Worldwide transfer pricing reference guide 2014

Slovak Republic
Taxing authority and tax law
Taxing authority: Slovak Financial Directorate, local tax authorities and Ministry of Finance.
Tax law:
• Sections 2, 17 (5, 6, 7) and 18 of the Income Tax Act
• Act on International Assistance and Cooperation by Tax Administrators
Relevant regulations and rulings
The Slovak transfer pricing rules established in the Income Tax Act generally conform to the OECD Guidelines. The OECD Guidelines were
published in the Slovak Financial Newsletter, but are not legally binding. Nevertheless, the tax authorities generally follow them
in practice.
Since 2009, taxpayers are obliged to prepare and keep transfer pricing documentation that supports the transfer pricing method
used in transactions with foreign related parties. The required content of transfer pricing documentation is stipulated in Guidance No.
MF/8288/2009–72 of the Slovak Ministry of Finance.
OECD Guidelines treatment
The tax authority usually follows the provisions of the OECD Guidelines; e.g., the acceptable methods listed in the Income Tax Act
correspond with the methods listed in the OECD Guidelines. As of 1 January 2014, the Slovak Income Tax Act reflects the updated
version of the OECD Guidelines (e.g., elimination of preference in applying selected transfer pricing method).
Priorities/pricing methods
The Slovak Income Tax Act is in line with the OECD Guidelines. Combination of methods is permitted. Methods that are not listed may be
used if they are in compliance with the arm’s length principle.
Transfer pricing penalties
No penalties specific to transfer pricing exist. The penalty rate for unpaid (or understated) tax liability is the highest of either three times
the basic interest rate of the European Central Bank (at the date of issue 3*0.25% = 0.75%) or 10%. The penalty is not a per annum rate,
but a multiple of this rate and the under-declared tax, irrespective of the time of tax underpayment. In addition, a penalty for the breach
of non-monetary obligations (e.g., non-existing or insufficient supporting documentation) of an amount up to EUR3,000 can be imposed.
On assessing the penalty for the breach of non-monetary obligations, the tax authorities have to take into account all the circumstances
that led to the breach of non-monetary obligations (e.g., importance, duration and consequences of the breach).
Penalty relief
There are no specific penalty reductions. Generally, a penalty is reduced by half if the taxpayer submits a supplementary income tax
return where the tax base is adjusted upwards. Upon a successful challenge of transfer prices by the tax authorities, no specific penalty
reduction is available.
Documentation requirements
The required content of transfer pricing documentation is stipulated in Guidance No. MF/8288/2009–72 of the Slovak Ministry of
Finance. The Guidance aims to conform to the EU Code of Conduct on Transfer Pricing Documentation for Associated Enterprises in the
European Union (No. 2006/C 176/01).
Transfer pricing documentation must be prepared for related party transactions with an amount exceeding the level of materiality for
accounting purposes (as defined by International Financial Reporting Standards (IFRS)). Documentation must be prepared separately for
each transaction or homogenous group of transactions.
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