VAT controls

VAT controls

VAT audits form the most extensive area of our representation in tax proceedings. In fact, VAT audits occur much more frequently than income tax audits (e.g. in connection with illegal tax optimizations). VAT is the main source of revenue for public budgets in Slovakia. It is the most profitable tax and only the income from social levies is more significant for the state. If we analyse the period of the last 10 years (cash methodology), VAT has on average a 44% share in the total tax revenues of the state. By comparison, corporate income tax only accounts for 18% of the state’s revenue.

The second reason for which it is possible to understand why the state places so much emphasis on VAT is the problem of the so called “VAT”. VAT tax loopholes. This loophole represents a kind of estimate of VAT evasion, as VAT ranks the state among the highest risk taxes in terms of tax evasion. The peak of inefficiency of VAT collection in Slovakia was in 2012, when the VAT tax gap reached 40% of the VAT collection potential. Today, the gap is much smaller, but still relevant. This is a relatively significant step forward, and this is also the reason why the state has decided to relax some of the institutes of the VAT Act (for example, the abolition of the mandatory security).

While one can generally agree with the dynamism and emphasis that the state has placed on VAT collection and related tax controls in recent years, this approach has its limits. And it seems that in many cases these limits have been exceeded, which should not be the case in a state governed by the rule of law. And it is up to the courts to be able to identify those limits reliably and consistently, in order to cultivate the much-needed legal certainty in the business environment. And it is our job as tax attorneys and tax advisors to sensibly inform the courts of these oversights by the tax authorities.

You can also find interesting facts from tax audits in our media outputs or articles or seminars. We often talk about this at our conferences (click here to link to conferences). However, we pay particular attention to interviews for Trend (Advocate: tax audits are often purposeful and absurd) or ( You should have known! How taxpayers hunt for healthy companies ) but the Economic Newspaper (Are tax audits still a problem even for honest companies?)