Draft Amendments to the Income Tax Act

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A number of governmental and parliamentary bills amending and supplementing the Income Tax Act were submitted to the National Council of the Slovak Republic. The proposed changes cover various areas, such as the government’s Sports Bill or the amendment of the CFC rules applicable to natural persons/individuals.

The Government’s Sports Bill

  • Introduces the possibility for income from the activities of a sports professional which is not included in the income from employment to be treated as income from other self-employment on which tax is levied by withholding;
  • simplifies the administration and filing of tax returns for sports professionals;
  • reduces the administrative burden and bureaucracy of paying remuneration to sports professionals;
  • shall enter into force as of 1 May 2023, and will be used for the first time for the taxation of income as of 1 January 2024.

Abolition of rules for taxation of controlled foreign companies for individuals

  • Because of the problematic application in practice, it is proposed to abolish the rules regarding controlled foreign companies for natural persons/individuals, the so-called CFC rules, which were applied for the first time when filing tax returns for the year 2022.
  • The CFC rules for natural persons/individuals are not regulated by EU legislation, and EU countries can decide whether to implement these rules in their legislation. Only five EU member states, including Slovakia, have introduced these rules, but the conditions for their application are much less strict than in Slovakia.
  • As these rules were first applied when tax returns were being returned for 2022, it is proposed to introduce a transitional provision under which natural persons/individuals will cease to be liable to pay tax arising under the CFC rules. If the taxpayer has already made a payment of the tax, this payment will be considered as a tax overpayment.
  • This change to the Income Tax Act is proposed to take effect as of 1 August 2023.

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