Wednesday, 29 October 2014 .Articles

Financial transaction tax

“All markets. All instruments. All actors.” is the motto of the Commission, or at least 11 EU Member States, in relation to the contemplated introduction of a financial transaction tax (FTT). The scope of the FTT should cover transactions on regulated markets as well as over-the-counter transactions, and should apply with respect to numerous types of transactions of financial institutions.

The recent rulings of the Court of Justice of the EU confirming the recognition of a doctrine of free movement of capital stipulated by primary law of the EU gives chance to tax planners that these rulings might override some of the objectives and provisions of the EU Interest and Royalties Directive. This means that certain part of the EU Interest and Royalties Directive might be legally inconsistent with the Treaty of the functioning of the EU, which is regarded as a part of unofficial constitution of the EU. Such conclusion could potentially lead to mass tax refunds and could give to tax planners some additional muscle with respect to tax optimization.

Since 1 January 2014, the Slovak anti-avoidance regulation has been strengthened up by a new amendment to the Slovak Tax Procedure Act introducing “business substance” clause. More specifically, the tax authorities should disregard fictitious operations having no business substance which at the same time aim at the obtaining of any kind of tax benefit.

Tuesday, 10 September 2013 .Articles

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.

Since July 1, 2013, there is no taxation of interests accruing on bonds distributed to foreign tax residents from the source within the area of the Slovak Republic. This is a result of the attempts of the Slovak government to attract more foreign investments for the purpose of helping Slovak entrepreneurs to inject cash into their businesses more easily and flexibly. This article is therefore aimed at providing a brief overview of financing through issue of bonds and related tax and social security payments issues.

In this article, the author briefly analyzes a potential inconsistency between the transfer pricing rules as defined and stipulated by Slovak law and principles of law of the European Union, mainly the principle of right of establishment pursuant to the article 49 and right to provide services pursuant to the article 56 of the Treaty on the functioning of the European Union. This might become a hot topic in the upcoming years as the level of motivation for tax avoidance on the domestic level will increase with the effectiveness of consolidation package in 2013 which has been adopted due to the attempts of the Slovak government to curb the deficit under 3% of gross domestic product.

The Slovak Republic which is a member of the European Union and the Eurozone and which is currently enjoying a relatively high economic growth compared to any of member states of the European Union, had a very competitive tax system in the European Union before adoption of consolidation package effective as of 2013.

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