Reducing the scope of income of a taxpayer with limited tax liability

In our 4Q 2022 Newsletter, we informed you that starting from 2023, income from commercial bonds paid by Slovak tax residents to taxpayers with limited tax liability in the Slovak Republic will be considered as income from sources in the territory of the Slovak Republic and will thus be subject to withholding tax.

On 29 March 2023, a bill was approved amending Act No. 595/2003 Z. z. on Income Tax, as amended. The bill that was adopted also included an amendment that reintroduces the tax treatment of bond income effective until 31 December 2022, which means that interest and other income from bonds flowing from taxpayers with unlimited tax liability in the Slovak Republic to taxpayers with limited tax liability in the Slovak Republic will again be excluded from income from sources within the Slovak Republic.

This change should facilitate the placement of bonds on foreign markets and should also reduce the administrative burden related to the assessment of the tax residence of a foreign investor and the determination of the withholding tax in the correct amount.

The Act was published in the Collection of Laws on 18 April 2023 and entered into force as of that date.