Tax & Legal News 2-3/2018. Tax & Legal Services

Transcription

1 2-3/2018 Tax & Legal News Tax & Legal Services 2 Corporate and Personal Taxation Change to the tax treatment of employee workplace transport arranged by the employer 3 Value Added Tax Definitive VAT regime for the EU EU Directive on VAT treatment of vouchers 5 Legal news The amendment to the Anti-Money Laundering Act Paid annual leave for the self-employed worker? 8 News in Brief

2 Corporate and Personal Taxation Matej Oravec ax compliance tel.: +421 Cross Change to the tax treatment of employee workplace transport arranged by the employer We would like to bring to your attention the latest development of Slovak tax legislation related to the Slovak Supreme Court ruling 6Sžf/85/2015, which we discussed in the September- October issue of our Tax and Legal News. According to last year s ruling, employee workplace transport is, under certain conditions, subject to taxation. However, a recent legislative amendment introduced a clear framework for its tax exemption. Detailed discussion In the ruling, the Slovak Supreme Court concluded that, in situations where the cost of the employee transport arranged by the employer is higher than the ticket price paid by the employee, the difference should be considered as income from the dependent activity for the employee. Moreover, the employer was held liable for the non-deduction of tax prepayments from employees salaries. Notwithstanding the above, according to the enacted amendment of Act No. 595/2003 Coll. on Income Tax, such arrangement of transport shall be tax exempt if the compensation (e.g., ticket price) paid by the employee reaches a certain percentage of workplace transport costs, provably incurred by the employer. 2 The exemption can be applied under the following conditions: For employers carrying out activities in multi-shift production, employees should cover at least 30% of the employers costs and simultaneously such a mode of workplace transport should be used by at least 30% of the total average number of employees. Otherwise, the coverage of 60% of the employers costs by the employees is required for the exemption to become applicable. In cases where the employee s contribution does not reach the stipulated percentage, the difference between the applicable threshold and the employee s contribution should be included in the employee s tax base as an income from the dependent activity, i.e., a regular item of taxable salary. Next steps If you arrange transport of your employees to the workplace, we recommend verifying that these conditions are met in order to review the potential tax exemption. Should you have any questions or would like obtain more information regarding this topic, please contact the author of the article or your usual contacts within EY.

3 Value Added Tax Definitive VAT regime for the EU Monika Fábryová In October 2017, the European Commission ( the monika.fabryova@sk.ey.com Commission ) introduced its proposal for adoption of a ax compliance tel.: +421 Cross definitive system for taxation of trade between EU Member States. Based on the principle of taxing goods in the Member State of destination, the aim is to create a robust single European VAT area. Reasons behind a definitive VAT regime When the single market was launched, the main goal was to tax goods in the country of origin, so that the same conditions which applied to domestic trade would apply to intra-community trade, perfectly reflecting the idea of a genuine internal market. Further, VAT would be redistributed to the countries of consumption based on macroeconomic indicators. However, due to the political and technical conditions, this system was not successfully implemented at that time. The current VAT system, in operation for more than 25 years, represents a temporary solution, whereby VAT is levied in the country in which the transport of goods ends. The Commission proposes that the temporary system is made permanent, with certain adjustments which should mitigate the risk of VAT fraud. As a first step, specific measures should be taken which should become effective as of 1 January However, it is unclear whether this is a realistic deadline. The Commission aims to launch the definitive VAT system as of Specific proposed measures preceding introduction of the definitive VAT regime Certified taxable person The concept of the certified taxable person represents one of the most important elements of the definitive VAT system for intra-community B2B trade. Under the current provisions, taxable persons are identified for VAT purposes via a VAT identification number. However, this identification number does not differentiate between reliable and unreliable taxable persons and the same VAT rules apply to both categories. Under the new proposals, if a taxable person, registered for VAT, meets reliability requirements, they may be regarded as a certified taxable person. This would simplify some rules and allow gradual implementation of the definitive VAT system. Initially, a reverse-charge mechanism (similar to the current regime) will apply in the situation where the customer is a certified taxable person. The status of the certified taxable person should guarantee no occurrence of VAT fraud. Call-off stock simplification Call-off stock is a simplification scheme where a supplier transfers goods to a previously known customer without transferring ownership of the goods. The customer becomes the legal owner of the goods only upon the removal of the goods from the warehouse. As a result, the supplier is not obliged to register for VAT purposes in the country where the warehouse is located. Currently, not all Member States have implemented such a simplification. The resulting differences in legislation are in contrast to the uniform application of VAT rules within the

4 ax compliance Cross single market. Therefore, the call-off stock simplification rules should be implemented in all Member States; however, they should be limited to supplies between certified taxable persons. Chain transactions Chain transactions are understood as successive supplies of the same goods, subject to a single intra-community transport between two Member States. The transport is attributed to one supply within the chain, which will also determine the exempt intra-community supplies. In this context, it was not completely clear for Member States to which transaction the shipment should be allocated. In order to increase legal certainty, the new legal provisions should introduce clear rules for the allocation of shipments. Exemption of supplies of goods to another Member State A valid VAT identification number of the customer from a Member State other than that in which transport of the goods begins, will form a substantial condition for VAT exemption to be granted to the supplier of goods. Under the current conditions, the VAT identification number of the customer represents only a formal condition of the right to exemption of an intra-community supply. Definitive system for intra-community trade The definitive VAT system should introduce taxation of intra-community supplies of goods in the same way as goods sold within individual Member States. Under the current provisions, the cross-border supplies of goods are split into two different transactions: an exempt supply in the Member State of dispatch of the goods and an intra-community acquisition of goods taxed in the Member State of destination. According to the Commission s proposal, the single supply of goods should be called an intra-union supply. The single supply will eliminate the anomaly of double treatment of one crossborder transaction. 4 The place of supply will be situated in the Member State of destination and VAT applied at the rate of the Member state where the transport of the goods ends. However, VAT will now be remitted by the supplier via a One Stop Shop in the country of its establishment, similarly to the current rules for electronic services. In light of this, the new VAT regime aims to provide administrative simplifications for VAT payers who will be able to file VAT returns using a single online portal in their own language and administrative templates as in their home country. Member States of establishment will collect VAT and directly redistribute it to Member States of destination. Practical considerations Currently, reporting of the supply and acquisition of goods to/from another Member State in the aggregate value in the EC Sales list and VAT return is relatively simple. In general, a customer pays VAT and claims VAT deduction in the same amount resulting in a nil VAT position. The new provisions could lead to a fundamental change in the future, affecting both supplier as well as customer, leading to inconsistences. For instance, a supplier may apply an incorrect VAT rate not valid in the Member State of destination. Further, the supplier may report a transaction rendered in one Member State in the VAT return of another Member State by mistake, which may lead to an overpayment in one Member State and underpayment of VAT in another. There is also a risk of double VAT payment in the situation where a Member State in which the customer is established has introduced a liability for VAT not paid by a supplier. In light of this, the definitive VAT regime as proposed does not seem favorable for VAT payers. We will monitor developments in this area, especially its Slovak implementation, and inform you about any news in following Tax and Legal News editions. If you have any questions or would like to obtain more information regarding this topic, please contact the author of the article or your usual contacts within EY.

5 Jana Ontkovičová ax compliance Cross tel.: Ján Broniš jan.bronis@sk.ey.com tel.: EU Directive on VAT treatment of vouchers In 2016, The Council of the European Union adopted a Directive aimed at clarifying and harmonizing EU rules on the VAT treatment of vouchers. The Member States are obliged to transpose it into national law before applying its provisions from 1 January Legal news The amendment to the Anti-Money Laundering Act An amendment to the Act on the Prevention of Legalization of Proceeds of Criminal Activity and Terrorist Financing entered into force on 15 March The amendment implements the IV. AML Directive into the Slovak legal order and introduces several significant changes. Taking into consideration the risk assessments for money laundering and terrorist financing introduced by the IV. AML Directive, obliged entities will be obliged to identify, assess, evaluate, and update risks of legalization and financing of terrorism according to types of business deals and business relations. It is also necessary for them to take into consideration 5 The Directive introduces single and multi-purpose vouchers along with their VAT regime. A single-purpose voucher is defined as one where the place of supply of the goods or services to which it relates, and the VAT due on those goods or services, are known at the time of its issue. A multi-purpose voucher is any other voucher. The VAT is due in the case of a single-purpose voucher when it is issued. Conversely, multipurpose vouchers will only be subject to VAT when the voucher is redeemed. Nevertheless, various known types of voucher, such as transport tickets, cash back vouchers and admission tickets are not covered by the Directive. At this stage the new rules bring a lot of uncertainties into the VAT regime of vouchers. We will inform you of further developments related to this topic. If you have any questions or would like to obtain more information regarding this topic, please contact the author of the article or your usual contacts within EY. their own risk factors, plus potentially higher risk factors mentioned in the Annex to the amendment. Significant changes have also been made to the required activities of the obliged entity which needs to include methods of risk assessment and risk management in accordance with the amendment. The obliged entities must amend their program of activities to comply with the new legislation no later than 15 May The amendment also adjusts the requirements of standard, simplified and enhanced due diligence and specifies measures

6 ax compliance Cross Soňa Hanková tel.: which need to be performed by an obliged entity, in the course of a particular type of due diligence, in relation to clients. The amendment introduces an obligation to identify the ultimate beneficial owner in the course of standard due diligence, whereby an obliged entity should not rely solely on the information obtained from the register of legal persons, undertakings and public authorities in the process of identifying the ultimate beneficial owner. At the same time the requirement to check and record whether a client is a person subject to international sanctions, pursuant to the Act on Imposing International Sanctions, is introduced. A significant change is also the introduction of the duty of legal persons to identify their ultimate beneficial owner, maintaining their up-to-date identification details, which must be retained for five years after the status of ultimate beneficial owner has ceased. Paid annual leave for the self-employed worker? In the Slovak Republic, there are many independent contractors active in various sectors, whose day-to-day working activities have several prerequisites typical for activities of employees. European Union law, subject to fulfilment of certain conditions, qualifies such independent contractors as self-employed workers with rights and responsibilities similar to those of employees. Let s designate them for purposes of this article as self-employed workers. Companies engaging self-employed workers thus have certain obligations of employers even without realizing this fact. One of the fundamental rights of employees is their entitlement to paid annual leave. The Slovak Labor Code stipulates the basic scope of an annual leave with wage compensation, as well as the period during which an employee must take it. Allowance in lieu of annual leave can be paid only on termination of an employment relationship. 6 Moreover, legal persons will be obliged to submit the identification details of the ultimate beneficial owner to the commercial register (and/or other registers they are included in). Information concerning ultimate beneficial owners, listed in the commercial register, is not published. In addition, entities entering into legal and business relations with public sector entities (public sector partners) will still have the obligation to also register their ultimate beneficial owners with the Register of Public Sector Partners. Legal persons entered in the Commercial Register before 31 October 2018 will be obliged to file an application for registration of information regarding the ultimate beneficial owner no later than 31 December If you would like to obtain more information or have any questions regarding this issue, please contact the author of this article or the appropriate EY partner or manager. The practice brought a question how to proceed in case of selfemployed workers? Commonly, the contracts of self-employed workers are silent on the question of paid leave or provide for option that the self-employed worker can enjoy free days but without remuneration. Does such a contract mean that a company engaging a self-employed worker is not obliged to grant them paid annual leave? A number of judgments of the Court of Justice have confirmed that, pursuant to European Union law, a self-employed worker is also entitled to paid annual leave. Of particular interest is recent litigation in the United Kingdom in which the Court of Justice granted its preliminary ruling on matters related to paid annual leave (C 214/16). In this dispute, the plaintiff was an independent contractor paid by commission indexed to the sales that he brought in. The plaintiff claimed allowance in lieu of annual leave which he had not taken for the years 1999 to The plaintiff was found to

7 ax compliance Cross be a self-employed worker. The key facts justifying his claims for such a long period of time were that he had not received any remuneration during the annual leave at all and that his employer had not paid him any allowance in lieu of untaken annual leave. It is a common practice to engage independent contractors in the Slovak labor market. Therefore, it is in the interest of entrepreneurs to review their contractual relations with independent contractors being potentially considered as selfemployed workers so that they address also their potential claims for paid annual leave. The recent judgment of the Court 7 of Justice thus brings another challenge, and not just for the economy sector, to which services such as Uber, Rukie or Airbnb belong. If you would like to learn more, or if you have any questions regarding this question, please contact the author or your EY partner or manager.

8 EY Assurance Tax Transactions Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization and may refer to one or more of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. If you would like to add a member of your organization to the list of subscribers for Tax & Legal News, or would like your name to be removed from the list, please contact erika.vidova@sk.ey.com. For further information please contact either your usual partner/manager or: Corporate Taxation Marián Bíž, Richard Panek, Peter Feiler, Andrej Paulina, Tomáš Nagy, Monika Fábryová, Stanislava Kocková, Marta Onuščáková Transfer Pricing Marián Bíž, Shabab Khan, Stanislava Kocková VAT and Customs Marián Bíž, Juraj Ontko, Miroslav Marcinčin, Andrej Paulina, Monika Fábryová, Stanislava Kocková, Jana Ontkovičová Personal Taxation Marián Bíž, Miroslav Marcinčin, Vadim Bogomolov, Matej Oravec, Katarína Šnáblová Legal Services Róbert Kováčik, Soňa Hanková, Adam Pichler, Ján Broniš Assurance Dalimil Draganovský, Tomáš Přeček, Peter Uram-Hrišo Fraud Investigation & Dispute Services Pavla Hladká Business Advisory Services Peter Borák, Peter Málik Transaction Advisory Services Matej Bošňák, Peter Demský Tel.: ey@sk.ey.com 2018 EYGM Limited. All Rights Reserved. This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice. ey.com/sk News in Brief Introduction of voluntary 13th and 14th salaries The Slovak parliament has approved an amendment to Act no. 311/2001 Coll. Labor Code, which introduces the possibility of voluntary 13th and 14th salaries. Slovak employers can provide bonus salaries before summer and Christmas holidays, i.e., in June and December. More importantly, such bonus salaries are, under certain circumstances, subject to beneficial tax and social security treatment. In order to qualify, employees receiving payments should have had an uninterrupted employment relationship with their employer of at least two years and the bonus salary is set at the minimum monthly average for the particular employee. Lastly, where two bonus payments are made, beneficial treatment is only available for the 14th salary, if it was also applied to the 13th salary. Social security contributions annual reconciliation The draft of a major amendment to Slovak social security legislation is currently undergoing the interdepartmental comments procedure. According to the draft amendment, an individual s social security contributions would be subject to an annual reconciliation performed by the social security authority. Sociálna Poisťovňa would be fully responsible for annual assessment of social security underpayments / overpayments after the year-end for each individual, based on their overall income, according to annual tax reconciliation or submitted tax return. The current amendment version s wording foresees the first reconciliation being performed in 2020 for social security contributions paid in The Constitutional Court of the Slovak Republic decided that the provision of the Act on Consumer Protection is not in accordance with the Slovak Constitution At its recent public session, the Constitutional Court of the Slovak Republic decided that the provision of the Act on Consumer Protection, which requires a court to take 8 into account the statute of limitations, ex officio, is not in accordance with the Slovak Constitution. The provision directs that in deciding claims arising from consumer contracts, an authority must take into account the expiry of limitation period, plus other legal impediment or grounds, which might weaken the claim of the seller against the consumer. This could prevent a claim from being placed at all, or significantly limit the chances of a decision in favor of the seller. Application of this legal provision conflicts with the Slovak Constitution in that it grants an advantage solely to the debtor, or consumer. Such protection of one of the parties in a civil procedure is in breach of the principle of judicial impartiality, and thus contradicts the principle of the rule of law. As a result of the Constitutional Court s decision, this particular provision of the Act on Consumer Protection no longer applies.