Optional reverse charge for non-resident suppliers (art. 194 of the VAT Directive)
The EU VAT systems is essentially based on fractionised payments, VAT being collected at each stage of the production and distribution chain after offsetting the input VAT paid on purchases against output VAT received on sales. According to the main rule laid down by Article 193 of VAT Directive, the person liable for the payment of this VAT is the person supplying goods or services. The liable person is the person who is held to pay VAT to the Treasury
Member States in which the VAT is due may provide for that the person liable for the payment of VAT is the person acquiring the goods or services where the transaction is carried out by a supplier who is not established in the country in which VAT is due. Such reverse charge is regulated by national regulation.
What are the rules in Slovenia?
Slovenia introduced (2022) reverse charge on supplies of goods and services made by foreign companies, according to the option from Article 194 VAT Directive (art. 76 (3) of SLO VAT Act).
The reverse charge VAT system applies provided the following conditions are met:
- The supplier is a foreign company (EU or non-EU) which is not established and not VAT registered in Slovenia
- The customer is a VAT taxable person who is registered for VAT in Slovenia (regardless of whether or not he is established in Slovenia).
Let's take an example
A French company purchases goods from a Slovenian supplier and resells them to a German company having a Slovenian VAT number. The goods remain in Slovenia.
The French company would then not be required to register for VAT purposes in Slovenia and should issue an invoice without applying Slovenian VAT to its German client. VAT incurred on its purchase would be recovered through the electronic procedure laid down by Directive 2008/9.
Good to know
The application of the reverse charge is not an option for foreign companies. They need to know if they qualify for the reverse charge.
Local tax authorities may refuse to refund local VAT when the reverse charge has not been applied or conversely reclaim VAT when the reverse charge has been applied incorrectly.