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Slovakia: MLI and real estate clause in tax treaties

Slovakia: MLI and real estate clause in tax treaties

The OECD multilateral instrument (MLI), as ratified, affects and modifies the wording of the real estate clause in 10 income tax treaties to which Slovakia is a party.


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The real estate clause allows the contracting state in which a company owning significant real estate is established to tax the capital gain from the sale of shares in the company.

The MLI proposes two possible approaches to the real estate clause. However, the language (an unofficial translation) adopted by the already modified income tax treaties is:

For purposes of a Covered Tax Agreement, gains derived by a resident of a Contracting Jurisdiction from the alienation of shares or comparable interests, such as interests in a partnership or trust, may be taxed in the other Contracting Jurisdiction if, at any time during the 365 days preceding the alienation, these shares or comparable interests derived more than 50 per cent of their value directly or indirectly from immovable property (real property) situated in that other Contracting Jurisdiction.

The new real estate clause provides a new definition of real estate companies for purposes of the income tax treaties. This change will affect only those treaties when both contractual countries elect to apply the change. Moreover, in some instances—for example, the income tax treaties with Japan and with Serbia—the MLI added a real estate clause, one that was previously not included in the tax treaties.

Read a May 2019 report prepared by the KPMG member firm in Slovakia

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