Latest tax developments

Taxation of digital platforms via which accommodation and transportation services are provided

An amendment to the Income Tax Act valid as of the beginning of this year lays down obligations for taxpayers that are Slovak tax non-residents and that intermediate transportation and accommodation services in Slovakia via digital platforms.

Based on the view of the Slovak Tax Directorate, foreign operators of digital platforms are obliged to register permanent establishments in Slovakia and appropriately tax the income derived in Slovakia. If this is not the case, Slovak taxpayers that use digital platforms to intermediate the sale of their services, are required to withhold tax from the payments of intermediation fees. The tax should be withheld at 19%, or at 35% if the recipients of the payments are from a non-contracting state. The tax withheld should be remitted to the Slovak tax authorities by the 15th day of the month following the month in which the payment was made.

Based on the information published by the Slovak Tax Directorate, they intend to perform tax audits of the relevant subjects and to register their permanent establishments ex offo.

Change to the calculation of tax relief for recipients of investment incentives and new tax relief for registered social enterprises

The new Act on Regional Investment Incentives published in the Collection of Laws changes the calculation of income tax relief for recipients of investment incentives. New rules will apply to taxpayers that receive a decision on the receipt of an investment incentive in the form of corporate income tax relief after 1 April 2018.

The new Act on Social Economy and social enterprises introduces a new income tax relief for registered social enterprises. Social enterprises are entities with a public benefit interest, as defined under the Act.  New provisions will apply as of 1 January 2019.

Guideline on the application of mutual agreement procedure to resolve international tax disputes

In accordance with the provisions of the Tax Administration Act, the Ministry of Finance also issued a guideline on the application of a mutual agreement procedure.

Competent authorities may face disputes regarding the correctness of taxation that may lead to double taxation of taxpayers. To resolve such disputes, the provisions of double tax treaties and the Arbitration Convention may apply, as they allow the competent authorities to resolve disputes using a mutual agreement procedure. A bilateral procedure is performed between competent authorities, and the taxpayer does not participate in such a procedure. In Slovakia, the competent authority is the Ministry of Finance.

The guideline relates mainly to the mutual agreement procedure that taxpayers may initiate in line with the relevant bilateral double tax treaty or the Arbitration Convention. The guideline sets out formal and factual requirements for the procedure in the Slovak Republic, including information on the minimum requirements and the steps the taxpayer must take to file a request to initiate a mutual agreement procedure, and the information on the steps that the competent authorities must follow.

We will provide you with more detailed information on this topic in a separate Tax and Legal Alert.

Draft of the Insurance Tax Act

A new indirect tax will apply to non-life insurance provided by insurance companies where the insurance risk is located in the Slovak Republic. The tax base will be the amount of the total insurance premium decreased by the tax, and the tax rate will be 8%. The tax period will be the calendar quarter, and the tax return should be filed at the end of the month following the end of the tax period. The tax will be due by the same deadline.

This insurance tax will replace the current levy on insurance premiums. The payment of a levy on compulsory contractual motor vehicle insurance will remain the same. Insurance tax remitted by the taxpayer will be tax deductible.

The Act will become effective as of 1 October 2018 and will apply to insurance which fulfils both of the following conditions – the insurance period starts after 30 September 2018 and the tax liability (e.g. the payment or the prescription of insurance premium) arises after 30 September 2018.

Monetary allowances in relation to summer and Christmas holidays

A new amendment of the Labour Code effective as of 1 May 2018 extends the types of income from employment that are tax exempt. These are the voluntary allowances (bonuses) that employers may provide to employees for work on the occasion of a summer holiday (i.e. in a salary for May) and Christmas holiday (i.e. in a salary for November), in a minimum amount of the average monthly salary.

This exemption will apply on the amount of allowance up to EUR 500 in total from all employers. The information about the received allowance must be declared on the wage list of the employee. The exemption will also apply to health insurance and social security contributions.

The application of exemptions should be set up consecutively in the following years and various conditions must be met. The first exemption will apply to health insurance contributions, provided all relevant conditions are met, for an allowance payment up to EUR 500 for May 2018.

• A draft of the new Act on Unfair Conditions in Business Relationships Related to Groceries extends the scope of monetary and non-monetary supplies, activities and relationships that are defined as unfair conditions. Subsequently, such fulfilments may have negative tax implications for the receiving entrepreneurs.
  
• A draft amendment to the Act on Social Insurance proposes to introduce an annual social insurance reconciliation carried out by the Social Insurance Company by 30 September (31 October respectively) of the following year.
  
  According to the draft amendment, employees, employers and self-employed individuals must pay advances on monthly social security contributions and, subsequently, an annual reconciliation up to the maximum annual assessment base will be undertaken. The determination of the maximum annual assessment base will remain under the current regime. However, the maximum monthly assessment base for employees and employers will be abolished. This will mean that monthly social security contributions will be paid from income received, until the maximum annual assessment base is reached.
  
  The system of annual social insurance reconciliation is likely to apply from January 2021 (i.e. social security contributions for January 2021 will be regarded as advances), and the first annual reconciliation is likely to be undertaken in 2022.
  
• A new draft amendment of the Act on the Electronic Cash Register is being prepared. It proposes that entrepreneurs providing specifically listed services will be obliged to use cash registers connected with the Tax Directorate’s system when reporting received income.
  
  Currently, entrepreneurs may use either electronic cash registers, or virtual cash registers to report received income and entrepreneurs may voluntarily use virtual cash registers that are connected with the Tax Directorate’s system.