Strategizing International Tax Best Practices – by Keith Brockman

Posts tagged ‘Slovakia’

BEPS related developments

EY’s Global Alert highlights several OECD / unilateral actions resulting from the BEPS Action Items announced earlier this month.

Click to access 2015G_CM5827_The%20Latest%20on%20BEPS%20-%2026%20October%202015.pdf

Highlights:

  • Czech Republic’s 2016’s income tax proposal, including the EU Parent-Subsidiary Directive change limiting exemption of tax deductible distributions, although retaining its own general anti-abuse rule (vs. that in the Directive).
  • EU’s State Aid decisions re: Luxembourg and Netherlands, for which legal appeals are expected.
  • Honduras transfer pricing information return requirement.
  • Indonesian thin capitalization limit of 4:1, remainder of interest non-deductible (thereby incurring one-sided taxation re: interest income of recipient).
  • Ireland’s Knowledge Development Box, following the OECD’s recommendations, and country-by-country (CbC) reporting by Irish headquartered groups with a secondary filing mechanism.
  • Norway’s 2016 budget proposal, with an interest limitation of 25% of taxable EBITDA.
  • Slovakia’s 2016 income tax changes, including implementation of the EU Parent-Subsidiary Directive.

This new post-BEPS period is starting off with a multitude of activities by countries and the EU that is not expected to slow down in the near future. ¬†These developments will shape the transfer pricing regime, and resulting complexity and disparity, around the world. ¬†Accordingly, these trends should be monitored and addressed in a corporation’s tax risk framework accordingly.

Slovakia’s amendments: TP, licenses, anti-abuse

Some interesting proposals to Slovakia’s tax code are highlighted for review, as detailed in the PwC summary in the attached link:

Click to access tax-and-legal-alert_4-2013_en.pdf

Interesting provisions include:

  • Transactions will not be recognized if they have no business substance and their purpose is to avoid tax or attain a tax advantage that would not be otherwise attributable to the taxpayer
  • Binding rulings will be available at the end of 2014
  • The corporate income tax rate will decrease by 1% to 22% in 2014
  • Net loss carryover period is shortened from seven to four years
  • A tax license, from EUR 480 to EUR 2,880 will be introduced
  • A service permanent establishment (PE) concept is created, provided it is recognized in the double tax treaty
  • A new 35% withholding tax rate is introduced for payments to taxpayers from non-contracting states
  • Transfer pricing documentation is to be provided within 15 days upon request

Slovakia’s proposals are further evidence of increased general anti-avoidance rules (GAAR) and emphasis on transfer pricing.

 

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