Amendments to the Income Tax Act of Slovakia from 2023

New rules in accordance with OECD TP Guidelines and ATAD Directive


At the end of August, the Income Tax Act of Slovakia has been significantly changed. According to the amendments, safe harbour rule is being introduced and the procedure of taxpayer’s registration will be simplified among others. Lots of rules have been specified and definitions have been clarified, too. Most of the changes will take effect on 1 January next year.

Safe harbour rule in Slovakia

One of the most important changes to the Income Tax Act of Slovakia is the specification of the determining method of the economic ties between close persons (e.g., husband and wife). The new method has to be applied from 1 January 2023. Furthermore, the legislator clarified the definition of a controlled transaction when a dependent activity is not considered as a controlled transaction.

In this context, following the example from other countries, a safe harbour rule is being introduced in the Income Tax Act of Slovakia. The rule exempts taxpayers from the obligation to document the valuation method and conditions in controlled transactions. The safe harbour includes controlled transactions from which taxable income earned or tax expense deducted is not exceeding EUR 10,000 or EUR 50,000 in the case of the loan principal.

Furthermore, the procedure for calculating the difference by which the prices or conditions in controlled transactions differ from the prices or conditions that would be used between independent persons, is specified. This procedure shall be in accordance with the OECD Transfer Pricing Guidelines.

Changes related to PEs and APAs

From 2023, the rules for determining the tax base in the case of existence of a permanent establishment (PE) in the Slovak Republic have also been clarified, as in the case where a non-resident taxpayer does not have a permanent establishment, but the income earned within the territory of the country is also taxable in the country according to international law. When determining the tax base of a permanent establishment, it is also recommended to respect the procedure in accordance with the OECD Transfer Pricing Guidelines.

At the same time, the tax administrator’s procedure is specified in cases, where the prices in controlled transactions do not correspond to the arm’s length principle. From the new year, the Ministry of Finance of the Slovak Republic can also issue a decision in advance pricing agreement (APA) for more than five tax periods, and at the same time, taxpayers can also submit the transfer pricing documentation in a foreign language.

Other changes to the Income Tax Act of Slovakia

The Income Tax Act of Slovakia will be amended with the possibility of legal write-off of the receivable in the case, if the receivable has ceased to exist as a result of forgiveness during preventive restructuring. Also, the creation of adjustments to receivables against the debtor in preventive restructuring will be a tax-deductible expense.

The last significant change to the Income Tax Act of Slovakia effective from 1 January 2023, is the new procedure of taxpayer’s registration, where the tax administrator will register the taxpayer ex offo on the basis of data from publicly available registers. The tax administrator will announce such fact on the website of the Financial Directorate of the Slovak Republic.

As the result of the transposition of the ATAD directive, a rule is also being introduced to limit the tax deductibility of net interest costs if their amount exceeds EUR 3,000,000. The aforementioned rule will take effect on 1 January 2024, the aim is to prevent the artificial erosion of corporate tax bases through debt financing. The tax base will be increased by interest, that exceeds 30% of the tax EBITDA indicator. At the same time, the tax administrator allows the transfer of unused interest to future tax periods.

If you want to know more about the latest amendments to the Income Tax Act of Slovakia or other tax issues in the country, we recommend you visit the website of Mandat Consulting, k.s. and contact the local WTS experts in Slovakia.

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