In this podcast, Peter Varga provides insight into the issue and discusses in more detail:

• When does VAT apply to the sale of property and land?
• How to calculate and deduct VAT correctly?
• Methods and rules for VAT exemption or carry forward?
• How about holiday properties and apartments?
• Important exceptions and specifics that every dealer should know.
• Practical advice and examples from real practice.

VAT exemption: when and how?

One of the most interesting moments of the podcast was the explanation of the situation when the sale of real estate can be exempt from VAT. In practice, we encounter attempts, mainly by smaller developers, to sell properties as individuals. More was said by Peter Varga in the podcast.

Legal Persons and Transfer of Tax Liability

For legal entities Peter Varga explained the application of the “reverse charge” mechanism or otherwise the transfer of VAT tax liability. This mechanism is only possible for the sale of certain buildings, not for the sale of the land itself. The podcast also covers other practical aspects, such as how to calculate and deduct VAT correctly, specifics regarding holiday properties and apartments, and more. For real estate professionals, sellers and buyers, understanding these rules is key to avoiding potential mistakes and financial losses. So don’t miss this opportunity to watch the full interview with Peter Vargo VAT on property sales.

Make sure you don’t neglect your obligations related to income from the sale of real estate, which we wrote about in our article Taxation of income from the sale of real estate. Take advantage of this valuable information and make sure your sale goes smoothly and in compliance with all legal standards, if you have further technical questions, feel free to consult with Peter Varga.

You can book a consultation with Peter Varga here:

Článok How does VAT control the sale of real estate? Peter Varga bol hosťom vo videopodcaste Národnej asociácie realitných kancelárií (NARKS) je zobrazený ako prvý na Highgate.

If you are more interested in this topic, you can book a personal consultation with Peter Varga.

Článok Peter Varga on taxation of investment instruments at TA3 conference je zobrazený ako prvý na Highgate.

In the interview, in abbreviated form, and at the conference, in a comprehensive form, we paid particular attention to the following topics:

• Where is the threshold after which it is no longer possible to “employ” a sole trader;
• What are the penalties;
• When is it a crime;
• How about one-person SROs;
• What are the implications for social insurance benefits?

You can watch the full interview here: https://www.trend.sk/ekonomika/zamestnavanie-zivnostnikov-ma-svoje-limity-ktorym-firmam-hrozia-postihy?itm_brand=trend&itm_template=news&itm_modul=denny_suhrn_sprav&itm_position=1

Článok Peter Varga for Trend on the issue of “employing” freelancers je zobrazený ako prvý na Highgate.

Several such digital platforms have been operating in Slovakia for a long time. Some of them operate on a charitable basis (donations), others on a reward and pre-sale basis (priority access to the product) and others on an investment (share or loan) basis. In our consulting practice, we mainly deal with crowdinvesting – a type of collective financing (crowdfunding), which enables startups and smaller start-up companies, for which bank financing is not yet available, to obtain external financing.

Until recently, the area of collective financing lacked systematic regulation. However, as of November 2023, the so-called “collective collective bargaining scheme” has ended. The transitional period for the provision of crowdfunding services under national law has now ended. From 11. 11. 2023, the provision of crowdfunding services in Slovakia is now also subject to authorisation by the National Bank of Slovakia. At Highgate Law & Tax, we provide comprehensive advice to clients on crowdfunding, including representing our clients in licensing proceedings before the National Bank of Slovakia.

Our partner Tomáš Demo commented on the topic of crowdfunding regulation in more detail in the Investing show on TA3 television. You can watch the full video here: https://www.ta3.com/relacia/929027/crowdfundingove-poziciavanie-penazi

Článok Tomáš Demo on regulation of crowdfunding in Investujeme on TA3 je zobrazený ako prvý na Highgate.

In our practice, we often encounter structures where it is not entirely clear whether or not they should be regulated. Unfortunately, in some cases, ignorance can even lead to criminal law. Peter Varga demonstrated this risk with examples at our conference, which focused on real estate financing through various regulatory and tax structures. However, Peter Varga also spoke briefly about this at the TA 3 investment conference.

Scams with funds, bonds or other investment structures and opportunities?

As the regulatory jurisdiction of the NBS and the OČTK is often territorially limited, many investors in Slovakia fall victim to fraud. However, some of these fraudulent schemes are purely Slovak.

Taxation of funds in Slovakia?

At the time of the conference, there was a law in place that gave tax advantages to certain types of fund structures that was to be effective January 1, 2024. Although Peter Varga described the new tax regime, he quite astutely stated that the debate on the taxation of funds may be premature given the activities of the new government.

We have been actively dealing with the topic of funds in our practice for a long time, if you are interested in this topic, we attach links where we deal with it in more detail, namely:

in the following articles or lectures:

at our successful unique conference:

or in our video podcasts and online training:

Tokenised financial instruments and real estate

Tokenisation of assets undoubtedly brings with it a number of benefits, but also challenges. Peter Varga summarized them at the conference as follows.

If you are interested in the topic of tokenised financial instruments, we have covered it in more detail in the following article:

Taxation of portfolio rebalancing

In most cases, Slovak tax law has the ambition to tax the generation of income when rebalancing portfolios. However, there are institutes where taxation on rebalancing does not occur. Peter Varga also commented on this at the conference.

Článok Peter Varga on financial regulation and taxes at TA3 conference on investing je zobrazený ako prvý na Highgate.

We perceived that this conference can help many entrepreneurs to navigate through the challenging tangle of Slovak and foreign tax and legal issues. A number of interesting findings and insights were also provided by Highgate Group’s internal surveys, which were presented at the Real Estate Conference, but were also further published through Hospodárske noviny.

If you are interested in this topic, please do not hesitate to contact us.

Článok Conference on Real Estate – Taxes and Financing je zobrazený ako prvý na Highgate.

Why can the failure to recognise a VAT deduction have devastating consequences?

Imagine a trading company that buys goods worth €1,000,000 + VAT per year and then sells them for €1,100,000 + VAT. The gross margin is thus EUR 100 000 . If the tax authorities were not to allow the company to deduct the VAT (i.e. EUR 200 000), this would be an amount significantly in excess of the gross margin. Add to this the company’s other costs, and the non-recognition of the VAT deduction could be liquidating for the company.

Although the company can seek justice in court, until the court decides, this decision of the tax administrator is in most cases enforceable. And this entails in larger companies, for example, the loss of ratings against partner companies or the repayment of bank loans. And if the business as an individual is liable for the bank loan, the private assets of the company owner may also fall victim.

What are the common mistakes of the tax administrator?

In practice, we encounter several mistakes. These include simple procedural errors, such as the signature on the tax inspection report. Simple at first sight, but in the end, even such things can win a tax dispute. More complex and, above all, more dangerous are these oversights:

The supplier has not made delivery on the invoice

While the tax administrator does not dispute that the delivery did not take place, it does dispute whether the delivery was made by the supplier on the invoice. Did the supplier have employees? Which persons at the supplier made the delivery? If the delivery is of goods, did the supplier have a sufficiently large warehouse? For how long a period was that warehouse available?

Often these are requirements that are objectively outside the sphere of disposal of the audited tax entity. How is the taxable person to prove whether his supplier had employees and a sufficiently large warehouse at the time?

Such an approach of the tax administrator is contrary to the case law of the Court of Justice of the EU as well as the Constitutional Court of the Slovak Republic. The burden of proof of the tax subject is not absolute and such requirements are manifestly disproportionate. In so far as the tax authorities do not dispute the existence of the supply, the right to deduct VAT cannot be denied on the sole ground that it appears to the tax authorities that the supplier did not have sufficient material and personnel or that the transaction does not make economic sense to the tax authorities. This defence is supported by relatively recent court decisions and is therefore often disregarded by tax authorities in practice.

Devasion or tax fraud

It is common for a tax administrator to attempt to burden a healthy audited taxpayer with fraudulent conduct by one of the supply or purchasing partners in the chain. In other words, if someone in the chain has failed to pay VAT, it is the controlled tax entity that is supposedly liable to compensate the State.

However, the case law of the CJEU is clear on this point too. It is not enough for the tax authorities to raise doubts that the taxpayer being audited may have participated in fraudulent conduct. The tax administration must prove that the taxable person concerned knew or was obliged to know that fact. This jurisprudential view is sufficiently settled and should be automatically applied by tax administrations in tax proceedings. And if it is not, a court should be able to identify it and overturn the tax administrator’s decision.

Confusion of terms

A very common phenomenon is also the confusion of terms in the tax administrator’s reasoning. The use of the terms ‘undue tax advantage’ and ‘tax evasion’ or ‘tax fraud’ in the same reasoning is confusing. Each of those terms involves a different procedural position of the taxpayer under scrutiny. Therefore, if the tax administration is unable to formulate its line of argument clearly, the fairness of the proceedings is affected and the taxpayer concerned is prevented from making an effective legal defence in such a case. And this argumentation may be successful before the court.

Proof that delivery has taken place

In some proceedings, the tax authorities argue that the existence of the supply has not been proven. The burden of proof in this case lies on the shoulders of the taxable person. The taxable person should be able to prove that the supply actually took place. On the other hand, the taxable person cannot reasonably be expected to discharge that burden of proof absolutely and such proof must be beyond reasonable doubt. Unrealistic and cumbersome requirements by the tax authorities to prove the existence of, for example, supplies of services by means of detailed minutes of meetings, protocols or official records are frequent.

What should be the operational preventive defence?

If taxpayers want to avoid VAT irregularities during tax audits, one option is to be extremely diligent and check their suppliers and customers in detail. One of the main principles is not to do business with businesses that have a record of amounts owed to any of the public authorities. At the same time, caution should be exercised with newly established business partners, partners with minimal share capital and those with no employees or high turnover. Clients are advised to always verify suppliers as well as customers through public registers for larger deliveries and to record this information in separate records. Such steps can significantly help in arguments in tax proceedings.

What should be the systemic defence?

Setting the right corporate structure for the business. This includes, in particular, elements of protecting assets and values that may be threatened by tax proceedings, as well as protecting the owners of the companies themselves. However, caution must be exercised in such structuring. For example, in situations where the Financial Administration is already circling over the tax entity, the transfer of assets and business to another company needs to be dealt with not only through the lens of transfer pricing, the legal opposability of such transfers, but also criminal law. Therefore, it is important to set up the corporate structure of the business in advance.

You can also see the full article here:

If you are interested in this topic, please do not hesitate to contact us.

Článok Highgate Law & Tax: failure to allow VAT deductions can put a business on the back foot.
Peter Varga’s statement for HOSPODÁRSKE NOVINY je zobrazený ako prvý na Highgate.

During tax inspections carried out by the auditors of the Financial Administration of the Slovak Republic (FA), a common problem in practice from the point of view of entrepreneurs is the application of the right to deduct value added tax.

As tax attorney Peter Varga of Highgate Law & Tax points out, there are often situations when the tax authorities deny a businessman’s claim for deduction on the grounds that the person on the invoice did not supply the necessary service or goods, according to the tax authorities. This is contrary to EU law in many situations.

Often healthy companies pay the price, and in such cases they are also responsible for the fact that their supplier does not keep accounts in accordance with the law or has become uncontactable over the course of a few years, for example, does not receive shipments from the financial administration.

“However, such practice is often contrary to the established case law of the Court of Justice of the EU or the Constitutional Court of the Slovak Republic. Doubts about a supplier or customer in a certain chain of supplies are relevant only to assess their participation in fraud – thus, they cannot in themselves lead to the rejection of a VAT deduction claim,” explains a tax lawyer from Highgate Law & Tax.

Errors and inconsistency are also on the side of companies

For example, the taxpayer may not be able to prove the carriage if the supply of goods is connected with it. In such cases, the tax authorities do not want to recognise the exemption of the supply, for example when the goods are delivered to another Member State, and charge the taxpayer output tax.

So, if companies want to avoid VAT irregularities during tax audits, one option is to be extremely thorough. Verify your suppliers and customers in detail, document everything, take photographs or film everything.

The tax administrator should be able to prove unequivocally that fraud has been committed on the basis of sufficiently established facts and objective evidence in the event of suspicion. Not to mention the fact that in some segments it is virtually impossible for businesses to fully scrutinise their partners. In fact, there are companies on the market that have a very wide range of suppliers.

“We have encountered cases where auditors have accused the company of having no employees and therefore it is not possible to credibly prove who actually delivered the service in question. However, it is not in the power of a business to go into such detail. And if he wanted to do so, his business costs would increase extremely,” explains tax lawyer Peter Varga.

Read the full article at https://www.trend.sk/financie/daniari-neferovo-neuznavaju-firmam-odpocty-dph-chcu-nich-nemozne-idu-aj-proti-zasadam-eu.

Source: KULLOVÁ, Z.: Taxpayers unfairly do not recognize VAT deductions for companies and want the impossible from them. In: TREND, 6.3.2023. Available at: https://www.trend.sk/financie/daniari-neferovo-neuznavaju-firmam-odpocty-dph-chcu-nich-nemozne-idu-aj-proti-zasadam-eu

If you are interested in this topic, please do not hesitate to contact us.

Článok Taxpayers unfairly do not recognize VAT deductions for companies and want the impossible from them.
They also go against EU principles – Interview by Petr Varga for TREND je zobrazený ako prvý na Highgate.

Článok Tomas Demo in an interview about startups for startitup je zobrazený ako prvý na Highgate.

If you are interested in this topic, please do not hesitate to contact us.

Článok Expert article by Vladimíra Mačuhová and Petr Varga in the Bulletin of the Slovak Chamber of Tax Advisors on the topic of crypto assets je zobrazený ako prvý na Highgate.