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Transfer pricing safe harbours in the Slovak Republic

Publication date: 31.03.2020

Financial Law Review, 2020, Issue 17 (1)/ 2020, pp. 70-85

https://doi.org/10.4467/22996834FLR.20.005.12046

Authors

,
Andrej Choma
Financial law department, Comenius University in Bratislava, Faculty of law, Slovakia
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,
Matej Kačaljak
Financial law department, Comenius University in Bratislava, Faculty of law, Slovakia
All publications →
Peter Rakovský
Financial law department, Comenius University in Bratislava, Faculty of law, Slovakia
https://orcid.org/0000-0002-5726-3552 Orcid
All publications →

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Titles

Transfer pricing safe harbours in the Slovak Republic

Abstract

This contribution deals with the position of the Slovak Republic in relation to safe harbours in transfer pricing from de lege lata perspective and from the perspective of existing application practice of tax authorities in Slovakia. The main aim of the contribution is to confirm or disprove the hypothesis that the existing safe harbour framework in the Slovak Republic is in line with the OECD recommendations in the Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations. Methods of analysis and synthesis and of comparative legal method were employed. The results indicate that though de lege lata the Slovak law contains certain features which might be described as safe harbours, essentially relieving certain taxpayers from the obligation to have contemporaneous transfer pricing documentation, a safe harbour stricto sensu was not identified. However, in the practice of Slovak tax authorities there seem to be routinely accepted safe harbours with respect to low value-adding intra group services. Moreover, there seems to be an excessive reliance on transactional net margin method which in practice may lead to establishment of a de facto safe harbour. The authors argue that such practice seems to be in direct contradiction to OECD recommendations, poses a significant risk of becoming a target of safe harbour shopping and should be reconsidered.

References

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Bartelsman, E. J., and Beetsma, R. MWJ.: Why pay more? Corporate tax avoidance through transfer pricing in OECD countries. Journal of public economics 87.9-10, 2003: 2225-2252.

Babčák, V.: Zneužívanie daňového systému v EÚ [Abuse of tax system in the EU]. (in:) I. SLOVENSKO-ČESKÉ DNI DAŇOVÉHO PRÁVA. Daňové úniky a vyhýbanie sa daňovým povinnostiam [I. SLOVAK-CZECH DAYS OF TAX LAW. Tax evasion and tax avoidance]. Košice, 2017.

Cottani, G.: Transfer Pricing. IBFD, 2015.

Choma,A. and Balco,T.: Nové usmernenie k obsahu dokumentácie transferového oceňovania [New guideline to the contents of transfer pricing documentation], Dane a účtovníctvo v praxi : mesačník plný informácií z oblasti daní, práva a účtovníctva [Taxes and accounting in practice : monthly review of information from taxes, law and accounting], Bratislava : Wolters Kluwer, nr 20, [7-8], 2015.

Evers, L., & Spengel, C.: Effective tax rates under IP tax planning. ZEW-Centre for European Economic Research Discussion Paper, (14-111), 2014.

Kačaljak, M. and Rakovský, P.: Právny charakter OECD Smernice o transferovom oceňovaní na Slovensku [Legal relevance of the OECD Transfer Pricing Guidelines in Slovakia], Justičná revue, 11/2019.

Kočiš, M.: Úvod do práva transferového oceňovania, Bratislava: Wolters Kluwer, 2015.

Mehta, K.: Comments for OECD on Transfer Pricing and Safe Harbors. [online]. Available at: https://www.oecd.org/tax/transfer-pricing/4893110.

OECD: Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations. Paris: OECD, 2017.

Saad, N.: Tax knowledge, tax complexity and tax compliance: Taxpayers’ view. Procedia-Social and Behavioral Sciences 109 (2014): 1069-1075.

Solilová, V. and Nerudová, D.: Návrh bezpečných přístavů v oblasti převodních cen pro malé a střední podniky [The Proposal of Safe Harbours in the Area of Transfer Prices for Small and Medium Sized Enterprises], Politická ekonomie [Political economy], No. 5, 2016.

Solilová, V.; Nerudová, D.: Transfer Pricing Rules in the Context of SMEs, Praha: Vysoká škola ekonomická v Praze, Nakladatelství Oeconomica, 2015.

Legal acts:

Act of 18 June, 2002 on Accounting No. 431/2002 Coll. as amended

Act of 4 December, 2003 on Income Tax No. 595/2003 Coll. as amended

Act of 1 December, 2009 on Tax Procedural Code No. 563/2009 Z. z. Coll. as amended

Court decisions:

Rozsudok Krajského súdu v Bratislave sp. zn. 1S/231/2016 zo dňa 20 Septembra 2018 [Decision of the Regional Court in Bratislava file no. 1S/231/2016 dated 20 September 2018]

Other official documents:

Joint Transfer Pricing Forum: Guidelines on low-value-adding intra-group services. [Online] Available at: https://ec.europa.eu/taxation_customs/sites/taxation/files/resources/documents/taxation/company_tax/transfer_pricing/forum/c_2011_16_en.pdf

Joint transfer pricing forum – Member States’ Transfer pricing profiles [Online] Available at: https://ec.europa.eu/taxation_customs/business/company-tax/transfer-pricing-eu-context/joint-transfer-pricing-forum_en#heading_3

OECD Transfer Pricing Country Profiles [Online] Available at: https://www.oecd.org/ctp/transfer-pricing/transfer-pricing-country-profiles.htm

Resolution of the Council and of the representatives of the governments of the Member States, meeting within the Council, of 27 June 2006 on a code of conduct on transfer pricing documentation for associated enterprises in the European Union. (2006/C 176/01).

Usmernenie MF SR č. MF/019153/2018-724 o určení obsahu dokumentácie podľa § 18 ods. 1 zákona 595/2003 Z. z. o dani z príjmov v znení neskorších predpisov [Guideline of the

Ministry of Finance no. MF/019153/2018-724 on the content of the documentation under Section 18 (1) of the Act No. 595/2003 Coll. On Income Tax as amended]

Internet resources:

Oslobodenie od dokumentačnej povinnosti a niektoré zásady dokumentačnej povinnosti [Relief from documentation requirement and certain documentation principles] [Online] Available at: https://www.carpathianag.sk/publikacie/oslobodenie-od-dokumentacnej-povinnosti-a-niektore-zasady-dokumentacnej-povinnosti/

Information

Information: Financial Law Review, 2020, Issue 17 (1)/ 2020, pp. 70-85

Article type: Original article

Authors

Financial law department, Comenius University in Bratislava, Faculty of law, Slovakia

Financial law department, Comenius University in Bratislava, Faculty of law, Slovakia

https://orcid.org/0000-0002-5726-3552

Peter Rakovský
Financial law department, Comenius University in Bratislava, Faculty of law, Slovakia
https://orcid.org/0000-0002-5726-3552 Orcid
All publications →

Financial law department, Comenius University in Bratislava, Faculty of law, Slovakia

Published at: 31.03.2020

Article status: Open

Licence: CC BY-NC-ND  licence icon

Percentage share of authors:

Andrej Choma (Author) - 33%
Matej Kačaljak (Author) - 33%
Peter Rakovský (Author) - 34%

Classification number:

JEL Classification System:

Tax Law (K34)

Article corrections:

-

Publication languages:

English

View count: 816

Number of downloads: 663

<p>Transfer pricing safe harbours in the Slovak Republic</p>