Draft amendment to the Income Tax Act from 1 January

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The Government´s amendment to Act No. 595/2003 Coll. on Income Tax, as amended, was submitted to the National Council of the Slovak Republic on 28 August 2020. The submitted draft implements, among other things, Council Directive (EU) 2017/952 of 29 May 2017 amending Directive (EU) 2016/1164 as regards hybrid mismatches with third countries. The aim of this amendment is primarily to strengthen the level of protection against aggressive tax planning and the rules against violating the tax base and transferring profits outside the territory of the Slovak Republic.


The most significant proposed changes include:


  • the definition of the registered office and place of actual management, as one of the criteria for determining the tax residence of a legal entity in the Slovak Republic, is made more precise;
  • the exception for those individuals who cross the borders of the Slovak Republic on a daily basis for the purpose of performing dependent activity in Slovakia is omitted from the criteria for determining the residence of an individual. The purpose of such arrangement is to ensure that the tax residence of individuals is determined according to the delimitation criteria in the relevant agreement on avoidance of double taxation;
  • for the purposes of defining the position of the so-called micro-taxpayer, only taxable income (and not all income from business and from other self-employed activities, as under the current valid wording of the law) should be included in the income (revenues);
  • legislation on hybrid mismatches is being extended, e.g. the definition of transparent entity and reverse hybrid entity is introduced, and the rules for the taxation of income of these entities are introduced;
  • the application of the CFC rules (rules for controlled foreign persons – so far valid in law only for legal entities) is extended also to individuals; the aim of these rules is to prevent tax evasion and to tax the income of a CFC company in the Slovak Republic as early as at the moment of achieving the income in the CFC company and not as late as when dividends are paid out;
  • it is proposed to exempt from taxation the income/performance provided under the active labour policy to support the retention of jobs and employees in the employment, in connection with the declaration of an emergency situation as a result of COVID-19;
  • it is proposed to refrain from settling the corporate income tax advances paid, which are paid from the beginning of the tax period to the deadline for filing the tax return in a lower amount than that based on the tax return filed;
  • it is proposed to extend the benefits provided by the financial administration to taxpayers, namely by including the obligation of the tax administrator to notify the taxpayer filing the tax return of the amount and due date of the income tax advance no later than 20 days after the deadline for filing the tax return;
  • for the sake of simplification and legal certainty, an employee is allowed to request the annual settlement from any employer who is a taxpayer and who paid a taxable salary to the employee during the tax period.

The submitted act is proposed to be effective from 1 January 2021, with the exception of some provisions, proposed to be effective as late as from 1 January 2022.

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