Amendment to the Slovak income tax act – taxation of corporate bonds

UniCredit Bank Czech Republic and Slovakia, a.s., pobočka zahraničnej banky
Tue, 20/12/2022

On 6 December 2022, the Slovak Parliament approved the amendment to Act No. 595/2003 on Income tax. The amendment is introducing a 19% withholding tax (WHT) rate on the interest for domestic corporate bonds being paid to foreign investors. The amendment is expected to come into effect on 1 January 2023. Before becoming valid, the amendment will need to be signed by the Slovak President and published in the collections of laws.

Applicable WHT rates: 

 - 19% - for non-resident investors residing in countries which have concluded an agreement with the Slovak Republic on the exchange of tax-relevant information.

 - 35% - for non-resident investors residing in non-, white-listed countries which have not concluded a similar agreement with the Slovak Republic, nor hold a Convention on the avoidance of double taxation. 

Reduced WHT rates will apply for non-resident investors residing in states which have concluded with the Slovak Republic a Convention on the avoidance of double taxation according to specific Convention conditions.

Documentation requirements of withholding tax agents (issuers):

A Certificate of tax residency will be required at the execution of an income payment. It is also expected that a newly introduced document, namely the Beneficial Owner Affidavit, will be collected. 

The Amendment was approved on very short notice and without prior discussion in the capital market, therefore the documentary requirements might be extended further. 

Impact on investors:  Interest from domestic corporate bonds paid to foreign investors will become subject to WHT from 1 January 2023.  Supporting documentation identifying beneficial owners of income will be required.