In Slovakia, a marketing agency usually operates either as a free-trade sole trader (živnosť) or as a limited company (s.r.o.), and its accounting hinges on one question: whether you invoice the client’s ad budget in your own name, or merely arrange the purchase in the client’s name. In the first case the entire amount flows through your business, including your turnover for VAT; in the second, only your commission is income. Your turnover, your record-keeping and how much you ultimately pay all follow from this choice.
Sole trader or s.r.o.: which form to choose?
Most marketers and smaller agencies start out as a free-trade sole trader – advertising and marketing services, content creation and social media management are free trades that require only a notification and no proof of qualification. A sole trader is cheap, administratively simple and, at lower income levels, tax-efficient thanks to lump-sum expenses.
Agencies usually move to an s.r.o. for three reasons: growing invoicing volume, the need to separate personal assets from business risk, and working with larger clients who prefer to contract with a company. A limited company also lets you bring in partners or distribute profit as dividends.
When is simple record-keeping enough and when must you keep full accounts?
A sole trader is not an accounting entity in the same sense as an s.r.o. They can opt for lump-sum expenses (60% of income, up to EUR 20,000 a year), which require only simple records of income, receivables and inventory. The alternative is actual expenses, kept in tax records or single-entry bookkeeping. Whether the lump sum pays off depends on the ratio of real costs to income.
A limited company always keeps double-entry accounting and prepares financial statements regardless of turnover. This is where many agencies fail to realise that re-invoicing large ad budgets artificially inflates both revenue and costs and makes the profit-and-loss statement harder to read. All the more reason to set up correctly what actually flows through the company.
Re-invoicing ads: in your own name or the client’s?
This is the core of every agency’s accounting when it buys ads for a client. What matters is whose name you act in:
- In your own name, for the client’s account – you hold the contract with Google or Meta, buy the ads and then re-charge the client. Under the VAT Act you are treated as having both received and supplied the service. The entire ad budget becomes your revenue and your cost and counts towards your turnover.
- In the client’s name and account – you only arrange the purchase, the Google invoice goes directly to the client and you invoice only a management commission. Only the commission enters your turnover.
Example: if you manage a monthly budget of EUR 8,000 with a 15% commission, invoicing in your own name pushes EUR 9,200 through your revenue, whereas the commission model pushes only EUR 1,200. With three such clients the difference in annual turnover exceeds EUR 280,000 – and turnover is what triggers mandatory VAT registration.
How does re-invoicing affect VAT registration?
You become a VAT payer once your turnover exceeds EUR 50,000 in a calendar year (the VAT number then applies from the following year), or immediately on exceeding EUR 62,500. If you invoice ads in your own name, you reach this ceiling far sooner than your real margin would suggest. Many agencies therefore choose the commission model or plan in advance to become a payer.
Once you are a payer, both models have consequences for input VAT deduction and for invoicing at the 23% rate. Setting up client contracts should therefore come before the accounting, not the other way round.
Ads from Google and Meta: what is reverse charge and §7a?
Google and Meta invoice from Ireland, i.e. from another EU member state. The place of supply of such a service is Slovakia, so you declare the tax through the reverse-charge (self-assessment) mechanism. Before your first purchase of advertising from a foreign supplier you must register under § 7a of the VAT Act and obtain a VAT number.
Beware a common misconception: a § 7a registration does not make you a full VAT payer. You pay 23% VAT on the received advertising, but you have no right to deduct it – the tax becomes a real cost. You also declare services you yourself supply to business clients in the EU via § 7a. We described the related cross-border rules in our article on how to invoice abroad from a VAT perspective.
How much do you really pay in tax and contributions?
Take a marketer operating as a sole trader with annual income of EUR 40,000 who claims lump-sum expenses. Sixty percent of income is EUR 24,000, but the lump sum is capped at EUR 20,000. On top of that they add the contributions actually paid – at the minimum level this amounts to roughly EUR 425 a month in 2026 (EUR 303.11 social insurance and EUR 121.92 health advance), i.e. about EUR 5,100 a year.
The tax base thus falls to roughly EUR 15,000. As their taxable income does not exceed EUR 100,000, it is taxed at the 15% rate, i.e. tax of about EUR 2,250. Above EUR 100,000 of taxable income the progressive rate of 19% and higher would apply. The figures are illustrative, but they show why it is crucial for marketers to track whether their income wrongly includes clients’ ad budgets.
Typical agency costs and the most common mistakes
Common deductible costs of an agency include tool subscriptions (design, schedulers, analytics, AI assistants), subcontracted designers and copywriters, equipment, professional courses and a share of office or home-office costs. For subcontracting, keep proper invoices and contracts – without them the cost will not stand up to an audit.
The three mistakes we see most often are: confusing commission with the whole budget and the resulting late handling of VAT, overlooking the § 7a registration before the first ad purchase, and mixing private and business expenses in one account. Each of them becomes expensive during a tax audit – and all of them can be avoided by setting up the accounting correctly from the start.
Do you need to set up your agency’s accounting so that re-invoicing ads does not create needless turnover and VAT headaches? We are glad to help.
FAQ
Does a marketing agency have to register for VAT even without EUR 50,000 turnover?
Yes, if it buys advertising from Google, Meta or another foreign EU supplier. The obligation to register under § 7a of the VAT Act arises before the first purchase. This registration is not full VAT payer status – the agency pays 23% VAT via self-assessment but cannot deduct it. The EUR 50,000 turnover threshold concerns mandatory payer status, which is a separate matter.
Does the client’s ad budget count towards my VAT turnover?
It depends on whose name you buy the ads in. If you invoice in your own name for the client’s account, the whole budget is your revenue and cost and counts towards turnover. If you act only as an intermediary in the client’s name, only the commission enters turnover. With larger budgets this difference decides when you become a VAT payer.
Lump-sum or actual expenses for a marketer?
Lump-sum expenses (60%, up to EUR 20,000) pay off for marketers with low real costs – typically those working alone without large subcontracting. But if you pay designers, copywriters or expensive licences and tools, actual expenses tend to exceed the lump sum and give you a lower tax base. The decision depends on your specific cost structure.