Hybrid Mismatches

Effective 1 January 2020, hybrid mismatch rules are introduced in the Slovak Republic as part of the EU Anti-Tax Avoidance Directive as amended (ATAD 2). The hybrid mismatch rules apply to related parties as also unrelated parties within a structured arrangement. The hybrid mismatch rules also apply to transactions between a head office and its permanent establishment or between permanent establishments of the same taxpayer. Broadly, a hybrid mismatch will arise if:

An entity enters into a scheme that gives rise to payment; and
The payment gives rise to:

a deduction without inclusion mismatch where a deduction is provided for payment in one country, but the corresponding income is not included as assessable income in the recipient country; or
a double deduction mismatch where a business receives a deduction in two countries for the same payment.

Transactions covered by the hybrid mismatch rules include:

A hybrid financial instrument;
A hybrid entity;
A diverted payment;
An unrecognized permanent establishment;
An unrecognized payment;
An unrealized payment;
A multiple expenditure deduction;
An embedded mismatch between permanent establishments of the same taxpayer; or
An imported payment between related parties.

If a mismatch arises, it is neutralized by:

Disallowance of the deduction of expenditure under the hybrid arrangement to the extent that the corresponding income is not included in the tax base of the recipient or in case of double deduction; and
Inclusion of the income arising from hybrid arrangement as taxable income to the extent that it is deductible for the payer.

Tax Information Exchange Agreements (TIEAs)

Tax Information Exchange Agreements (TIEAs) provide for the exchange of information on tax matters, and the Slovak Republic has concluded TIEAs with several countries, including Albania, Andorra, Antigua and Barbuda, Argentina, Armenia, Aruba, Azerbaijan, Barbados, Botswana, Brunei, Cameroon, Cape Verde, Chile, Colombia, Cook Islands, Costa Rica, Curaçao, Dominica, Dominican Republic, Faroe Islands, Ghana, Gibraltar, Greenland, Guatemala, Grenada, Hong Kong SAR, Jamaica, Jordan, Kenya, Liechtenstein, Lebanon, Liberia, Macao, Maldives, Marshall Islands, Mauritius, Monaco, Mongolia, Montenegro, Montserrat, Morocco, Namibia, Nauru, New Zealand, Niue, Pakistan, Paraguay, Peru, Qatar, San Marino, Saudi Arabia, Senegal, Seychelles, St. Kitts and Nevis, St. Lucia, St. Maarten, St. Vincent and the Grenadines, Thailand, Uganda and Uruguay.

Financial Account Information Reporting and Exchange

The Slovak Republic has adopted measures to implement the automatic exchange of financial account information with the EU Member States pursuant to Council Directive 2014/107/EU of 9 December 2014, which synchronized EU rules with the global standard for the exchange of information developed by the OECD under the Common Reporting Standard (CRS). The Slovak Republic is also a party to the OECD Mutual Assistance Convention and the related Multilateral Competent Authority Agreement and as such exchanges financial account information under CRS with qualifying non-EU countries. Further, the Slovak Republic concluded an Intergovernmental Agreement (IGA) with the US for the implementation of the U.S. Foreign Account Tax Compliance Act (FATCA), effective 1 January 2016.

Mandatory Reporting of Cross-Border Tax Arrangements (DAC6/ MDR)

The Slovak government has implemented the EU Council Directive on the mandatory disclosure and exchange of cross-border tax arrangements (DAC6). Effective 1 July 2020, the legislation mandates the reporting of cross-border arrangements by intermediaries and the exchange of information with the other EU Member States. The reporting requirements will be applicable to intermediaries engaged in the design, marketing, organizing, and management of reportable arrangements. However, in certain instances, the reporting requirements are shifted to the taxpayer.

From 1 July 2020, the disclosure of reportable arrangements is required to be made within 30 days from the date when the arrangement is made available for implementation or is ready for implementation or where the first step to implementation has been carried out. The initial disclosures will, therefore, be due from 31 July 2020 (i.e., 30 days following the effective date of 1 July 2020). However, reportable arrangements made during the period 25 June 2018 to 30 June 2020 are required to be reported by 31 August 2020.

Failure to comply with the reporting requirements may result in penalties of up to EUR 30,000 for each failure.

COVID-19 Emergency Measures

Due to the COVID-19 pandemic, the EU Council adopted an amendment to the directive whereby the Member States could opt to defer the reporting under DAC6 by up to 6 months.

The Slovak Republic adopted the deferral option and postponed the DAC6 reporting requirements as follows:

The deadline for reporting historical arrangements between 25 June 2018 and 30 June 2020 was deferred from 31 August 2020 to 28 February 2021; and
The standard 30-day reporting deadline began on 1 January 2021, instead of 1 July 2020. This included reporting on cross-border arrangements put in place between 1 July 2020 and 31 December 2020.

Reporting Obligation for Digital Platforms (DAC7)

The Slovak government has implemented the EU Council Directive on the reporting obligations of digital platform operators (DAC7). Effective 1 January 2023, the legislation mandates digital platform operators to report the income earned by the sellers using their platforms and provides for the automatic exchange of information with the other EU Member States. The rules apply to digital platforms located both inside and outside the EU.

As per the law, platform operators must notify the Slovak tax authorities by 31 January of the following year in which the seller subject to the notification is identified. If a different operator has already notified the same seller, the operator is required to only make an electronic announcement that another operator has already notified the tax authorities. Due diligence on the information on sellers and their transactions must be conducted and reported to the Slovak tax authorities by 31 December of the respective tax period. For sellers registered on the platform prior to 1 January 2023, the due diligence procedures must be performed by 31 December 2024. All relevant documents and information must be maintained for a period of 10 years from the end of the year in which the notification was filed.

Income earned by sellers (except where the activity is performed as an employee of the platform operator or of another connected entity) from the following qualifying activities must be notified:

Rental income from the immovable property (residential or commercial), including parking spaces;
Revenue from personal services;
Sale of goods; and
Rental income from any mode of transport.

The following sellers are excluded from the notification requirement:

Governmental entities;
Entities the shares of which are regularly traded on a stock exchange;
Sellers with the number of transactions relating to letting out of real estate exceeding 2,000 for the reporting period; and
Sellers with less than 30 transactions and total compensation not exceeding EUR 2,000 for the reporting period.

The law also provides for joint tax audits conducted by the tax authorities of two or more EU Member States, effective 1 January 2024. The results of the joint tax audit can be used by the Slovak tax authorities in domestic tax administration for proceedings relating to double tax avoidance.

Failure to comply with the reporting requirements and due diligence procedures may result in penalties, which may vary from EUR 3,000 up to EUR 10,000 for each failure.

Exit Tax

Effective 1 January 2018, the government has introduced new exit tax rules, required as part of the EU Anti-Tax Avoidance Directive. The exit tax is due at the rate of 21% (standard corporate rate) on the value of assets (with adjustments) when leaving the Slovak Republic, which may be paid in instalments over five years.

Exchange of Cross-Border Tax Rulings

The Slovak Republic implemented in 2016 the amendments to the EU Directive on administrative cooperation in the field of taxation. The amendments require the automatic exchange of cross-border tax rulings and APAs with the other EU Member States from 1 January 2017. The exchange also includes rulings and APAs issued, amended or renewed between 1 January 2012 and 31 December 2016, subject to certain conditions.

Low or No Tax Jurisdictions

The Slovak Republic adopts a White List rather than a Black List approach for identifying non-cooperative jurisdictions. The Slovak Republic published a White List effective from 1 January 2024 containing 133 jurisdictions. The White list excludes:

Jurisdictions that are included in the EU non-cooperative jurisdiction list (see below);
Jurisdictions that do not apply corporate income tax; and
Jurisdictions that apply a zero corporate income tax rate.

The list of non-cooperative jurisdictions as last amended by the EU Council on 18 October 2024 is as follows:

American Samoa	Antigua and Barbuda (removed effective 18 October 2024)(see Note below)	Anguilla (effective 12 October 2022)	The Bahamas (removed effective 26 February 2024) (see Note below)
British Virgin Islands (removed effective 23 October 2023) (see Note below)	Belize (removed effective 26 February 2024) (see Note below)	Costa Rica (removed effective 23 October 2023)	Fiji
Guam	Marshall Islands (removed effective 23 October 2023)	Palau	Panama
Russia (effective 14 February 2023)	Samoa	Seychelles (removed effective 26 February 2024) (see Note below)	Trinidad and Tobago
Turks and Caicos Islands (removed effective 26 February 2024) (see Note below)	The US Virgin Islands	Vanuatu

Note: The following jurisdictions that are removed from the EU non-cooperative jurisdictions list are not included in the current Slovakian White List:

British Virgin Islands – removed from the EU non-cooperative jurisdictions list, effective 23 October 2023;
The Bahamas, Belize, Seychelles, and Turks and Caicos Islands - removed from the EU non-cooperative jurisdictions list, effective 26 February 2024; and
Antigua and Barbuda – removed from the EU non-cooperative jurisdictions list, effective 18 October 2024.

Ultimate Beneficial Ownership

The Slovak Republic transposed the EU’s Fourth Anti-Money Laundering Directive, which imposes an obligation on resident companies and other legal entities to disclose information on their Ultimate Beneficial Owners (UBO). Existing companies were required to disclose information about their UBOs by 31 December 2019 and new companies are required to disclose the information upon registration of the company in the Slovak Commercial Register. The information is required to be continuously updated and maintained during the period that a person is a UBO and 5 years after the termination of such status.

A UBO is a natural person who ultimately owns or controls, directly or indirectly, a company or other legal entity, or is a natural person on whose behalf a company or legal entity carries out its business activities, including a person who:

a) Holds directly or indirectly at least 25% of the voting rights, or at least 25% of share in the registered capital (including bearer shares) in a legal entity;

b) Is entitled to appoint or recall the entity's statutory, supervisory, and/or controlling body and/or members of its top management;

c) Controls the entity by ways other than those stipulated under(a) and (b) above; or

d) Has the right to participate in at least 25% of the entity's profits.

In the absence of persons that meet the above-mentioned criteria, the entity's top management is considered the UBOs.

Certain entities are exempt from the UBO reporting requirements, such as:

Legal entities issuing securities admitted for trading on a regulated market that is subject to disclosure requirements consistent with EU law or subject to equivalent international law requirements; or
Legal entities registered with the Slovak Register of Public Sector Partners.

Failure to comply with the reporting requirements attracts a fine of up to EUR 3,310. The failure to maintain the company's internal records (in electronic or paper form) regarding the UBOs may attract a fine of up to EUR 200,000.

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