Slovakia: Draft legislation implementing Pillar Two global minimum tax

Draft legislation introducing a “top-up tax”

Draft legislation introducing a “top-up tax”

The Ministry of Finance in August 2023 published draft legislation introducing a so-called “top-up tax,” intended to implement the OECD Pillar Two and EU global minimum global tax directive.

The top-up tax would be based on the total effective tax rate of the group compared to the global minimum effective tax of 15%. The allocation of the top-up tax between the individual companies of the group would be based on the ratio of the adjusted profit of the given company to the total profit of the group.

It is not clear from the draft legislation whether the top-up tax would apply for the 2023 tax period, although the EU directive clearly requires application to tax periods starting on 31 December 2023 and later.

Entities subject to the top-up tax

The top-up tax would apply to those companies that fall under the ultimate parent company with consolidated revenues of at least €750 million in two of the last four accounting periods.

  • Revenues would probably be determined in accordance with the determination of consolidated revenues for the purposes of country-by-country (CbC) reporting.
  • As part of the OECD Pillar Two proposal, it is required that at least one company in the group has a residence in a country other than the country of residence of the ultimate parent company, but within the EU, the directive also applies to purely local groups of companies.
  • Excluded entities would include some state-owned enterprises with 100% state participation, non-profit organizations, pension funds or some investment funds. However, their income would be included in the group's consolidated income for the purpose of determining whether the group is subject to the top-up tax.

Read a September 2023 report prepared by the KPMG member firm in Slovakia


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