Apart from the changes published in Slovak News, June 1998, the income tax amendment No. 173/1998 Coll. includes the following important changes, which will become effective from 1 January 1999:
* Individuals
1. International hire of labour
The Amendment widens the definition of an employer for income tax purposes by the concept of "deemed employer."
A Slovak person may be regarded as an "employer" in the case that person gives orders to an individual, which they are obliged to follow, despite the fact that the individual may be contractually employed by another person.
2. Foreign income
If a Slovak tax resident is in receipt of foreign income from dependent activities from a foreign employer or the costs are borne by a permanent establishment abroad, this income is exempt from Slovak tax.
However, such income will be considered when calculating the tax rate that should be applied to the other taxable income.
An individual may use this method if it proves more advantageous than claiming a foreign tax credit or relief under a tax treaty.
3. Income from dependent activities
Income from work performed by statutory representatives of a limited liability company shall be regarded as income from dependent activities, even if there is no employment contract.
4. Income from business activity and other independent gainful activity
Income derived from property transactions used and registered for business purposes shall be regarded as business income.
5. Interests on deposits
Interest income derived from accounts and deposit books in foreign currency are now considered taxable income.
6. Income from renting
The Amendment details the method of proving and recording income and expenditures concerned with renting activities.
* Companies etc.
1. Transfer pricing
The amendment includes provisions on transfer pricing between "related persons".
For further information see Slovak News, June 1998.
With regard to transfer pricing, the Slovak Ministry of Finance published Directive No. 1/6-651/1997 on Transfer Pricing for Multinational Companies and Tax Administration (Financial Newsletter No. 14/ 1997). As publication of the Directive has not yet been announced in the Collection of Laws, it is not legally binding.
2. Sale of bonds
The profit and the loss from sale of bonds will be included in the tax base.
3. Companies in liquidation
Definition of the tax period for companies in liquidation and in bankruptcy is more precise.
4. Sale of company
The Amendment clarifies the method for calculation of tax base in the case of sale of a company.
5. Interest on late payment
The Amendment defines the interest on late payment on loan agreements with banks. It also specifies when it is possible to treat such interest as tax deductible expense for the company.
6. Cession of financial leasing contract
The Amendment deals with the tax deductibility of expenses on cession of a financial leasing contract.
It is clarified that depreciation claimed by lessor and leasing payments by lessee are tax deductible expenses if the conditions of the contract remain the same.
7. Depreciation
The Amendment modifies depreciation categories of various types of assets.
Tax Holidays
The Government issued Ruling No. 192/1998 Coll. which enables certain joint stock companies, established by a foreign entity in 1998, claim exemption from the corporate income tax for the period of 10 years after fulfilment of several strict criteria.
For example, the new entity must be increase the basic capital by at least Sk 300 million and put Sk 1 000 million of initial investment. Additionally, Sk 300 million must be invested annually during the tax holiday period, including reinvestment of the profit created. Company's annual production must grow by 5% on average and export must exceed 90% of the output.
The Ruling was adopted to increase Slovak export and is effective from 1 July 1998.
Please note that there is a separate relief that applies to a 5 year period, 75% exemption of tax liability etc. For further information see Slovak News, June 1998.
Act on Banks
Amendment No. 170/1998 Coll. which changes the Act on Banks came into effect from 12 June 1998 (see Slovak News, June 1998).
Taxation of state bonds
Measure No. 33/1998 on taxation of state bonds issued with discount bearing fixed interest rate provides that as of 5 November 1997, 15% tax should be withheld from interest income.
Income from discounted state bonds, i.e. discount, should be included in the tax base.
Yields from state bonds including T-bills received by individuals continue to be tax-free.
The Measure was issued in the Financial Newsletter No. 5/1998.
Application of VAT on transfer of new flats
Acquirement of a new flat is treated as provision of construction services and not a transfer of title. Therefore, it is considered as VAT supply.
The Instruction was published in the Financial Newsletter No. 5/1998.
Ownership of residential and non-residential space
Amendment No. 158/1998 Coll. changes the Act on ownership of residential and non-residential space and modifies essentials of the contract for transfer of the title to residential and non-residential space.
The amendment is effective from 1 July 1998.
Foreign trade support fund
The amendment No. 162/1998 Coll. on the Foreign trade support fund also defines the terms domestic exporter, domestic importer and at the same time it specifies how to contribute to the fund.
Act on warehouse warrants, commodity lists and amendment to some other laws
Conditions for operating public warehouses, issue and use of the warehouse warrants and commodity lists are stipulated in the Act No. 144/1998 Coll.
In line with the above the provisions of the following acts have been amended:
- Act on Securities
- Trading Act
- Amendment on Civil Court Rules.
The Act is effective from 1 June 1998.
Granting (official) permission to import and export goods and services
Decree No. 193/1998 Coll. on the conditions of granting official permission to import and export goods and services, issued by Ministry of Economy SR, specifies the conditions. The decree also includes the list of goods liable to the licensing procedure.
The decree is effective from 23 June 1998.
Per diems
Measure No. 146/1998 Coll., issued by the Ministry of labour, social affairs and family, amends the per diems, effective from 1 June 1998, as follows:
Length of the business trip Per diems (hours) (Sk) from 5 to 12 56 from 12 to 18 88 Over 18 136
Provided that the business trip lasts less than 5 hours and the employee is not allowed to board as usual, than the employee is entitled to per diems of Sk 56.
A foreign employee seconded to the Slovak Republic, by virtue of Agreements on mutual labour force exchange, is entitled to per diems of Sk 442.
The Measure enters into effect from 18 May 1998.
Proceedings and essentials on submission of complaints
Act No. 152/1998 Coll. stipulates procedure related to filing, receipt, recording, checking and arrangement of the complaints of legal entities and individuals. The Act is to replace Decree No. 150/1958 U.v. and it deals with essentials of complaints upon:
- State authorities and organisations controlled by state authorities
- Municipalities and organisations controlled by municipalities
- Legal entities and individuals entrusted by state to decide upon rights and obligations of other legal entities or individuals
The Act is effective from 1 June 1998.
The information in this newsletter is correct to the best of our knowledge and belief at the time of going to press. Specific advice should be sought, however, before investment and other decisions are made.
For further information contact Mr Frank Walsh on +421 7 5340 545 Email directly on Click Contact Link
