Global Tax Alert | 13 June 2013

Slovakia amends rules on the taxation of bond income

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The Slovak Parliament recently approved an amendment to the Income Tax Act that introduces new rules with respect to the taxation of income from bonds in Slovakia.

Under the current legislation, income from bonds, other than state bonds, is subject to withholding tax if paid to a foreign legal entity unless a double taxation treaty applies and excludes this.

The amendment introduces a unified approach towards taxation of income from state bonds and all other bonds. The amendment provides that income from all types of bonds paid by Slovak tax residents to foreign tax residents will no longer be treated as Slovak source income. Hence all foreign tax residents will not be taxed on income from bonds in Slovakia and therefore, will no longer be subject to withholding tax.

Continued liability for withholding tax applies solely to taxpayers not established for business purposes and some institutions, e.g., Slovak National Bank.

These new taxation rules will apply on all income from bonds received after 1 July 2013, regardless of the date of the purchase of bonds or their emission.

The amendment should be of particular interest for foreign companies residing in non-treaty countries and having significant income from bonds paid by Slovak tax residents. After 1 July 2013, these foreign companies may benefit from the new rules and thus, reduce their tax costs accordingly.

For additional information with respect to this Alert, please contact the following:

EY, k.s., Bratislava, Slovakia
  • Richard Panek
    +421 2 333 39 109
    richard.panek@sk.ey.com
Ernst & Young LLP, Eastern European Business Group, New York
  • Miklos Santa
    +1 212 773 1395
    miklos.santa@ey.com
  • Vladimir Sopkuliak
    +1 212 773 4144
    vladimir.sopkuliak@ey.com

EYG no. CM3527