Supply of goods

What it means

For VAT purposes a supply of goods is the transfer of the right to dispose of tangible property as owner. What counts is economic control over the thing, not the moment civil law passes legal title.

Electricity, gas, water and heat count as goods too. Anything that is not a supply of goods is a supply of services, and that split decides the place of supply and the rate that applies.

The line between goods and services shows up in leasing. Where the contract provides for ownership to pass no later than on payment of the last instalment, there is a supply of goods as soon as the item is handed over, and the tax is declared at once. An ordinary lease without such a term is a service, taxed period by period instead.

How it works in practice

The day of supply fixes the tax point and therefore the period the transaction belongs to. Shipments to another member state also go into the EC sales list as an intra-EU supply.

The Act treats two further things as supplies for consideration: moving the company’s own goods to another member state, and handing goods over free of charge after input tax was deducted. Neither has a customer, yet both are taxed.

When a company supplies goods with installation - a production line assembled at the customer’s premises in another country, say - the place of supply is where the goods are installed. On such orders we therefore assess before invoicing whether the Slovak company has to register in the country of installation or whether the reverse charge shifts the tax to the customer.

What to watch out for

Goods taken for private use and gifts above the statutory low-value limit are the usual omission. The deduction on purchase stays, the output tax on the handover is missing, and an audit assesses the tax with interest on a movement that brought in nothing.

An invoice issued in January for goods handed over in December belongs in the December return, not the January one. Companies that account for tax by invoice date push it into the wrong period and, in an inspection, pay late payment interest for the time by which the tax was declared late.