Slovakia: Changes to content of transfer pricing documentation
Effective for the tax period starting after 31 December 2022
Effective for the tax period starting after 31 December 2022
New guidelines were issued at the end of 2022 for determining the content of transfer pricing documentation, effective for the tax period starting after 31 December 2022.
The guidelines reflect an amendment to the income tax law introduced the concept of “significant controlled transaction,” according to which transactions with a value of up to €10,000 are considered “insignificant.” Credits or loans are considered insignificant if their principal did not exceed the value of €50,000. As transfer pricing rules do not apply to insignificant transactions, the taxpayer does not have to include them in the transfer pricing documentation.
The new guidelines still recognize three types of the documentation scopes from a content perspective—simplified, basic and full-scope—and in terms of content, no significant changes were made.
Changes in new guidelines
- Significant changes were made to the criteria for transactions for which documentation in simplified scope must be prepared. According to the new rules, taxpayers must prepare such documentation for any significant transactions in the relevant tax period in which the taxpayer reported a tax loss, applied for a tax loss deduction, or did not apply the tax rate according to § 15 letter a) point 2 or letter b) point 1a of the Income Tax Act. Thus, the guidelines extend the documentation obligation to all taxpayers with a turnover for a maximum of 12 previous consecutive calendar months of at least €49,790.
- The taxpayer does not have to prepare documentation related to transactions that do not affect the income tax base of the taxpayer. However, the new guidelines introduce an exception for credit and loans, when the taxpayer is always obliged to prepare documentation.
- The guidelines also regulate the mandatory content of the documentation for permanent establishments. If a permanent establishment claims financing costs as a tax deductible expense, transfer pricing documentation must also include a description of the allocation method of capital and the allocation method of financing costs.
Read a January 2023 report prepared by the KPMG member firm in Slovakia
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