Corporate Tax 2010 - BMR Advisors

White & Case
Slovakia
3.7 Are there any restrictions on tax relief for interest
payments by a local company to a non-resident in addition
to any thin capitalisation rules mentioned in questions
3.4-3.6 above
No further restrictions other than mentioned in questions 3.4 (thin
capitalisation) and 3.8 (transfer pricing) are adopted in Slovakia.
3.8 Does Slovakia have transfer pricing rules
Under Slovak tax law, transactions realised between foreign related
parties should be subject to Slovak transfer pricing rules. The
prices agreed between them should be set on an arm’s length basis.
The definition of related parties includes those related through
personnel (through statutory representatives, members of statutory
bodies or supervisory boards), related economically (directly or
indirectly holding more than 25% of the capital or voting shares), or
otherwise related (through a relationship arising with the aim of
decreasing the tax base).
The determination of transfer prices between related parties is
generally considered to be very sensitive from the tax perspective.
According to Slovak tax legislation, if the prices contracted
between related parties differ from prices that would be contracted
between unrelated parties on the same or similar terms, and this
difference decreased a tax payer’s tax base, the tax base of the
taxpayer should be adjusted by the ascertained difference.
Under Slovak tax legislation, an advance ruling from the tax
authority on the transfer pricing method to be used between related
parties may be obtained. Slovak transfer pricing legislation
stipulates the methods available based on the OECD Transfer
Pricing Guidelines.
It was proposed that as of January 1, 2009, a specific transfer
pricing documentation must be maintained by each entity that
carries out transactions with foreign related parties if it meets
certain criteria. Similarly to the EU Code of Conduct on transfer
pricing documentation, the transfer pricing documentation should
consist of (1) a “master file” containing mainly general information
relevant for all EU group members of a multinational enterprise,
and (2) “country-specific documentation” containing information
relating to the respective local (Slovak) entity involved.
4 Tax on Business Operations: General
4.1 What is the headline rate of tax on corporate profits
The corporate income tax flat rate is set at 19%.
4.2 When is that tax generally payable
The corporate income tax is generally payable within three months
after the end of the tax period (calendar/financial year). In addition,
corporate income tax prepayments might be payable monthly or
quarterly (pro-rata) during the current tax period, depending on the
tax liability reported in the previous tax period.
4.3 What is the tax base for that tax (profits pursuant to
commercial accounts subject to adjustments; other tax
base)
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The corporate income tax base is generally based on profit/loss
determined according to the Slovak statutory accounting standards,
which is further adjusted for non-deductible expenses and nontaxable
income. For specific taxpayers (e.g. banks, insurance
companies, mutual fund management companies, etc.), the
accounting result is compiled according to IFRS, which is further
adjusted for tax base calculation purposes. These adjustments
include, among others, various items to exclude the impact of IFRS
accounting.
4.4 If it otherwise differs from the profit shown in commercial
accounts, what are the main other differences
Non-deductible tax expenses include, among others: (1)
entertainment and travel allowances paid in excess of the statutory
limits; (2) general accounting reserves and provisions, except for
specific tax deductible reserves and provisions (special rules apply
for banks and insurance companies); (3) fines and penalties except
for contractual penalties; (4) taxes paid on behalf of other
taxpayers; and (5) shortfalls and losses exceeding compensation
received, except for specific losses.
Slovak tax law further specifically sets the rules for the tax
deductibility of certain items, e.g. tax depreciation of assets; lease
payments.
4.5 Are there any tax grouping rules Do these allow for relief
in Slovakia for losses of overseas subsidiaries
Tax grouping is not possible in Slovakia. Therefore, if one
company is profitable and the other is making losses, the losses may
not be credited against the profits.
4.6 Is tax imposed at a different rate upon distributed, as
opposed to retained, profits
No, both the distributed and retained profits are taxed at the same
rate (19%).
4.7 What other national taxes (excluding those dealt with in
“Transaction Taxes”, above) are there - e.g. property taxes,
etc.
Municipalities are entitled to assess several municipal taxes, such as
real estate tax, tax on dogs, tax on the use of public areas, tax on
accommodation, tax on vending machines, tax on non-winning
game slot machines, tax on entry and parking of motor vehicles in
the historic parts of a city, tax on nuclear devices, and a motor
vehicle tax. The level of the applicable municipal tax rate is set by
the municipalities. The municipal taxes are administered by the
respective municipalities, except for the motor vehicle tax, which is
the responsibility of the tax authorities. The most significant of
these are real estate and motor vehicle tax.
Real Estate Tax
Only real estate located within the territory of the Slovak Republic
is subject to real estate tax. In general, the owner of real property
is obliged to submit a tax return for the calendar year and to pay real
estate tax, which is levied on buildings, land and apartments.
The real estate tax base is calculated according to the area in square
meters on buildings and apartments or the value of land. The basic
tax rates for buildings, land, and apartments are stipulated in the Act
on Municipal Taxes. However, the rates can be changed by the
respective municipality.
Motor Vehicle Tax
The motor vehicle tax is payable by both individuals and legal
entities for all vehicles used for business purposes. The tax rate is
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