Frequently asked questions on Financial Transaction Tax

What questions do our tax advisors receive from entrepreneurs interested in the current topic of transaction tax? Based on our experience and the latest information, we have summarized the answers to the three most common questions our experts encounter when consulting with foreign companies. The answers are based on currently available information and the forthcoming methodological guidance. Please note that the interpretation of the provisions continues to evolve very dynamically and it is therefore necessary to regularly monitor changes in legislation.

When does a foreign company pay financial transaction tax?

Simply put, a foreign company pays tax on financial transactions if it has a payment account with a local payment service provider or carries on business in the country. In that case, its financial transactions carried out on the account abroad and related to the activity carried out in Slovakia are subject to tax.

How should we understand the expression "activity in Slovakia"?

The Ministry of Finance has taken inspiration from the definition of a permanent establishment in Section 16 (2) of the Income Tax Act and added digital platform, online marketplace and insurance risks in interpreting this term. Thus, if a foreign entity has a warehouse in Slovakia, it carries on business in Slovakia. It is important to note that even if a permanent establishment does not arise (usually because of the exceptions in Article 5 of the double taxation treaty), the foreign company will still be liable to pay financial transaction tax.

What is a recharge of costs?

Recharges of costs most often occur when a Slovak company enters into a contract with a third party (usually foreign) and asks it to remit funds or make payments to other entities (usually suppliers of the Slovak company) on its behalf. Such a payment is treated as a recharged expense and will be taxable at a rate 0.4 % of the tax base, with a maximum tax of EUR 40 if the taxpayer can identify the individual payments made by the third party. If he cannot identify them, tax is payable on the entire amount of the expense, without applying the maximum amount of tax per transaction. In this case, the tax levied by the bank on the payment to the third party may be deducted from the tax on the costs recharged.

The legislation still contains uncertainties, but we already know that the administrative burden on entrepreneurs will increase. Do not hesitate to contact us, as experienced tax advisors we will help you to minimize the impact, set up the right processes and prepare for the new obligations.