Slovakia VAT Split Payments Widened from 2027
Starting on January 1, 2027, Slovakia will significantly expand its "special method of tax payment," enabling the Slovak tax authority to mandate split payments in certain circumstances.
This shift aims to address concerns related to missing trader fraud, ensuring that VAT is promptly remitted to the tax authority in scenarios where there is a reasonable suspicion that a supplier may not remit the VAT.
Key Features of the New Split Payment System
Under the new regulations, when there is justified concern that a supplier will fail to pay the VAT on an invoice, customers will be required to pay the VAT portion directly to the tax authority. This means that the customer will only remit the net amount to the supplier, thereby effectively safeguarding the VAT collection process.
Failure to comply with these requirements poses significant risks for customers, including penalties that could reach the full VAT amount stated on the invoice. This emphasizes the need for strong accounts payable, treasury, and payment control processes to mitigate risks for businesses impacted by these changes.
Legislative Context
The amendments are part of Act No. 385/2025 Coll., and the timing aligns with Slovakia's enforcement of a mandatory e-invoicing system in 2027. This is designed to help close the VAT gap by enhancing the accuracy and efficiency of VAT collection processes.
The concept of split payments is not unique to Slovakia; several other countries have implemented similar mechanisms. For example, Poland applies split payments specifically to high-fraud risk industries, while Italy has been utilizing B2G split payments for nearly a decade (Understanding Split Payments for VAT: A Global Perspective).
How the Current Special Method of Tax Payment Works
Presently, the special method allows customers to protect themselves from situations where they suspect a supplier will not remit VAT. The customer only pays the net amount to the supplier while remitting the VAT directly to the tax authority, specifically into an account designated for the supplier’s VAT payments. This mechanism helps capture the VAT at the moment of transaction, minimizing the risk of non-remittance by the supplier.
Expanded Authority for Tax Enforcement Starting January 2027
Historically, the special method of tax payment was primarily a voluntary measure that customers could initiate if they had reason to believe that a supplier would fail to remit VAT. Beginning in January 2027, however, the Slovak tax authority will have the power to impose split payments proactively.
In situations where the tax authority perceives a "reasonable concern" that the supplier will not pay the VAT due on an invoice, it may issue an order mandating the customer to complete the payment directly to the tax authority’s designated account during a specified period.
This change signifies a substantial shift from a protective measure for customers to a mandatory enforcement tool imposed by the tax authority, specifically targeting suppliers deemed high-risk.
Compliance Risks for Affected Customers
The recent amendment introduces a strict compliance framework, where failure to follow the tax office's directives regarding VAT payments could result in hefty fines. Penalties are not limited to a percentage of the VAT or capped amounts; rather, they reflect the full VAT due on the invoice. This lack of leniency means that customers cannot treat compliance as a mere administrative task—robust payment processes are essential to avoid financial penalties.
In conclusion, the expansion of the split payment mechanism in Slovakia from January 2027 represents a significant regulatory development with far-reaching implications for businesses engaged in B2B trading chains. Companies will need to adapt their financial and payment protocols accordingly to ensure compliance and avoid severe penalties.
