Corporate Tax 2010 - BMR Advisors

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Slovakia
Slovakia
based on engine capacity for passenger cars, and weight and size for
other vehicles. The level of the tax rate is determined by the
municipalities, without any maximum limitation.
4.8 Are there any local taxes not dealt with in answers to
other questions
Except for immaterial fees, there are no local taxes other than those
dealt with in question 4.7.
5 Capital Gains
5.1 Is there a special set of rules for taxing capital gains and
losses
No, there are no special rules for taxing capital gains and losses in
Slovakia. Any capital gains and losses are included in the tax base
of the Slovak company and taxed at the standard corporate tax rate
of 19%.
6.3 How would the taxable profits of a local branch be
determined
Generally, a permanent establishment is taxed on a profit and loss
basis (“P/L basis”) in Slovakia. If it is impossible to determine the
tax base on a P/L basis, another method to determine the tax base
can be used, e.g. percentage from annual turnover generated in
Slovakia, cost plus method, etc.
6.4 Would such a branch be subject to a branch profits tax (or
other tax limited to branches of non-resident companies)
The tax base of a branch is taxed at the same corporate tax rate as
the tax base of other Slovak legal entities, i.e. at 19%. However,
according to the Slovak Income Tax Act, Slovak legal entities are
required to withhold 19% tax securing from payments made to
foreign entities having a tax presence in Slovakia (including
branches). The guarantee tax is then offset against the corporate
income tax liability of the branch. However, this obligation does
not apply to branches of entities seated in an EU country or for
branches paying tax prepayments in Slovakia.
5.2 If so, is the rate of tax imposed upon capital gains
different from the rate imposed upon business profits
No, the same 19% corporate income tax rate applies to all profits
realised by the Slovak company.
5.3 Is there a participation exemption
Slovakia has neither participation exemption rules nor relief for
reinvestment incorporated in its income tax law.
5.4 Is there any special relief for reinvestment
In respect of state aid, individual tax relief can be granted. Such
relief, however, is not necessarily linked to reinvestment.
6 Branch or Subsidiary
6.1 What taxes (e.g. capital duty) would be imposed upon the
formation of a subsidiary
The setting-up of a Slovak Company (and the subsequent increase
of registered capital) will not trigger any Slovak capital duty,
transfer taxes or other similar implications for its shareholders or
the Slovak Company.
6.2 Are there any other significant taxes or fees that would be
incurred by a locally formed subsidiary but not by a
branch of a non-resident company
Generally, the rules for taxation of a subsidiary and a branch are the
same (Profit/Loss Statement).
6.5 Would a branch benefit from tax treaty provisions, or some
of them
As a branch is considered to be a non-resident, the majority of tax
treaty benefits can not be applied to the branch, but the tax treaty
may eliminate or decrease the application of tax securing as
mentioned in question 6.4 above.
6.6 Would any withholding tax or other tax be imposed as the
result of a remittance of profits by the branch
The profits of a branch are first taxed in Slovakia. Subsequently,
the remittance of after tax profits to the headquarters is not subject
to further taxation in Slovakia.
7 Anti-avoidance
7.1 How does Slovakia address the issue of preventing tax
avoidance For example, is there a general anti-avoidance
rule or a disclosure rule imposing a requirement to
disclose avoidance schemes in advance of the company’s
tax return being submitted
A general anti-avoidance principle has been incorporated in Slovak
tax law. To prevent abuse, the tax authorities are obligated to take
into account the substance of a transaction, and to disregard the
formal structuring (Substance-Over-Form Principle). Tax
authorities can use their own assessment for the determination of
the tax base of a taxpayer who performed operations that, in
substance or purpose, were aimed at circumventing the tax law and
which resulted in a reduction in the tax base. In addition, any
business relation established solely for the purpose of the decrease
of tax base/increase of tax loss should be subject to transfer pricing
rules.
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