Difference between VAT payer according to §7 and §7a

If you buy goods or services from abroad or supply them there, you have obligations to the state in terms of VAT. The VAT Act (hereinafter VAT) underwent changes on 1 January this year and other changes apply from 1 July 2021. Some do not apply only to legal entities and entrepreneurs, but also to natural persons, i.e. ordinary people who order via the Internet from abroad. Let’s take a closer look at §4, §7 and §7a of the current VAT, concerning changes in the VAT registration obligation.


detail ženských rúk pri rátaní na kalkulačke

source: pexels.com


The most important changes

To be objective, changes in the VAT law are not an another whim of the Minister of Finance. Act no. 344/2020, which amends Act no. 222/2004 Coll. on value added tax takes over the supranational legislation from the directives of the Council of the European Union.

Among serveral changes, we can consider the most important:

  • the possibility of correcting the tax base in the event of an uncollectible receivable

  • defining and modifying the rules for the distance sale of goods – until recently, mail order sales – within the Union, but also from other countries

  • changes in the rules for determining the place of delivery when selling goods to a distant country

  • the introduction of “legal fiction” in the sale of goods at a distance

  • abolition of the tax exemption for the import of consignments with a value of up to € 22, as the elimination of distortions of competition between suppliers of goods from the EU and suppliers from third countries

  • introduction of new rules for the sale of goods using an electronic communication interface

  • the obligation to prove the dispatch or transport of the goods at export

  • extension of special arrangements for the application of the tax

  • introduction of special arrangements for the declaration and payment of tax on the import of goods


Did you know?…

… the VAT law has been amended and amended a total of 44 words since its “birth” in 2004 – forty-four times? A remarkable number in 17 years. We will not look for the reasons, but we must put the hat down in front of colleagues from our industry, who not only manage to register changes, but also apply them in practice without mistakes.


Registration obligation

As part of the registration obligation, there were changes in the VAT regulation, applied by a taxable person with a registered office or establishment in Slovakia, as well as a change in the registration obligation for another reason.

  • if the taxable person is not registered according to § 4 as a taxpayer, he will be assigned a VAT ID for the purposes of applying a special arrangement

  • if the taxable person achieves a turnover in the Czech Republic for the registration of a VAT payer under § 4 – more than € 14,000 or requests voluntary registration, he will be left with the same VAT ID number after registration, which was assigned to him for the purposes of applying special arrangements

  • if a taxable person achieves or is to achieve a turnover from another EU Member State of € 14,000 or more, he must submit an application for registration under § 7 VAT and remain with the same VAT ID number as he was assigned for the purposes of applying the special regulation

  • similarly, the same VAT ID remains for the person who must register for VAT for the reasons stated in § 7a ZDPH, i.e. if he receives or supplies a service from or to another EU Member State

  • the above applies equally to the purchase of goods or services as well as to their delivery

  • the tax office will issue a certificate of registration and assign a VAT ID no later than 7 days from the submission of the application for registration

  • on the date specified in the tax registration certificate, the taxable person becomes a taxable person

detail prstov počítajúcich na kalkulačke

source: pexels.com


Our tip

The complete wording of the VAT Act, with changes valid from 1.1.2021 and 1.7.2021, is available on the website of the Financial Administration of the Slovak Republic. In the document you will also find comments, methodological instructions, guidelines and forms for current changes.


So when is it necessary to pay VAT ?

When buying goods or services from abroad or their delivery? Well, whenever the law shows it. We know it’s not that easy after all. We also know that practically applied knowledge of VAT legislation is not really commonplace, let’s give it financial literacy. Since we cannot – and fortunately not all – know everything, we can boldly delegate. If you do not know how to deal with VAT in connection with foreign trade, we are available. We also deal with VAT and we will be happy to help you professionally.

Contact us

    How to create an Ltd.

    If you are going to start a limited liability company, you have chosen the most popular form of business in Slovakia. Maybe you would expect to do this seemlessly, but you have to realize that we live in Slovakia. Set aside time, strong nerves, and prepare for a rather complicated “administrative ride” to start your own limited liability company. Nonetheless, if you don’t have time we can help you to arrange and set up an Ltd. for you.


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    What is the procedure for establishing an Ltd.?

    Since the average person certainly does not establish an Ltd. every day, knowledge of the process does not really belong to general education and ordinary literacy. The procedure is determined by law. The state in which you establish the company determines all the conditions and also the entire administrative process. Complete, verified and up-to-date information guaranteed by the Ministry of Justice is available on the central public administration portal. The whole process of establishing an Ltd. can be summarized into several successive steps:


    1.   Choice of trade name and registered office

    • in the publicly available database of the Commercial Register, check whether the business name you have chosen is not used by someone else

    • if you do not check this and the trade names match, you registration will be refused

    • if you are not based on your own premises, the consent of the property owners must be signed with officially certified signatures


    2.   Selection of the subject of business

    • you must have a trade license for the subject of business

    • if you do not have a trade, they will issue it to you within 3 working days of receiving all the necessary documents

    • if you do not establish a “single-person” Ltd., one of the partners must be the administrator of the company’s deposit

    • the amount deposited by one partner must be at least 750 €

    • the contributions of all partners together – ie the share capital of the company – must be at least € 5,000

    • the shareholders’ contribution may also be non-monetary


    3.   Preparation of founding documents 

    • the founding documents must be attached to the submission of the application for entry in the Commercial Register

    • if your company has one founder, it is a charter

    • in the case of several partners, a partnership agreement is required

    • if the registered office of the company is rented, a lease agreement or the officially certified consent of the owner is required

    • if the founder is on the list of tax debtors, the consent of the tax administrator is also required


    4.   Company registration

    • electronically through the service Proposal for entry, change and deletion of data in the commercial register with a qualified electronic signature

    • in person through a single contact point – usually at the trade licensing department of the district office

    • if the company’s founders are registered in the list of debtors, the court will reject the registration

    • the deadline for registration in the Commercial Register is 2 working days, the day of registration is the date of the beginning of the business


    5. Notification obligations after registration

    • within 30 days from the start of the business, the company must be registered with the locally competent tax administrator, who will assign a VAT number

    • if a company at least one employee, it must be registered with the health and social insurance company within 8 days of starting the business

    4 ľudia zakladajú s.r.o.

    source: pexels.com

    How long will it take?

    Establishment of a common Ltd. takes about a week. If you want to set up an Ltd. as a VAT payer, the whole process can take several weeks. Although the submissions in connection with the establishment of an Ltd. can be handled electronically, do not expect the processing of these tasks to be quick. Such an agenda is “on the table” continuously, the date of submission is what determines the legal deadlines.

    However, this is not entirely true; in practice, the date on which your application is assigned to a specific official or judge and he begins to process is also very crucial. A paradox is that even though you communicate electronically, several state institutions, for example, must send you requests for additional information “on paper”, i.e. by regular mail. In this way, the statutory time limits of several days can be extended to several weeks.


    Establishment of an Ltd….

    is a relatively complex process in our country with the conditions and procedures set by law that must be met and adhered to. The basic condition is integrity and a “clean shield” when it comes to taxes. If you dont have time or experience needed for the establishment of an Ltd., leave it to us. We are at your disposal and we will make sure that all the required procedures are followed. This way you can omit any stress or complications.

    Civic association and taxes

    In every democratic country, there is the third sector, i.e. non-governmental non-profit associations. They often represent the state, public or self-governing institutions where they do not have sufficient flexibility or ability to act. Civil society is a viable and non-negligible force that can move still waters in many areas of our lives. Today we will look at the obligations of civic associations in terms of taxes and accounting.


    mladý tím občianskeho združenie diskutuje

      source: pexels.com

    Civic association and business

    Non-profit organizations operate in Slovakia mainly according to Act no. 83/1990 Coll. on the association of citizens. It recognizes the status of non-profit associations as organizations that they were not established or set up for business. However, no one has the right to forbid them from doing business. From the point of view of Act no. 595/2003 Coll. on income tax, taxpayers who are not established for business purposes are considered to be legal entities established under special regulations.

    Non-profit organizations should not be primarily engaged in business activities. But everyone in the third sector knows that this is often a necessity. Funds from membership fees, donations, grants, subsidies or 2% of donations from paid tax are often not enough to sustain a civic association. Thus, under certain conditions, civic associations can do business and the funds thus obtained should be used for the activities of the association. However, entrepreneurship cannot be the main activity of a civic association.


    Did you know ? …

    can the Ministry of the Interior, which registers civic associations and keeps their register, refuse to register a non-profit organization that wants to engage primarily in business? Similarly, Interior Ministry officials can dissolve an already registered civic association if they find that instead of their goals and activities, they are engaged in business as their primary activity.


    Business conditions of civic associations

    • the business must be stated in the statutes of the civic association

    • other conditions are identical with other business entities

    • the civic association must be authorized to conduct business

    • they must also be registered with the income tax administrator

    Registration of a civic association with the tax administrator

    Civic associations carrying out their main activity and at the same time not doing business are not obliged to register with the tax office. An exception is the obligation to deduct tax or tax advances if the non-profit begins to employ and pay employees.

    If a civic association wants to do business after changing the statutes – if it does not have a business activity in them – and obtaining a business license, it will be required by law to register with the income tax administrator. With a deadline of a maximum of the end of the calendar month after the end of the month in which it obtained the right to do business. If the non-profit gets a trade on 13.8.2021, it is obliged to register by 30.9.2021.

    Tax return of a civic association

    According to the Income Tax Act, a civic association does not have to file a tax return and pay tax in the case of income:

    • which are not subject to tax

    • from which the tax is levied by deductions

    • from tax-exempt membership fees

    • from advertising up to € 20,000 for the tax period

    If a civic association obtains income from business activities that are subject to tax, it must file a tax return in the same way as all business legal and natural persons. The only exception is the case where the civic association is authorized to conduct business but has not received any income from business activities in the relevant tax period. Then he is not obliged to file a tax return.

    Our tip

    We must commend the experts from the Financial Administration who have prepared detailed information material for the business not only of civic associations, but of all taxpayers not established for business. We can consider it as an interpretative basis for tax and accounting issues of non-governmental governments.


    spojené ruky na znak tímovej spolupráce

    source: pexels.com

    Non-profit and business…

    … they are not antonyms, so they are not mutually exclusive. It is clear that civic associations will not do business according to the classic motto: “buy cheap, sell expensively”. The business of non-profits is usually related to the areas of their activities and may not be their main activity, but secondary, supporting the primary goal. The civic associations that do business are legal entities and also have tax obligations. Practically the same – with a few exceptions – as other business entities. If you need advice on tax and accounting issues for a civic association, we are at your disposal.

    Real estate rental

    If you own a property and have decided to rent it, you need to know a few important facts. Firstly, even if you are not an entrepreneur and you rent the property as an ordinary person – a natural person – you are obliged to pay tax on this income. The amount of tax also depends on what expenses you can claim in connection with the rental of the property. Read what is important to know about rental property in connection with its taxation.


    manželia vypĺňajú daňové priznanie

    source: pexels.com


    Legal limits

    Income from the rental of real estate is primarily dealt with by the Income Tax Act and partly – as far as leases are concerned – by the Civil Code. From the point of view of the accountant, of course, also the Accounting Act. You do not need a doctorate in law and a higher professional accounting to find your footing in this topic. Complete information, including the questions answered, was prepared by experts from the Financial Administration.


    Basic facts

    • The real estate rental income tax base is the difference between rental income and expenses

    • No flat-rate expenses can be claimed for rental income from real estate

    • It is not possible to recognize a tax loss if the expenses are higher than the rental income

    • Rental income not exceeding € 500 in the tax period – per year is exempt from tax

    • Only rental income over € 500 will be included in the tax base

    • The tax expenses incurred must be provable by tax records or accounting

    • Rental income is passive – if it is the only income, it is not possible to apply the non-taxable part of the tax base

    • The tax liability on rental income – if any – must be fulfilled by filing a tax return

    Rental income is rent received for the tax period, meaning per year. We recommend that you include the price of energy in the rental agreement so that you can claim it in the expenses.


    What we can include in the expenses

    • Energy costs – electricity, gas, water, heat

    • Common services related to renting – fees for internet access, television, use of elevator, lighting in common areas, waste collection

    • Other expenses specified in the lease agreement – the price of the equipment, including appliances

    • Other expenses – real estate tax, insurance, mortgage interest, contributions to the repair fund, depreciation – but only if the real estate is included in commercial property


    Our tip

    Tax deductible expenses for the purchase of equipment are those that do not exceed € 1700 for each piece of furniture or appliance. But beware, this does not apply to built-in furniture and built-in appliances – unless you have a property included in commercial property.


    To include or not to include real estate in commercial property ?

    Anyone who rents a property, including an ordinary person – a non-entrepreneur can include whether they want to include it in their business property. The option he chooses has an impact on the application of the expenses incurred on rental income, but also on the tax on the sale of the originally leased property.

    manželia diskutujú pri rátaní nákladov nájmu

    source: pexels.com

    What is the difference ?

    If the property is included in commercial property, its owner can also claim expenses for tax expenses for:

    • Acquisition of rented real estate

    • Its technical evaluation

    • Repairs and maintenance

    • Other related expenses related to use: expenses for energy, payments to the fund for operation, maintenance and repairs, real estate tax, interest on loans and borrowings for the purchase of rented real estate, insurance

    If the lessor does not have real estate included in his commercial property, he cannot claim expenses related to:

    • Acquisition of rented real estate

    • Its repair or technical improvement

    • Insurance and real estate tax

    These expenses are considered to be related to the use of his personal property for personal consumption. However, he may incur these expenses when selling the property.


    Did you know ?…

    … if the property is rented out by a non-shareholder spouse, can they agree whether the rental income will be taxed by only one of them or by both in any proportion? Here it is logical to choose the right – more advantageous option.


    It’s not as complicated…

    …as it probably looks at the first glance. However, that is our view, because we deal with this topic professionally. Rental taxes are a fairly specific topic, and if you’re not sure, feel free to contact us. Just as you don’t need to know how coffee is grown, harvested, stored, roasted and packaged to enjoy it daily, you also don’t need to master all the nuances of legislation and accounting details related to renting and taxing. We are here for that, we will be happy to advise you help you figure out what option would work best for you.