The latest legislative changes regarding taxation
20/12/22
Tax and Legal Alert, December 2022, Issue 3
In the current issue, we bring you an overview of the latest legislative changes.
Amendment to the Act on Accounting
During 2022, parliament approved an amendment to the Act on Accounting, which introduces a number of changes:
- With effect from 1 September 2022, there was a change to the entities required to prepare individual financial statements according to international accounting standards. The new rules will apply to the preparation of financial statements which are prepared from 1 January 2023 onwards.
- With effect from 31 December 2022, the following changes are introduced:
- the definition of accounting entities required to provide information in their annual report on the development, actions, position and impact of the accounting entities’ activities on environmental, social and employment areas, information on compliance with human rights and the fight against corruption and bribery is changed. These rules will apply for the first time when preparing annual reports for the accounting period ending on 31 December 2022.
- Effective from 1.1.2022, the following changes will apply:
- the obligation to state "significant errors" found by the auditor in the annual report during the audit,
- following the regulation of the archiving of accounting records from 2022, there is a more detailed regulation of the obligations of accounting entities and tax authorities when submitting accounting records for the needs of tax authorities.
- With effect from 22 June 2023, a comprehensive amendment of the Income Tax Information Report is introduced. The law defines accounting entities that are obliged to prepare this report and under what circumstances this obligation will apply to them. The affected accounting entities will be obliged to file an Income Tax Information Report in the Commercial Register and some also on their website. The detailed content of the report will be determined by the Ministry of Finance of the Slovak Republic in a decree. This legislation will apply for the first time when filing an Income Tax Information Report for the accounting period starting 22 June 2024.
Amendment to the Income Tax Act
The Slovak parliament has approved an amendment to the Income Tax Act (“ITA”) related to corporate income tax. We informed you about the draft amendment in our August Tax and Legal Alert when it was published for discussion and comments from governmental bodies and other relevant institutions.
In addition to some minor technical accuracy improvements, the Slovak parliament approved the following:
- Changes to transfer pricing issues, e.g. a more precise definition of the economic interconnection between persons/entities, supplementation of the negative specification of a controlled transaction, introduction of the definition of a significant controlled transaction, supplementation of the right to a corresponding adjustment of the tax base in specific cases, a new reference to the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations, and changes to the procedure for submitting transfer pricing documentation regarding the use of the Slovak language;
- Introduction of a rule on limiting interest expense to be included in the tax base due to the implementation of Council Directive (EU) 2016/1164, laying down rules against tax avoidance practices, into Slovak legislation. As a result, the ITA applies an adjustment to (increase of) the tax base for taxpayers whose net interest expense, i.e. the difference between interest expense and interest income in the respective tax period, is higher than €3 million;
- Improved accuracy of provisions related to determining the tax base (or tax loss) of taxpayers with limited tax liability in Slovakia who perform their activities in Slovakia via a permanent establishment;
- Amendments following the adoption of the Act on Handling Impending Bankruptcy which regulates public and non-public preventive restructuring; and
- Changes related to the implementation of IFRS 17 (Insurance Contracts) and IFRS 9 (Financial Instruments) by insurance companies.
For more information, please see Issue 2 of our Tax and Legal Alert published on 22 August 2022.
In addition to the above amendments, the Slovak parliament also approved a supplementary proposal to amend provisions specifying the source of income for taxpayers with limited tax liability in Slovakia. As of 1 January 2023, income of Slovak tax non-residents from Slovak sources also includes interest income from bonds issued by Slovak tax residents. As a result of this amendment and unless provided otherwise by the respective international treaty, interest from bonds issued on foreign markets is subject to Slovak withholding tax after interest has been paid, remitted, or credited for the benefit of a non-resident.
Tax bonus
As of 1 January 2023, an amendment to the Income Tax Act will come into force which amends provisions regarding the application of the tax bonus.
a) EUR 140 per month if the dependent child under 18 and the dependent child does not receive a meal subsidy, or
b) EUR 50 per month if the dependent child is 18 and older.
The tax bonus may only be granted up to the amount of the stipulated percentage of half of the tax base (partial tax base) from dependent or entrepreneurial activity, or their combination thereof, depending on the number of children and the current percentage limit.
Amendment to the Act on a special levy on regulated industries
An amendment is currently being discussed in parliament, which proposes an increase in the rate of the special levy for a regulated entity from 0.00726 to 0.01.
In addition, the scope of regulated persons is expanded to include entities authorized to perform the following activities:
- on the basis of a permit issued or granted by the National Bank of Slovakia, except for a bank permit,
- broadcasts and retransmissions carried out on the basis of a license granted by the Council for Broadcasting and Retransmission and based on a decision of the Council for Broadcasting and Retransmission on registration,
- collection of tolls carried out on the basis of the authorization of Národná diaľníčná spoločnosť, a.s.
If the amendment is approved, regulated entities will be required to pay the levy for the month following the month in which the amendment takes effect.
Increased meal allowances
A new regulation of the Ministry of Labour, Social Affairs and Family of the Slovak Republic has been published in the Collection of Laws which increases meal allowances from 1 January 2023 as follows:
- EUR 6.80 for 5 - 12 hours;
- EUR 10.10 for 12 - 18 hours;
- EUR 15.30 for over 18 hours.
The above amounts are employees’ entitlements to a meal allowance for each calendar day of a domestic business trip, and are used to determine the employer's contribution to an employees’ meal allowance, providing a meal allowance via a third person, or a financial meal allowance.
If the regulation is approved, the tax-free amount for the employees and the tax-deductible cost for the employers related to the provision of meals at work will increase from the current EUR 3.52 to EUR 3.74. In addition, the minimum value of a meal voucher will increase from the current EUR 4.80 to EUR 5.10.
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