News Flash

December 14, 2015

VAT – Reverse-charge mechanism

when providing construction works

in Slovakia as of January 1, 2016

News Flash I Accace Slovakia I Reverse-charge mechanism when providing construction works

VAT – Reverse-charge mechanism when providing

construction works in Slovakia as of January 1, 2016

In our recent issue of News Flash, we have informed you about changes introduced in the area of VAT as

of 1 January 2016. One of the most important changes is an introduction of so-called reverse-charge in

provision of construction works.

Reverse-charge mechanism

Taking effect in 1 January 2016 a taxpayer who

is the recipient of a supply from another

taxpayer shall be obliged to pay the tax

attributable to:

the supply of construction works that belong under section F of the statistical classification of products by activity according to Guideline of European Commission (EU) No. 1209/2014 of 29 October 2014 amending Regulation (EC) No. 451/2008 of the European Parliament and of the Council establishing a new statistical classification of products by activity (CPA) and repealing Council Regulation (EEC) No. 3696/93 (hereinafter referred to as “CPA classification”),

the supply of construction or its part under any contract for work or another similar contract that belong to section F of the CPA classification,

the supply of goods with installation or erection, if the installation or erection is a construction work that belongs under section F of the CPA classification

(hereinafter referred together to as „construction

works“).

Conditions of reverse-charge

Inland reverse-charge from the provider of

taxable supply to the recipient will apply in

provision of construction works only in case, if

the following conditions are met:

the subject of delivery are construction works belonging under the section F of classification CPA,

the place of delivery of goods or services is within the Slovak Republic,

supplier and recipient are tax payers inland, i.e. they are registered for tax purposes pursuant to § 4, 4b, 5 and 6 of the Act on VAT.

New guideline in this matter

In this matter, we would like to draw your attention to the new Guideline on Classification of construction works into section F of statistical classification of CPA that has been issued by the Financial Directorate of the Slovak Republic recently. We are ready to provide you with the English

version of the Guideline upon request. Section F – Constructions and construction works contain the following divisions:

41 – Buildings and building construction

works (groups: residential buildings,

non-residential buildings, construction

works for residential and non-residential

buildings – new works, additions,

alterations and renovation works)

42 – Constructions and construction

works for civil engineering (groups:

roads and railways; construction works

for roads and railways, construction and

construction works for engineering

infrastructure, other civil engineering

projects and construction works for

other civil engineering projects)

43 – Specialised construction works

(groups: demolition and site preparation

works, electrical, plumbing and other

construction installation works, building

completion and finishing works, other

specialised construction works).

In the light of practical experience resulting from

the application of reverse charge to the recipient

News Flash I Accace Slovakia I Reverse-charge mechanism when providing construction works

of a supply in the building sector, in the context

of classification, the cases of works the

character of which can be linked to division 43 or

division 33 of the CPA classification prove to be

of concern. They involve installation works,

repairs or maintenance of different devices that

are firmly attached to buildings.

Please note that if more supplies are subject of

a delivery within the established contractual

relationship, for the correct tax regime of value

added tax will be important to find out if there is

single composite supply with one tax base or

several different supplies.

In case of the single composite supply, it is

crucial to determine what is the main supply and

which supplies are ancillary to the main supply.

Reverse-charge will apply to the supply as the

whole only if based on the agreed contractual

conditions it is clear that there is only single

composite supply and the main service, which

determines the character of provided supply, is

a service of construction Works classified in the

section F of classification CPA.

Otherwise if a single composite supply is

a subject of the contractual relationship, where

the main supply does not belong to the section F

of the classification CPA, the normal tax regime

will apply to the supply as a whole, and this also

in case when within this supply, constructions

works that belong to the section F of

classification CPA, are provided as ancillary to

the main supply.

In case of several different supplies which do not

constitute one inseparable economic supply,

reverse charge will apply only by services of

construction works which belong to the section F

of classification of production and normal regime

will apply to other single services.

If a taxpayer received a payment before the

delivery of construction works before 1

January 2016, the normal tax regime will

apply to the received payment, i.e. the

supplier of construction works will be obliged to

pay the tax on received payment (pursuant to §

69 par. 1 Act on VAT), and this also in case the

delivery of construction works will be done in

2016.

After the delivery of construction works in 2016, the reverse-charge will be applied to a recipient of supply, a taxpayer, from the difference of the total tax base for construction works and tax base from the granted payment by which the tax duty has arisen to the supplier before 1 January 2016.

Disclaimer

Please note that our publications have been prepared for general guidance on the matter and do not represent a

customized professional advice. Furthermore, because the legislation is changing continuously, some of the

information may have been modified after the publication has been released. Accace does not take any responsibility

and is not liable for any potential risks or damages caused by taking actions based on the information provided

herein.

News Flash I Accace Slovakia I Reverse-charge mechanism when providing construction works

Contact

Katarína Balogová

Tax Manager

Katarina.Balogova@accace.com

Tel: +421 2 325 53 000

About Accace

With more than 250 professionals and branches in 7 countries, Accace counts as one of the leading

outsourcing and consultancy services providers in Central and Eastern Europe. During past years, while

having more than 1400 international companies as customers, Accace set in motion its strategic

expansion outside CEE to become a provider with truly global reach.

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