Withholding tax on payments for software in Slovakia – changes from 2026

The Ministry of Finance of the Slovak Republic has issued new guidance No. MF/016959/2025-724, which replaces the current instruction from 1998 and defines more precisely when payments for software are subject to withholding tax. This entails several practical implications for Slovak companies as well as foreign software suppliers.

Who and what is the subject of the guideline?

The Guideline applies to all income of non-residents from computer programs (software), regardless of the form – whether it is the sale, licensing, provision of software as a service, or transfer of rights in software. A distinction is made between income from the use of the software itself, income from the provision of the right to use copyright, income from know-how or transfer of copyright.

Key changes and news

• More clearly defined content and more precise qualification of income: The Guideline defines the individual types of income from software and sets out the procedure for their taxation from the point of view of Slovak legislation and the application of the relevant articles of DTTs.
• Removal of reservations to Article 12 of the OECD Model Tax Convention: Until now, payments for non-standardized software were in most cases considered to be royalties that could be subject to withholding tax under Slovak regulations and fell under Article 12 of the relevant DTT.

Differentiation of types of software income from withholding tax perspective

When paying for software, it is important to correctly classify what type of software it is. This depends, in particular, on the nature of the rights that one party acquires by virtue of contractual relationships governing the manner in which the rights or assets are used or exploited. After identifying the legal and economic substance of the relationship, it is then possible to determine which provision of the Income Tax Act and the relevant DTT should be applied, and whether the income in question will be subject to withholding tax.

Payments normally subject to withholding tax

• Granting the right to commercially use the copyright in the software

This includes payments for the right to commercially use the software, including the right to reproduce, process, translate and modify the software.

• Providing know-how for software development

These are payments for the provision of specific technological knowledge, documentation, or source code that has the character of know‑how.

Payments generally not subject to withholding tax

• Provision of Software as a service

These are payments for remote access to the software, without providing the source code or control over the modification and copying of the software in question.

• Provision of software as a product

These are payments for the provision of a copy of the software, in which the user acquires only limited copyright to the software (e.g. the right to install it, make backup copies, or make necessary modifications for personal use). Withholding tax is not applied unless the income in question is explicitly included in the definition of “royalties” in the relevant DTT.

• Transfer of software copyright

This is income from a one‑time sale (alienation) of the full copyright to the software.

Practical impacts

For Slovak companies, the new Guideline requires a thorough analysis of contractual relationships with foreign software suppliers and the correct determination of the nature of individual payments. This forms the basis for the obligation to withhold tax at source and to fulfil any related reporting obligations. The changes will also affect existing contracts if the revenues are paid after 31.12.2025.

Recommendations

We recommend reviewing existing contracts and setting up internal processes for purchasing software and IT services from foreign entities in a timely manner. If you have any doubts, do not hesitate to contact us. We will be happy to discuss your situation with you and explain what is changing in practice.