Tax news and developments

08/06/18

 Tax and Legal Alert, June 2018, Issue 3

In this issue, we would like to inform you of the latest developments in the Slovak tax area, and of changes in the international tax area that will have an impact on Slovak tax legislation.

Following the guideline on interpretation of the Income Tax Act in relation to the taxation of income from the sale of virtual currency, about which we informed you in our latest Alert Issue, the Slovak Ministry of Finance has prepared a draft amendment to the Income Tax Act and the Accounting Act (“Amendment”). The Amendment confirms the Ministry’s approach to valuation and taxation of income from the sale of virtual currency.

In accordance with the Amendment, virtual currency will not be subject to taxation at the time of its mining or acquisition, but upon sale. The sale of virtual currency is considered to be any exchange, for example, exchange of virtual currency for assets, for provision of services, for another virtual currency or sale for a consideration.

It also proposes a valuation method for virtual currency, depending on the method of its acquisition, as well as a method of valuation of assets and services acquired by exchange for a virtual currency.

If the National Council approves and the President signs the Amendment, the provisions detailing the taxation of income from the sale of virtual currency, and the valuation of virtual currency at real (fair) value, will be applicable in tax returns filed after 30 September 2018.  

In accordance with the provisions of the Act on travel allowances, the Ministry of Labour and Social Affairs of the Slovak republic issued the ruling on the values of statutory meal allowances (“Ruling”), valid from 1 June 2018, in the following amounts:

  • EUR 4.80 per diems applicable for business trips of 5 – 12 hours,
  • EUR 7.10 per diems applicable for business trips of 12 – 18 hours, and
  • EUR 10.90 per diems applicable for business trips of over 18 hours.

The above amounts determine, for example, the amount of meal allowance for the employee for each calendar day on a domestic business trip, as well as the employer’s contribution for employee’s catering, or the contribution in the form of the meal vouchers.

Based on the Ruling, the maximum tax deductible meal allowance contribution for an employer is EUR 2.64. The value of a meal voucher must be a minimum of EUR 3.60, and the minimum employer’s contribution for employee’s catering in the form of a meal voucher is EUR 1.98.

The tax deductible amount for the employer from 1 June 2018 will be EUR 1.98 to EUR 2.64, depending on the amount of the employer’s contribution.

The Slovak Ministry of Finance (“MF SR”) drafted a new Act on Tax Dispute Resolution Mechanisms (“Draft Act”). The Draft Act implements the provisions of Council Directive (EU) 2017/1852 of 10 October 2017 on tax dispute resolution mechanisms in the European Union.

The Draft Act sets the rules for mechanisms for resolving disputes that may arise in connection with double taxation. Such disputes may arise from the interpretation and application of bilateral double tax treaties between the Slovak Republic and (i) the EU / EEA member state, or (ii) a member state with which the Slovak Republic has concluded a double tax treaty.           

The Draft Act also sets the rules for mechanisms for resolving disputes that may arise between the Slovak Republic and a member state of the Convention on the Elimination of Double Taxation in connection with the adjustments of profits of associated enterprises, provided such disputes arise from the interpretation and application of the Convention with regard to transfer pricing or the allocation of profits to permanent establishments.

The Draft Act sets formal and factual requirements, including information on steps to be taken by the taxpayer and the competent authorities, as regards resolving a dispute by using the mutual agreement procedure at the advisory commission, or the alternative dispute resolution commission.

The effectiveness of the Act is proposed from 1 July 2019.

MF SR has prepared ordinary a preliminary opinion on the proposal for a:

  1. Council Directive laying down rules relating to the corporate taxation of a significant digital presence; and
  2. Council Directive on the common system of a digital services tax on revenues resulting from the provision of certain digital services 

The first of the above proposals sets rules for corporate taxation by extending the concept of the permanent establishment to include a significant digital presence, via which business activity is wholly or partially carried out. The proposal also sets out principles for attributing profits to such a digital business / permanent establishment for tax purposes.

The rules from the proposal should be implemented in local legislation for the Slovak Republic, i.e. the Income Tax Act, by 31 December 2019, with effectiveness from 1 January 2020. Double tax treaties and the OECD Model tax Convention should also be amended.

As the approval of the above solution requires time, mostly for extending the rules to double tax treaties concluded with third countries, another proposal for implementation of digital services tax has been prepared.

This tax will be an indirect tax. Taxable revenues will be those resulting from services consisting of interface placement of advertising targeted at users of that interface, the transmission of data collected about users including the intermediation services that allow users to find  other users and to interact with them, where such services are supplied by a tax non-resident. The digital services tax should apply temporarily, until comprehensive digital corporate taxation legislation is implemented.

In connection with the above, MF SR has also issued preliminary information on the preparation of the Slovak Draft Act on Digital Services Tax.

Contact us

Christiana Serugová

Christiana Serugová

Partner, CEE TLP Clients & Markets Leader, PwC Slovakia

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