Taxable supply

What it means

A taxable supply is the everyday name for a transaction on which VAT is charged. The Slovak VAT Act speaks of a taxable transaction and knows four: supply of goods, supply of services, acquisition of goods from another EU state, and import.

Not every transaction is taxed here. A supply whose place of supply lies outside Slovakia bears no Slovak tax, and an exempt supply is still within the scope of the tax, only no tax is applied to it.

A taxable transaction presupposes consideration and a taxable person acting in the course of business. A free-of-charge supply therefore usually bears no tax. The Act does, however, treat as a supply for consideration, for example, a gift or private use of an asset on whose purchase the company deducted input VAT, so that the deduction does not turn into untaxed consumption.

How it works in practice

Every transaction raises three questions: where the place of supply is, when the tax point falls, and which rate or exemption applies. The answers produce the line in the VAT return and in the control statement.

The document shows the tax base, the rate and the amount of tax; where the liability shifts to the customer, no tax is shown and the document carries the reverse charge note. The supply belongs to the tax period of its tax point, not of the payment.

Taxable supplies are not limited to the core business. When an s. r. o. sells an old company car or a retired machine, on disposal of the asset we check whether VAT was deducted on the purchase and decide from that whether the sale is taxed or exempt. The invoice then goes out as for any other sale.

What to watch out for

An advance received before delivery: the liability arises on the day the payment comes in, so the supply belongs to that earlier period. A business that issues the document only on delivery declares the tax late and pays interest on it, even though the year as a whole agrees.

Goods from a supplier in another member state arrive with an invoice showing no VAT, and the bookkeeper records them simply as a cost. On an acquisition of goods from another member state, however, the customer declares the tax itself. The missing line in the return and the control statement shows up when EU data are matched, followed by a request, a fine and interest.