ATAD implemented through amendment to Income Tax Act – Exit tax and hybrid mismatches
The ATAD (known as the Anti-Tax Avoidance Directive or “ATAD”) seeks to ensure that tax is paid where profits and value are generated.
The objective of the “exit tax“ regulation is to ensure that where a taxpayer moves assets or its tax residence outside of the country, the Slovak Republic taxes the economic value of any capital gain created within the country, even if that gain has not yet been realised at the time of the exit. Exit tax will be calculated using a special tax base and a 21 % tax rate will be applied.
The aim of the rule “hybrid mismatches“ is to prevent situations that occur or may occur between related parties. This rule seeks to prevent situations in which the same expense is considered as tax-deductible under both Slovak law and that of another Member State (i.e. double deduction of the same expense), as well as situations in which an expense is tax-deductible within the territory of the Slovak Republic without being included in the tax base of the other Member State.
Changes to the application of original prices for tax purposes in business combinations
The change to the Slovak Income Tax Act with effect from 1st January 2018 will also have significant effects on business combinations and, as such, strictly requires that, with the exception of so-called cross-border business combinations, all non-monetary contributions and mergers and divisions for tax purposes shall be performed in real values only.
R&D support in the form of Patent Box and Super cost deduction
The Patent Box represents a special tax regime under which it will be possible to be exempt from income tax up to 50 % of any revenues derived in the form of licence fees relating to the provision of intangible assets during the period of tax depreciation of the intangible assets. In addition, a part of any revenues derived from the sale of products manufactured based on an invention protected by patent or a technical solution protected by utility model will also be exempt from income tax.
Super cost deduction allows additional deduction of research and development costs from the tax base in the amount of up to 100 % of the research and development expenditure (costs) entered in the accounts. In addition, 100 % of the increase of the research and development expenditure (costs) between the years (subject to special calculation) can be also deducted from the tax base.
Tax exemption of the disposal gains on the transfer of shares
Gains from sale of shares are exempted from tax in case at least 10 % of shares are held for more than 24 months after date of acquisition. In case of shares acquired before 01.01.2018 the period of 24 months starts on 01.01.2018.
TPA offers an overview of the most important tax innovations in the following CEE and SEE countries in which we operate: Austria, Albania, Bulgaria, Croatia, Czech Republic, Hungary, Poland, Romania, Serbia, Slovakia and Slovenia. Investing in CEE/SEE 2018