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Transfer Pricing

Full Transfer Pricing Documentation

Full transfer pricing documentation is the most comprehensive form of documenting of relationships between related parties. These are primarily large multinational companies, which often require the tax office to issue a decision on the approval of their pricing method.

Taxpayers who are required to keep shortened full transfer pricing documentation are:

  • taxpayers requesting the tax administrator to issue a decision approving the pricing method under the Income Tax Act;
  • taxpayers who request adjustment of the tax base under the Income Tax Act, this limitation does not apply to taxpayers seeking adjustment of the income tax base in relation to domestic controlled transactions;
  • taxable persons who, in the taxable period, deduct from the tax base a tax loss in excess of EUR 300,000, and taxable persons who deduct tax losses exceeding the amount of EUR 400,000 for two consecutive tax periods, this limitation does not apply to taxpayers as defined in the Act on Accounting (for example, entities controlled by state and established under special regulations, state funds, organizations funded from or receiving contributions from a state’s budget, entities set up by a municipality or a higher territorial unit) in the range of transactions carried out with other persons as defined in the Act on Accounting;
  • taxable persons who, in the taxable period, apply for a tax credit granted under the Investment Aid Act and the Research and Development Incentives Act.

The full transfer documentation includes:

  • identification and legal form of the individual members of the group, description of the group’s organizational and ownership structure, including changes to the previous taxable period;
  • description of business activities and business strategy within the group, identification of the economic sector, business relations and group activities in the economic sector, including changes to the previous taxable period;
  • planned business strategy, projected future activities, projects and targets of the group, including changes to the previous taxable period;
  • a general description of the functions performed by the individual members of the group and their foreseeable risks, including changes to the previous taxable period;
  • other information that will contribute to demonstrating the conformity of prices used with the arm’s length principle;
  • details and legal form of the taxpayer, a description of its organizational and ownership structure, including changes to the previous taxable period;
  • a description of the taxpayer’s business activity and business strategy, including changes to the previous taxable period;
  • the economic sector identification, business relations and taxpayer activities, including changes to the previous taxable period;
  • planned business strategy and business intent, foreseeable future activities, taxpayer projects and goals;
  • a list of inspected transactions, a description of the individual taxpayer’s controlled transactions that identify the parties of the inspected transaction, the monetary value of the transaction and other information about the transaction under review (business conditions and other facts affecting controlled transactions);
  • an overview of intangible assets owned or used by the taxpayer (patents, trademarks, business names, know-how, etc.), the manner and extent of their use,
  • the list of pre-pricing measures approved by the taxpayer, reconciliation of the pricing method;
  • a list of the agreements on the contributions to the costs involved by the taxpayer and any other decisions affecting transfer pricing;
  • information on intra-group financial transactions (direct or indirect credit relationships), cash-pooling relationships, guarantees and also the use of derivative and other financial instruments, including hybrid instruments, including changes to the previous taxable period;
  • a general description of the functions performed by the taxpayer, the assets used and the risks anticipated, including changes to the previous taxable period;
  • a description of the taxpayer’s transfer pricing system including information on the choice, the manner of applying the transfer pricing method(s) and pricing;
  • controlled transactions;
  • internal and/or external comparable data of independent persons, comparability analysis (information on factors determining the comparability of controlled transactions with uncontrolled transactions, property or service characteristics, function analysis, contract terms, economic environment, specific business strategies);
  • information on monetary benefits and non-monetary benefits provided on the taxpayer’s behalf to the healthcare provider, its employee or to a health worker from a foreign dependent person if these recipients are taxpayers with unlimited tax liability in the territory of the Slovak Republic, except for benefits paid for clinical trials);
  • other information that contributes to evidencing of compliance of prices with an arm’s length principle