Non-monetary benefits in the Income Tax Act exempt at the time of acquisition

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The National Council of the Slovak Republic has approved the draft act on transformations of commercial companies and cooperatives and on amendments and supplements to certain acts (hereinafter referred to as the “Act”), in connection with which other acts, such as the Income Tax Act, the Value Added Tax Act and the Accounting Act, are also amended.

We informed you in more detail about the draft Act as well as other changes within the abovementioned acts in previous issues of our newsletter. While the changes to the Value Added Tax Act and the Accounting Act have remained in the original proposed wording, the final approved version of the Act has expanded the Income Tax Act with the following additions:

  • Exemption of a non-monetary benefit from tax for an employee/supplier (individual) acquired in the form of a share or business share in the employer’s/customer’s company; however, this exemption applies only under the following conditions:
    • the employer/customer did not pay out profit shares, and if profit shares are paid out, the exemption of the non-monetary benefit will cease to apply from the following tax period (i.e. the non-monetary benefit is additionally taxed in this period);
    • the shares in question have not been and are not admitted to trading on a regulated market by the end of the tax period in which this non-monetary benefit was acquired by the employee/supplier;
  • shares and business shares acquired in this way are taxed as other income in the event of a sale, with only the amount paid by the employee being an expense (i.e. if these were acquired free of charge, no expense can be claimed);
  • Further, exemption of income from the transfer of a share in a limited liability company after three years from the date of its acquisition has been introduced, unless it was acquired as a tax-exempt non-monetary benefit from the employer/customer and unless it was a business asset of the taxpayer at the same time.

The abovementioned changes concerning income tax exemptions for taxpayers (individuals) take effect on 1 January 2024, and the approved wording raises a number of questions already at the outset. The other changes regarding the Income Tax Act, the Value Added Tax Act and the Accounting Act, which we informed you about in the previous newsletter, take effect on 1 March 2024.

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