Overview of the most interesting changes brought by the amendment to the Tax Code

On 12 November 2021, the amendment to the Tax Administration Act (Tax Code), including indirect amendments to several tax laws, was published in the Collection of Laws. The amendment introduces a package of measures aimed at combating tax avoidance. Here's an overview of the most interesting changes:

• Tax Reliability Index - the amendment to the Act modifies the institute of the Tax Reliability Index, which will become public and will apply to entrepreneurs registered for income tax. In particular, the aim of the Tax Reliability Index is to be of an incentive nature and will not be used to assess a risk level of the taxpayer. The taxpayer shall receive its first tax reliability index within the end of the month following the two years period after the year in which this taxpayer was registered for income tax. The criteria determining the Tax Reliability Index will be laid down in the regulation published by the Slovak Ministry of Finance. For example, highly reliable taxpayers will have a deadline within tax audit not shorter than 15 days and unreliable taxpayers 8 days. The Tax Reliability Index will be reviewed bi-annually. Based on the transitional provisions, taxpayers who have received notification of special tax regimes or which have been registered for income tax by 31.12.2019 will receive a notification on the Tax Reliability Index by 28.2.2022.
• Disqualification of individuals – with respect to the amendment of the disqualification of individuals in the Commercial Code as well as in the Act on Courts, a provision is added to the Tax Code under which the Tax Authorities can decide to disqualify an individual once the legal conditions have been met. The consequence of such a decision is that a disqualified individual who is a member of the statutory body of the taxpayer, is not allowed to perform this function. The Tax Authorities may, by their decision, exclude the individual for a period of three years following the day when their decision becomes effective.
• Decrease of the fee for binding opinion – the amendment to the Act reduces the fee for issuance of a binding opinion to the amount of EUR 1,000. At the same time, half the fee will apply to taxpayers that are classified as highly reliable. At present, the fee is tied to the value of the anticipated business case and the number of applicable legal regulations, while the lowest possible fee is EUR 2,000.

The above provisions become effective as of 1 January 2022.

An unexpected change within the legislative process was the parliamentary amendment introduced at the second reading, which amends the Income Tax Act, and brings two important changes:

• reduction of the tax advantage for taxpayers who apply research and development deduction. The amendment to the Act, effective as of 1 January 2022, changes the amount of deduction from the current 200% to 100% of the eligible expenses
• a new provision on the deduction of investment expenditures is introduced which is intended to be a temporary instrument to support investment with higher added value - productive investment with a link to “industry 4.0”. The support will be represented by the additional deduction of expenses, determined as a percentage of the tax depreciation of the given assets. The amount of the deduction will range from 15% to 55% and will depend on the average value of the investment and the amount of the reinvestment. The so-called investment plan will represent a core document which has to contain information as required by the law, and which has to be prepared for the period of four years (tax periods 2022-2025 for taxpayers with tax period being a calendar year).

The amendment to the Tax Code indirectly amends also the VAT Act. We have prepared for you more detailed information about the new obligation of Slovak VAT payers introduced by amendment to the Slovak VAT Act which is due on 30 November 2021.