Tax and Legal - May 2017 | KPMG | SK

Tax and Legal News - May 2017

Tax and Legal - May 2017

We bring you our regular overview of tax and legal news in the Slovak legislation.

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OECD Multilateral Convention and its proposed adoption by Slovakia

The Slovak Government approved the proposal for the adoption of the OECD Multilateral Convention (further only the “Multilateral Instrument” or the “MLI”) on 10 May 2017. The MLI will thus be signed in June 2017 in Paris also by Slovakia. The Slovak Republic intends to adopt the MLI such that it will apply to 64 double taxation avoidance treaties (“tax treaties”) entered into with the following countries (covered tax treaties):

  • Belgium 
  • Cyprus
  • Estonia 
  • Ireland 
  • Malaysia 
  • Malta 
  • the Netherlands 
  • Singapore 
  • Switzerland 
  • Great Britain
  • Austria 
  • Hungary 
  • Sweden 
  • Bulgaria 
  • Latvia 
  • Lithuania 
  • Romania 
  • Denmark 
  • Luxembourg 
  • Brazil 
  • Australia 
  • Canada 
  • China 
  • Croatia 
  • the Czech Republic 
  • Finland 
  • France 
  • Georgia 
  • Germany 
  • Greece 
  • Island 
  • India
  • Indonesia 
  • Israel 
  • Italy 
  • Japan 
  • Kazakhstan 
  • South Korea 
  • Mexico 
  • Moldavia 
  • Nigeria 
  • Norway 
  • Poland 
  • Portugal 
  • Russia 
  • Montenegro 
  • Serbia 
  • Slovenia  
  • South Africa
  • Spain 
  • Sri Lanka 
  • Tunisia 
  • Turkey 
  • Ukraine 
  • USA 
  • Vietnam 
  • Belorussia 
  • Bosnia and Herzegovina 
  • Kuwait
  • Libya 
  • Macedonia
  • Syria 
  • Turkmenistan
  • Uzbekistan

In general, the Slovak plan is to apply nearly all provisions of the MLI on the covered tax treaties.

For example, in terms of the double taxation avoidance methods outlined by the MLI, Slovakia intends to apply the method defined by the MLI as the Option C, and has also chosen to apply the simplified limitation of benefits clause to selected tax treaties.

With respect to the real estate clause, Article 9.4 of the MLI will be adopted by Slovakia defining that gains derived by a resident of a contracting state from the alienation (disposal) of shares or comparable interests, such as interest in a partnership or trust, may be taxed in the other contracting state if, at any time during 365 days preceding the alienation, these shares or comparable interests derived more than 50 per cent of their value directly or indirectly from immovable property situated in that other contracting state.

In addition, Slovakia aims to apply Article 14.1 of the MLI in connection to splitting up of contracts which is aimed to avoid a construction permanent establishment. In summary, where activities of an enterprise on a construction, installation or other project as defined by the covered tax treaty in the other contracting state will be carried on during one or more periods of time that, in aggregate, exceed 30 days without exceeding the period/s referred to in the relevant tax treaty, and where connected activities are carried on at the same building site, construction or installation project, or other place during different periods of time, each exceeding 30 days, by one or more enterprises closely related to the first mentioned enterprise, these different periods of time shall be added to the aggregate period of time during which the first mentioned enterprise has carried on activities on that same project.

At the same time, Slovakia has chosen not to apply part VI of the MLI – Arbitration.

The question is which treaty countries will adopt the MLI to the same extent and where the provisions selected by Slovakia will match the selection of the other countries. 

The so far communicated understanding of the final provisions of the MLI is that the relevant provisions will only apply in the case of a matching position with the provisions selected by the other treaty country. However, at the same time we understand that many countries contemplate to adopt only the minimum required standard, i.e. the provisions governing the misuse of double taxation avoidance treaties and the mutual agreement procedure.

We will further monitor the developments in this area.

Contact:
Zuzana Blažejová
+421 2 5998 4111
kpmg@kpmg.sk

Executory Procedure Code Amendment

Executory Procedure Code (Act No. 233/1995 Coll.) has been extensively amended as of 1 April 2017 (“Amendment“).

The Amendment introduces mainly following changes:

  • The only executory court with territorial jurisdiction for the whole Slovak Republic is District court Banská Bystrica; 
  • Court assignment of executors; the court assigns executor to the beneficiary on the basis of a random selection from executors performing execution-activity within the territory of the County court in which there is permanent residence (or the registered seat of legal entity) of the debtor, or where there is respective administrative authority if state is the debtor;
  • The execution petition may be newly filed only electronically with authorized electronic signature. Should the beneficiary not be able to use the authorized electronic signature, it may file the execution petition with any executor at a stipulated fee; filing the petition with a specific executor does not mean the assignment of this executor; 
  • Extension of reasons for suspension of the executory proceedings – executor shall suspend the executory proceedings:
    (a) if within 5 years following the commencement of execution on natural person´s property (30 months in case of legal entity), executor did not determine property or income of the debtor that may be subject to execution in the amount to cover at least the executor expenses;
  • Subject to meeting the statutory conditions, debtor - natural person has the right to pay its liability in instalments even without the consent of beneficiary.

Execution proceedings initiated prior to effectiveness of the Amendment should continue according to previous regulation.

Contact
Marian Dzuroška
+421 2 5998 4111
kpmg@kpmg.sk

Act on the Reminder proceedings

The purpose of Act No. 307/2016 Coll. on the Reminder proceedings (“Act”) is to provide faster and simpler alternative to enforcement of the monetary claims compared to the payment order pursuant to Civil Procedure Code. Act is effective as of 1 February 2017.

The new regulation comes with following changes:

  • Petition on payment order may only be filed electronically using a specific form and must be signed with authorized electronic signature;
  • The only competent court is District court Banská Bystrica;
  • Everyone whose claim against the defendant can be reasonably presumed may file the petition if such claim is reasoned by facts and documents attached to the petition;
  • If the plaintiff and the defendant are both accounting units, it is sufficient to attach the invoice, or the payment request and plaintiff´s declaration that he registers the claim in its accounting records;
  • Should the plaintiff be a VAT-payer, it is sufficient to state in the petition, that he has provided the information on the claim in the control statement according to specific law;
    Petition on issuance of the payment order is excluded in specific cases, e.g. if (a) agreed rate of late interest is higher by more than five percent than the statutory rate, (b) if the relevant claim originated from the promissory note, or (c) if the relevant claim originated under the consumer agreement;
  • Court issues the payment order within 10 days upon fulfillment of the issuance conditions, and orders the defendant to pay the claim to the plaintiff within 15 days.

Contact:
Marian Dzuroška
+421 2 5998 4111
kpmg@kpmg.sk

Action plan of fight against tax evasion

The Slovak Government approved the proposal of the Action plan of fight against tax evasion for the period 2017 – 2018 (hereinafter “Action plan”) which was introduced by the Ministry of finance, Ministry of Justice and Ministry of Home affairs.

The Action plan contains 21 new actions, which are aimed to eliminate new forms of tax frauds. Each action of the Action plan has a set time frame while the first ones to be implemented cover unfair practices during the mergers of legal entities, introduction of on-line connection between revenues evidence of cash register and the Financial Directorate and strengthening the responsibility of partners of legal entities without statutory body.

The Action plan also proposes introduction of an option to return a part of the VAT excessive deduction before performance of a tax audit in the amount which is without any doubts based on data stated in the VAT ledger statements. The respective Amendment of the VAT Act has already been introduced by the Ministry of Finance.

The Amendment of the Tax Code should, as of 1 January 2018, extend the possibilities of the Financial Directorate and introduce indexation of taxpayers on subjects that follow a tax discipline and subjects that do not fulfill legislative obligations. In addition, the period during which it is possible to levy tax based on request of law enforcement authorities should be prolonged from 5 to 10 years. The archiving period of the accounting records should be prolonged to 10 years.

Action plan includes also introduction of summary protocol from several tax audits that are performed simultaneously at several taxpayers which should provide a complex result valid for the respective taxpayers without breaking a tax secret.

The amendment of the Act on Accounting should provide a definition of a serious accounting infringement which, if performed repeatedly, is not compatible with business activity performed based on business license. The respective action should prevent the persons who seriously and repeatedly infringe the provisions of the Act on Accounting from business activities.
The Action plan contains also the action which implements on-line monitoring of transport of goods. In this respect the Slovak Ministry of Finance together with Ministry of Transport and Construction prepares the analysis of introduction of a system monitoring cross-border transportation of goods in Slovakia, i.e. ETCS system.

Please see below overview of individual actions together with the proposed timeframe:

Name of action 
Date
Mergers of legal entities
1.9.2017
Electronic cash register
1.9.2017
Strengthening the responsibility of partners of legal entities without statutory body
1.9.2017
Option to return a part of the VAT excessive deduction before
performance of a tax audit in the amount which is indubitable based on data stated in VAT ledger statements 
1.1.2018
JACK - Common analytical center 
1.1.2018
INDEX 1.1.2018
Elimination of tax frauds on excise duties 
1.1.2018
Introduction of an obligation to archive documents in electronic or paper version for 10 years 
1.1.2018
Prolongation of a tax proceeding period to 10 years
1.1.2018
Simplification of levying proceeding
1.1.2018
Extension the institutes of protection of the state interest in the tax area  
1.1.2018
Extension of the authorities of Criminal office of the financial
directorate 
1.1.2018
Introducing the possibility to use the institute of an agent 
1.1.2018
Asset Management Office  1.1.2018
Extension of superpreliminary measure (super ensurance order) on assets 
1.4.2018
On-line monitoring of transportation of goods
1.4.2018
Change of the merits of the criminal offence of tax administration
obstruction based on Article 278a of the Criminal Code 
1.4.2018
Cancelation of trade license in case of a repeatedly infringed Act on Accounting
1.6.2018
Introduction of a summary protocol
1.6.2018
Introduction of an obligation for courts and civil service agencies to verify the information included in the respective registers and evidence 
1.7.2018
Introduction of an entitlement of financial directorate to enter into building acceptation proceeding 
1.7.2018


Contact:

Marianna Dávidová
+421 2 5998 4111
kpmg@kpmg.sk

Draft amendment to the Slovak VAT Act

The Slovak Ministry of Finance introduced in May 2017 a draft amendment to Act No. 222/2004 Coll. on VAT as amended.

The following major changes are proposed to be effective from 1 January 2018:

  • Conditions for application of triangular simplification as regards the status of the first customer will be changed;
  • VAT payers will be obliged to refund input VAT deducted from the payment paid prior supply of goods or services should the goods or services be not supplied or provided to them as at the deregistration date;
  • The limitation for application of “domestic reverse-charge” (tax base in the invoice amounting to or exceeding the amount of EUR 5,000) upon supply of particular kind of agricultural crops and metals will be cancelled;
  • The Tax Authorities will be allowed to refund prior to opening a tax audit part of the excessive deduction should they, based on the data reported in the VAT Ledger Statement, have no doubts as regards the amount to be refunded;
  • VAT payers will be obliged to adjust the input VAT deducted (via capital goods scheme) also with respect to purchase of any construction, not only buildings;
  • Suppliers will be allowed to issue a summary invoice also for the lease and supply of electricity, gas, water or heat for the period up to 12 calendar months provided to the customer not seated in Slovakia;
  • A deposit upon VAT registration will be payable to the Tax Authorities also if the applicant is an individual or a legal entity that has a tax underpayment amounting at least to EUR 1,000 or has been deregistered for VAT purposes as he has repeatedly breached his administrative obligations;
  • Persons registered according to Article 7 or 7a of the Slovak VAT Act will be obliged to file an EU Sales List should they take part in a triangular transaction as the first customer;
  • The application of the special scheme for travel agents will be changed; thus, the customers, VAT payers, will not be allowed to claim input VAT deduction from purchase of travel services.

We will keep you informed on the next steps within the legislative process.

Contact:
Zuzana Šidlová
+421 2 5998 4111
kpmg@kpmg.sk

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