Supply of services

What it means

For VAT, a supply of services is any supply that is not a supply of goods: work, advice, a licence, a lease, and equally an obligation to refrain from an act. The definition is residual and deliberately wide.

What matters is not the nature of the activity but where its place of supply falls. That is what decides which state collects the tax, and with a business customer it is normally the state where that customer is established.

With mixed supplies you have to decide whether there is one supply or two separate ones. Installation that is merely part of delivering a machine is taxed with it as goods; a separately ordered service has its own place of supply and its own VAT rate. What the customer is really buying decides.

How it works in practice

For a service to a business in another member state the reverse charge applies: the Slovak supplier invoices without tax and reports the supply in the EC sales list for the relevant period.

The exceptions have to be known by heart because they come up often: services connected with immovable property, event admission, passenger transport or catering are taxed where the property sits or where the service is actually performed.

For services bought from abroad - social media advertising, software, hosting - we check whether the supplier invoiced without tax. If so, the client declares the tax by self-assessment: a VAT payer deducts it at the same time, while a company registered only under section 7a simply pays it.

What to watch out for

Invoicing without tax rests on the customer being a taxable person, and the simplest proof of that is a valid IČ DPH verified on the day the document is issued. If the number has since been cancelled and the firm holds no other evidence of the customer’s status, the office treats the service as supplied to a non-taxable person, with the place of supply in Slovakia, assesses tax on the whole invoice and adds a penalty for the faulty return.

The mistake in the other direction is charging Slovak VAT to a business outside the EU, even though the place of supply is normally in its country. The customer has no way to deduct Slovak tax and refuses to pay it; the fix is then a corrective invoice and an amendment to the return already filed.