Taxable person

What it means

A taxable person under the VAT act is anyone who carries on an economic activity independently, whatever its purpose or result. Economic activity is any activity from which income is obtained, such as business, a liberal profession or letting property to obtain income on a continuing basis.

A sole trader with low turnover who is not registered for VAT is therefore also a taxable person. The concept is wider than VAT payer: a taxable person becomes a VAT payer only on registration, whether compulsory under section 4 or voluntary.

Taxable person status matters for determining the place of supply of services and for regimes such as the reverse charge. Even a taxable person that is not a VAT payer has obligations when buying services from abroad or goods from the EU, such as registration under section 7a.

How it works in practice

We explain to sole traders under the small business exemption that although they are not VAT payers, they are taxable persons. When they buy advertising on foreign platforms or software from the EU, they must therefore deal with registration and self-assessment.

In dealings with foreign partners we check whether the customer is a taxable person. For services this determines the place of supply and whether to invoice with Slovak VAT or apply the reverse charge. A valid VAT number is usually the evidence.

Related companies in a group may, under statutory conditions, form a VAT group in which they act as a single taxable person. Supplies between group members are then not taxed, which pays off especially for companies with restricted deduction rights.

What to watch out for

An occasional sale of private property, such as a car used privately, is not economic activity. Repeated sales aimed at obtaining income, however, may amount to a business and create taxable person status with VAT obligations.

An employee working under an employment contract is not a taxable person, because they do not act independently. When working with contractors who are in reality employees, the VAT treatment may therefore also be called into question.