Tax Reliability Index, increased meal allowances and digital platform reporting
25/03/22
Tax and Legal Alert, March 2022, Issue 1
In the current issue, we would like to inform you about the latest legislative changes in the area of taxation.
Tax Reliability Index
As we informed you in our previous issues, the calculation of the Tax Reliability Index was changed as of 1 January 2022. The Tax Reliability Index is an assessment of taxable entities which are entrepreneurs registered for income tax for at least 2 years, based on criteria that include the fulfilment of their duties towards the financial administration and their economic indicator.
Breaches are scored according to their severity and duration. The criteria taken into account include, among others, non-payment of tax, late filing of tax returns and tax-related documents, findings from tax inspections, etc. The Tax Reliability Index also takes into consideration, in certain cases, the effective tax rate of the tax subject as the economic indicator. This is derived from reported income tax and payroll tax withheld for employees. Based on the points rating, taxpayers are assigned one of the following grades:
- highly reliable: maximum 10 points and fulfilment of the economic indicator
- reliable: maximum 10 points but non-fulfilment of the economic indicator, or more than 10 and less than 25 points (regardless of fulfilment of the economic indicator)
- unreliable: 25+ points
- not evaluated: taxpayer does not meet the conditions for inclusion as an evaluated subject.
The Financial Directorate of the Slovak Republic has recently published documents relating to the principles and the method used to calculate the Tax Reliability Index on its website, as well as an overview of benefits which will be provided to the taxpayers based on their score.
In addition to the benefits available to highly-reliable taxpayers under the law, such as a 50% reduction of the fee for issuing a binding opinion, setting a deadline of at least 15 days in connection with the performance of a tax audit or a local tax investigation, the financial administration will also provide certain benefits to both highly reliable and reliable taxpayers, e.g. granting approval of a request for a different payment of a corporate income tax advance, or prioritizing the performance of a local investigation over a tax audit for the purpose of verifying VAT refund entitlement.
The tax administrator must send taxpayers a notification of its grading in the Tax Reliability Index by 30 June 2022. The taxpayer may appeal against the grading received. The list of tax entities to which a Tax Reliability Index rating has been assigned, including their grade of reliability, will be published on the website of the Tax Directorate by 30 September 2022.
Increased meal allowances
The Ministry of Labour, Social Affairs and Family of the Slovak Republic has prepared a new regulation which proposes to increase meal allowances as follows:
- EUR 6.0 for 5 - 12 hours;
- EUR 9.0 for 12 - 18 hours;
- EUR 13.70 for over 18 hours.
The above amounts are used to determine the employee’s entitlement to a meal allowance for each calendar day of a domestic business trip, and to determine the employer's contribution to an employees’ meal allowance, providing a meal allowance via a third person, or a financial meal allowance.
If the regulation is approved, the tax-free amount for the employees and the tax-deductible cost for the employers related to the provision of meals at work will increase from the current EUR 2.81 to EUR 3.30. In addition, the minimum value of a meal voucher will increase from the current EUR 3.83 to EUR 4.50.
Based on the published information, the new regulation is likely to become valid in May 2022. However, the regulation has not yet been published in the Collection of Laws.
Digital platform reporting
The Slovak Government has approved the draft amendment to the Act on International Assistance and Cooperation on Tax Administration which transposes COUNCIL DIRECTIVE (EU) 2021/514 of 22 March 2021 amending the Directive on Administrative Cooperation in the Field of Taxation, i.e. the DAC 7 Directive (“Amendment”).
The Amendment implements new reporting obligations for the operators of digital platforms facilitating or intermediating certain commercial activities of third parties in Slovakia. Platform operators will be obliged to collect, report and verify selected information about sellers and service providers using the digital platforms to carry out their commercial activities. The commercial activities in scope relate to the:
- rental of immovable property, including residential and commercial property, as well as any other immovable property and parking spaces,
- personal services (provided physically or on-line), e.g. on-line or personal training, IT services, data processing, transport, delivery, cleaning services, etc.,
- sale of goods, and
- rental of vehicles.
Reporting platform operators will include entities established in the Slovak Republic, as well as entities not established in Slovakia (or other EU Member State), but facilitating or intermediating the commercial activities for reportable sellers that are considered Slovak tax residents, or activities with respect to the immovable property located in Slovakia. Certain exemptions from reporting may apply, for example, to excluded platforms or platform operators, or in relation to the excluded sellers specified by the law.
If the Amendment is approved by the Slovak parliament, the first reporting period will be the calendar year of 2023. Reporting platform operators will be obliged to report the relevant information to the Slovak Tax Authorities for the first time by 31 January 2024. As a consequence, platform operators will need to carry out the verification of sellers registered up to 1 January 2023 by 31 December 2024.
We will be pleased to provide you with more information on this topic, perform an impact assessment to determine whether and to what extent your business falls under the scope of Slovak DAC 7 reporting and assist you with the subsequent implementation of obligations arising from the Amendment, at your request.
