office.
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