Did you know that for income tax purposes it is not possible to extend the maturity of a liability?

According to the Slovak Income Tax Act, the taxpayer is obliged to increase the tax base by the amount of the liability, or its unpaid part, in accordance with the time test:

• an increase of 20% of the value of the liability, if more than 360 days have passed since the agreed maturity date of this liability,
• an increase of 50% of the value of the liability, if more than 720 days have passed since the agreed maturity date of this liability,
• an increase of 100% of the value of the liability, if more than 1 080 days have passed since the agreed maturity date of this liability.

The value of the liability from which the above percentage is calculated represents the nominal value of the liability, i.e. it is the amount for of the liability including VAT. The subject of taxation is only the current liability, or its unpaid part as of the last day of the tax period.

The above also applies to liabilities that are associated with assets that incur an expense when they are brought into or out of use. It also applies to liabilities that have been recorded as a reduction in revenue.

However, taxation of unpaid liabilities does not apply to non-profit organizations, budgetary organizations, and taxpayers who have been declared bankrupt.

The Commercial Code also regulates the period for fulfilling an obligation. The Commercial Code allows a creditor and debtor to conclude a contract in which a new maturity date for the liability is determined, i.e. the original period is postponed.

For reasons of legal certainty, a condition was added to the Slovak Income Tax Act that the maturity date of a liability is the period agreed upon when the liability arose, and the calculation of the time test is always based on this originally agreed period, while the law does not take into account a change in maturity that may be agreed upon under the Commercial Code.

We further state that if the contract does not specify a time limit for payment of liability, the creditor is entitled to demand payment of the liability immediately after the conclusion of the contract and the debtor is obliged to fulfill his obligation without undue delay after the creditor has requests him to fulfill it.

If you have any questions about this topic or other topics related to, for example, the tax base, we would be happy if you contact us.