Withholding Tax on Software Licences: New Approach from 2026
From January 1, 2026, a significant change has been introduced in the taxation of payments for the use or right to use computer software. This change applies to payments for software licences made from Slovakia to foreign suppliers.
The new rules may affect all Slovak companies that purchase software licences from abroad, as in many cases withholding tax will no longer apply.
Change in the approach to software licence taxation
The Slovak Republic has withdrawn its long-standing reservation to the interpretation of the OECD Model Tax Convention, under which payments for customized or non-standard software were previously treated as industrial royalties subject to withholding tax in Slovakia.
This reservation was officially removed in the updated OECD Commentary (2025) published in November 2025.
The new position was also confirmed by the Ministry of Finance of the Slovak Republic, which issued Guideline No. MF/016959/2025-724 on the taxation of income derived from computer software by non-resident taxpayers.
When withholding tax no longer applies
As a result of these changes, payments for software licences will in many cases no longer be treated as royalties, but rather as ordinary business income.
Withholding tax will generally not apply where:
a Slovak company acquires software for its own business use,
access to software is provided remotely, for example through Software as a Service (SaaS) solutions.
In such cases, and subject to the applicable double tax treaty, the payments are not considered payments for the use of copyright and therefore are not subject to withholding tax in Slovakia.
An exception may apply where the relevant tax treaty explicitly includes payments for software use within the definition of royalties.
When withholding tax may still apply
Withholding tax on software licences may still apply in situations involving broader rights or intellectual property elements.
This includes cases where the Slovak entity obtains:
the right to commercially distribute software,
access to a secret formula or process,
know-how for software development.
In these situations, payments may still qualify as royalties and remain subject to withholding tax.
What this means for Slovak companies
The new approach may significantly reduce administrative burdens for Slovak companies and generate cost savings for foreign suppliers, as withholding tax will no longer be required in many cases.
Importantly, the new rules also apply to:
contracts concluded before January 1, 2026,
provided that the income is paid after December 31, 2025.
Companies that make payments for software licences to foreign suppliers should therefore:
review their existing contractual arrangements,
reassess the classification of payments,
evaluate their withholding tax obligations under the new rules.
How TPA can support you
Given the complexity of these changes, we recommend that companies reassess their current setups and payment structures.
At TPA, we are ready to assist with:
analysis of contractual arrangements,
classification of payments,
assessment of withholding tax obligations under the updated framework.
If you require support, feel free to contact us.
