Tax news 2020

Changes in VAT rules to take place in 2020

Dean Košar Dean KošarDean Košar

The dynamic of creating a VAT system at the European Union level continues and Slovenia must follow this trend by ensuring the ongoing transposition of new rules into national law. The European Union seeks to create a definitive VAT system. One that does not contain shortcomings as the existing one does, therefore the EU gradually introduces amendments to VAT rules. In this regard, a number of new rules have recently been adopted. The most notable is the introduction of the expected swift solutions in the field of intra-Community supplies. Also important is the introduction of new rules on VAT rates applicable to books, newspapers and periodicals as well as the inclusion of two Italian enclaves in the application of EU VAT rules. The implementation of these novelties into the Slovenian legal order is planned with the draft amendment ZDDV-1K. It also includes other solutions proposed at the local level.

Goal and main purpose of amendments

The aim of the bill is to harmonize the [Slovene] Value Added Tax Act (ZDDV-1) with:

  • Council Directive (EU) 2018/1910 as regards the special arrangements of call-off stock and successive supplies,
  • Council Directive (EU) 2018/1713, concerning the application of reduced rates of value added tax (VAT) to electronic supplies of publications, and
  • Council Directive (EU) 2019/475 as regards the inclusion of the Italian municipality of Campione d'Italia and the Italian waters of Lake Lugano in the customs territory of the Union and in the territorial application of Directive 2008/118/EC.

The main purpose of the amendments is to regulate the four areas of supply of goods between Member States, which so far have been considered critical at EU level as the national rules vary from one country to another. Council Directive (EU) 2018/1910 and the Council Implementing Regulation (EU) 2018/1912 are intended to provide greater legal certainty for taxable persons and to unify the implementation of Directive 2006/112/EC (VAT Directive) in Member States, and thereby to simplify the operations of taxable persons and prevent possible cases of tax avoidance or cases of double taxation in two or more Member States for the same transaction. The aim is therefore to improve the harmonization of national rules at EU level in the following areas.

Main changes

  1. Emphasis on the recipient's VAT identification number

The proposed amendment to Article 46 paragraph one of ZDDV-1, which regulates the VAT exemption provided for intra-Community supplies, defines the substantive conditions for the enforcement of this exemption more clearly. The existing condition regarding the transport of goods from Slovenia to another Member State is supplemented by an additional substantive condition, in accordance to which the recipient of goods must submit to the supplier a VAT identification number from a Member State other than the country in which the dispatch of goods begins. So far, this was only a formal condition. In addition, the supplier's obligation to include information about the recipient in his recapitulative report is proposed.

  1. Unification of rules for successive or chain supplies of goods in accordance with the case law of the European Court of Justice

The transposition of a single rule based on the established case law of the European Court of Justice into the Slovene legislation and its application across the EU is proposed. According to the new rule, the transport shall be ascribed to only one supply in the chain, and only this supply shall be considered as an exempt supply, all other supplies shall be treated as supplies without transport for the purpose of determining the place of taxation.

In accordance with the proposed new rule, only the supply made to the supplier's first contractual partner (intermediary operator) shall be considered as the supply with transport, unless the intermediate operator submits to the supplier a VAT identification number of the country from which the goods are dispatched. In this case, the first supply shall be treated as the supply without transport in the Member State where the goods are located when the shipment begins, and the second supply to the final recipient shall be treated as the supply of goods with transport.

  1. Unification and simplification of the taxation rules for transferring goods from one country to another due to call-off stock

In all Member States, the uniform rule shall apply, in accordance to which it shall be deemed, in connection with the transfer of goods into a warehouse in another Member State, that the supply has been made only when the goods are actually supplied to the recipient, but only if the prescribed conditions are met. If the recipient of the goods is known to the supplier at the time of dispatch of goods from his Member State and the recipient is identified in his Member State for VAT purposes, and at the same time all the conditions for recording such transfer of goods are met, it shall be deemed that the supply has been made only when goods are actually supplied from the warehouse to its recipient. The goods must be supplied no later than 12 months after being dispatched from the Member State where the supplier is identified for VAT purposes.

Thus, the supplier from the first Member State shall make the exempt supply at the same time as the recipient records the acquisition of goods from another Member State. The supplier's VAT identification in the Member State where the warehouse is located will not be required.

  1. Setting common criteria for proving the supply of goods to another Member State

As already mentioned, one of the conditions for the exemption of the supply of goods to another Member State is that goods must be dispatched or transported from one Member State to another. From 1 January 2020, this condition will be further defined and harmonized in all Member States with Article 45(a) of Council Implementing Regulation (EU) 2018/1912. This article defines cases where, in the case of the application of the exemption for the intra-Community supply of goods, it shall be presumed that the goods have been dispatched or transported from a Member State to a destination outside its territory but within the Community. It is also foreseen that the tax authority may challenge the presumption.

The proof of dispatch or transport of goods is also prescribed in greater detail.

These provisions shall also apply in the case of proving that the imported goods are destined for another Member State (customs procedures 42 and 63).

Other changes

Inclusion of the Italian municipality of Campione d'Italia and the Italian waters of Lake Lugano in the customs territory of the Union and in the territorial application of Directive 2008/118/EC

From 1 January 2020, in accordance with the new Council Directive (EU) 2019/475, both Italian enclaves in the territory of Switzerland shall be included in the customs territory of the Union and in the territorial application of the general arrangements for excise duty (Directive 2008/118/EC), while, for VAT purposes, they shall be still excluded from the scope of the VAT Directive.

Harmonization of the VAT exemption regarding the treatment of the national radio and television subscription fee in accordance with the case law of the European Court of Justice

In line with the case law of the European Court of Justice and the draft amendment, the harmonization shall be carried out in a way in which the subscription fee for the provision of radio and television services, which are not commercial services and which are carried out as a public service in the field of broadcasting services under the act governing the Slovene national radio and television, shall not represent a payment for the service provided and shall therefore also not be subject to VAT.

Introduction of a lower VAT rate for electronically supplied publications

The ZDDV-1K amendment proposes the implementation of an arrangement, according to which lower VAT rates may be used for supplies of books, newspapers and periodicals, regardless of whether they are delivered on physical media or in electronic form.

Compulsory annual reporting of distance sales

The draft amendment envisages the obligation to report distance sales to the tax authority and a fine for a tax offence in case of non-compliance.

Obligatory submission of a form for obtaining a means of transport from another Member State

With a new article of ZDDV-1, the compulsory submission of a form for the registration of acquisition of a means of transport from another Member State, which is subject to VAT taxation in Slovenia (“DDV-PPS” form), is proposed. In case of non-compliance, a fine is proposed.

New case in which a taxable person does not have to make a correction of the deduction of VAT

In line with the draft amendment, the VAT correction shall no longer be necessary in the event of a theft of property.

Recast of penalty provisions

In the light of ensuring the equal treatment of taxpayers and perpetrators of offences under various tax laws, the harmonization of criminal provisions in ZDDV-1 and other tax rules is proposed, both in terms of the amount of fine as well as the definition of severe offences.

Entry into force and application

The draft amendment shall enter into force on the fifteenth day after its publication in the Official Gazette of the Republic of Slovenia and apply as of 1 January 2020.