Does the Tax Neutrality Directive apply to regulated levies?

Judgment of the Supreme Administrative Court No. 5Sžfk/10/2021

The subject of the dispute was the assessment of the legality of imposing a special levy on profits that arose in 2017 as a result of an internal reorganisation of a regulated entity, specifically through non-monetary contributions of business shares and stocks at their original values, amounting to EUR 10.2 million. The regulated entity carried out a purely domestic corporate transaction without the involvement of foreign entities, and the accounting difference resulting from this transaction affected its financial result as reported in the tax return.

This economic result, which was decisive for the calculation of the regulated levy, consisted of:

• profit from operating activities in the amount of EUR 157,000
• profit from financial activities in the amount of the above-mentioned EUR 10.2 million.

The regulated entity objected to the obligation to pay the levy on profits derived from activities other than regulated activities (i.e., from financial activities), arguing that, in this case, a constitutional and EU-compliant interpretation of the law should be taken into account, in particular Council Directive 2009/133/EC of 19 October 2009 on the common system of taxation applicable to mergers, divisions, partial divisions, transfers of assets and exchanges of shares between companies of different Member States, as well as to the transfer of the registered office of an SE or SCE between Member States (hereinafter the "Tax Neutrality Directive").

Conclusions of the Supreme Administrative Court of the Slovak Republic

The Supreme Administrative Court of the Slovak Republic considered the case within the context of EU law and found that the special levy is a national tax measure that is not regulated by EU law. According to the court, the Tax Neutrality Directive applies only to cross-border transactions and the Slovak law on the special levy does not contain any explicit reference to its application. Therefore, the EU directive cannot be automatically applied to purely domestic situations.

In this regard, the Supreme Administrative Court of the Slovak Republic referred prejudicial questions to the Court of Justice of the European Union on the interpretation of the Tax Neutrality Directive. In its judgment in Case C-201/24 of 28 April 2025, the Court found that there was no overlap with EU law and declared that it lacked jurisdiction to answer the questions referred. Accordingly, the Tax Neutrality Directive does not apply to this national case, and the determination of the levy does not fall under EU law. The intention of the legislator in introducing the regulated levy was to impose this levy on the overall economic result of regulated entities, as confirmed by the Court of Justice of the EU in the case of Slovenské elektrárne (C-376/18). The realisation of non-monetary contributions did not give rise to unforeseeable tax liabilities for the regulated entity.

Why is this judgment important?

The conclusions of the Supreme Administrative Court of the Slovak Republic therefore differ from those of the Supreme Court of the Slovak Republic in the similar case of eustream, a.s. (judgment No. 5Sžf/1/2019), due to the conclusions of the Court of Justice of the European Union in the prejudicial proceeding.

In its judgment No. 5Sžfk/10/2021, the Supreme Administrative Court confirmed that the special levy applies to the entire economic result of regulated entities, including revenues from unregulated activities, and that its application does not conflict with constitutional or EU law. The decision of the Supreme Administrative Court thus confirmed the legality of the administrative authorities' actions.