Electronically supplied services

What it means

For VAT, electronically supplied services are services delivered over the internet or an electronic network that are essentially automated and impossible without information technology. Examples include software subscriptions, SaaS, online courses without a live teacher, downloads of e-books, music and films, and database access.

Not everything done online qualifies. A video-call consultation, a live webinar with a teacher or goods ordered through an online shop are not electronic services, because human work or physical delivery is decisive. The distinction changes the place of supply and with it where VAT is due.

For sales to businesses, meaning taxable persons, the ordinary rule for supplies of services applies and the customer accounts for the tax. For sales to consumers in another EU state the service is taxed in the customer’s state once total such sales to other states exceed a common threshold.

How it works in practice

A company selling an app or online course to consumers across the EU need not register in every state. It declares and pays the tax of all states through OSS in Slovakia in one quarterly return, at the rate of the customer’s state.

To determine the customer’s state it needs evidence, such as the billing address, IP address or country of the card issuer, that does not conflict. This data is best kept from the payment system, because the tax office asks for it at an audit.

For sales to EU businesses, their VAT number is checked in VIES and the invoice is issued without VAT with a reverse charge note; this is a service supplied to the EU. When buying electronic services from foreign suppliers, such as advertising or software, a Slovak company accounts for the tax under reverse charge.

What to watch out for

The most common mistake is charging Slovak VAT to every customer regardless of country, or failing to distinguish businesses from consumers. A wrong rate on foreign sales surfaces only at an audit from another state, and correcting several quarters is laborious.

When selling through app stores and platforms, it matters who the supplier to the customer is. If the store acts in its own name, it is responsible for VAT towards the customer and the company invoices it as a business, which changes how revenue and VAT are recorded.