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Slovak Transfer Pricing Guide

The term transfer pricing simply means pricing of various business transactions between related parties in a manner ensuring hidden transfer of profits. The transfer pricing is regulated by the Slovak law to a certain extent. What are the requirements for disclosure of information? Who is obliged to submit the documentation or what are the sanctions in case of non-compliance with the relevant law? Please find below a questionnaire prepared by our company.

Is it required to keep transfer pricing documentation in the Slovak Republic?

Yes. Since 1 January 2009. However, there have always been transfer pricing rules in the Slovak Republic, even though the transfer pricing documentation requirement is relatively a fresh legislation.

What type of companies is obliged to prepare transfer pricing documentation?

According to the Slovak Income Tax Act, if a foreign party and a Slovak party are related (further only “foreign related parties”), they are subject to Slovak transfer pricing rules. In such case, transfer pricing documentation is required to be kept by this Slovak related party. A related party means a close party or another party, which is economically, personally, or otherwise interrelated with a foreign party.The threshold for being recognized as economically related party is 25% of direct or indirect share of voting rights or registered capital. For time being, the persons which do not enter into economic relations with foreign related parties are not required to prepare transfer pricing documentation.

What are the transfer pricing disclosure requirements?

There are two different types of disclosure requirements applicable to foreign related parties. A taxpayer is obliged to submit its tax return including a limited portion of information about economic relations between foreign related parties to the tax office on an annual basis. On the other hand, the transfer pricing documentation shall be submitted also to the tax office upon the request of the tax office within 15 days thereof.

In case of annual reporting, what is the information to be included into the tax return?

Following shall be included:

  • Interest resulting from provision of loans or credits;
  • Granting license rights;
  • Provision of services;
  • Transfer of tangible, intangible and financial assets; and
  • Transfer of inventory.

In case of transfer pricing documentation, what are the requirements?

It depends on whether a company prepares financial statements under EU IFRS or under Slovak accountancy standards. If EU IFRS standards are used, the company is obliged to prepare full scope of transfer pricing documentation for each respective period. In the latter case, only a simplified scope of transfer pricing documentation is needed. In both cases, the documentation shall support the use of arm´s length principle in the economic relations between foreign related parties. The content of transfer pricing documentation prepared by a company using EU IFRS should basically correspond with the EU Code of Conduct on Transfer Pricing Documentation. There is not an obligation to follow OECD Guidelines despite of membership of the Slovak Republic in OECD. On the other side, the companies using Slovak accounting standards shall cover in their transfer pricing documentation as follows:

  • List of transactions with foreign related parties;
  • Description of nature of the most important transactions of the company and their volume from the overall volume of transactions of the company;
  • Information regarding the volume of not yet completed transactions with foreign related parties; and
  • Information about prices used in already concluded transactions between foreign related parties

Do Slovak authorities favor any of the methods used in transfer pricing documentation?


What are the sanctions for non-compliance with transfer pricing rules?

There are various types of sanctions which could be potentially imposed. Firstly, non-compliance with arm´s length principle may lead to adjusting of tax base of a taxpayer by using of different aids by the tax authorities which mostly are not in favor of the taxpayer. Furthermore, the taxpayer shall be imposed a fine mainly as a result of failure to submit transfer pricing documentation or non-compliance with arm´s length principle.

What are the trends in this field? What is to be expected from the Slovak tax authorities?

There is a new transfer pricing department in the Slovak Tax Directory. The creation of this department represents one of the instruments introduced in the Slovak Republic as a result of the attempts of the Slovak government to curb tax avoidance and tax evasion. Therefore, the tax authorities are currently more focusing on transfer pricing issues in relation to various types of businesses. And hence, more is to be expected from the Slovak tax authorities in respect of tax inspections.

Publication Information

  • Practice: Transfer pricing
  • Location: Slovak Republic
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