Transfer Pricing

Dear clients and partners,

At the end of 2022, the Slovak Ministry of Finance issued new Guidance on the content of transfer pricing documentation. Further, the amendment of the Income Tax Act has some implications on transfer pricing. The deadline for submitting the documentation to the tax authorities is only 15 days upon their request without opening a tax audit. More interesting information can be found in the following.

We would also like to invite you to our Good Morning CEE seminar focusing on transfer pricing news in our LeitnerLeitner countries, which will take place on 25 April 2023.

We would be happy to assist if you need more information.

We for you,
Anna Fábryová & Miroslava Vojteková

Amendment of the Income Tax Act

As we already informed you last year, amendments to the Income Tax Act focused on transfer pricing rules. One of the most significant is the introduction of the safe harbour rule. Starting from 2023, transfer pricing rules shall not apply to transactions with a value of up to EUR 10,000. In case of loans or credit arrangements, the threshold is set at EUR 50,000.

In addition, if the prices used by taxpayers are not in line with the arm’s length range, which has been determined on basis of the comparability analysis, the tax administration may fix the arm’s length price at the level of the median.

Finally, the submission of the transfer pricing documentation in a foreign language shall be now accepted by the tax administration. The translation into Slovak language will be mandatory upon request of the tax administration and within 15 days only.

New Guidance on transfer pricing documentation

At the end of 2022, the Ministry of Finance issued new Guidance on content of the transfer pricing documentation, which, in addition to adjustments due to legislative changes, resulted in some other changes. The rules for the determination of full-scope, basic and shortened documentation or stating of amounts of controlled transactions in the tax return continue to apply. The rules are mainly based on the size of taxpayers and materiality of the controlled transactions in line with the accounting rules.

The new Guidance redefined the scope of taxpayers subject to shortened documentation. From now on, micro-taxpayers or individuals are also obliged to prepare shortened documentation for significant transactions if they reported a tax loss or claimed a tax loss deduction. Also, taxpayers applying 21 % tax rate are obliged to document their significant controlled transactions at least in the scope of shortened documentation.

The content of the documentation obligation for permanent establishments has been expanded as to include a description of capital and financing costs allocation in case that permanent establishment recognizes such financing costs as tax expenses.

Finally, we may recommend you our new flyer Transfer prices in Slovakia dealing with important and interesting answers to frequently asked questions.