Effective from April 1, 2025, Slovakia’s Financial Transaction Tax (FTT) - governed by Act No. 279/2024 Coll. - has introduced significant changes to the way financial operations are taxed, particularly affecting businesses operating locally or engaging with the Slovak market. In response to ongoing uncertainties, the Slovak Ministry of Finance (MF SR) has published detailed guidance (Ref. No. MF/008722/2025-77) to clarify the obligations under the new law. Below is an overview of the most critical aspects of this directive and its implications for cross-border business operations. However, the respective guidance does not clarify every aspect, which may happen in praxis.
Defining Business Activity Within Slovakia
One of the core components of the guidance is determining when a business activity is considered to be conducted within Slovakia. Drawing inspiration from the definition of a permanent establishment under Slovak income tax law, the Ministry outlines that a taxpayer is seen as operating domestically if:
- Activities are performed wholly or partially through a permanent facility regularly used for commercial purposes in Slovakia.
- A person authorized to act on behalf of the taxpayer consistently negotiates or concludes contracts within Slovak territory.
- A digital platform or marketplace is hosted or managed from within Slovakia.
- Insurance risks connected to local assets or liabilities are present within Slovak jurisdiction.
It’s important to note that merely storing inventory in Slovakia, without additional business activities, does not qualify as conducting business domestically. However, if goods are sold or services offered locally through a permanent establishment, the criteria are fulfilled and therefore the transaction tax applies on the goods bought for the sale in Slovakia.
For foreign entities, the presence of a Slovak bank account alone makes all financial transactions through that account subject to the FTT. If the account is foreign, only those transactions linked to Slovak activities are taxable. This aims to prevent avoidance through offshore structures.
Treatment of Reallocated Costs
The Ministry’s guidance also offers clarification on how reallocated costs - or "preúčtované náklady" - are taxed. These are defined as payments made on behalf of a taxpayer by a third party, under a legal agreement, or through internal cost allocation mechanisms within a corporate group.
Key distinctions include:
- Tax applies when cost reallocations cannot be linked to specific underlying payments, using a rate of 0.4% without a cap.
- When identifiable, a maximum tax of €40 per transaction is enforced.
- Not all recharges qualify. For instance, standard resale of goods by third parties on their own behalf is exempt, while centrally purchased software licenses redistributed among subsidiaries are considered reallocated costs.
Automated balance compensation (Cash pooling)
The final section of the guidance addresses cash pooling - the process of automatically balancing account surpluses and deficits within a corporate group. Transactions that involve internal compensation among accounts held with a single provider (within the same bank) and done automatically are excluded from the FTT.
However, related financial operations such as clearing, offsetting of intercompany receivables and payables, or third-party payments that fall under the reallocated cost category are still subject to the tax.
Political context and legislative clarity
Recent attempts by the Slovak National Party (SNS) to amend or repeal the FTT - especially for sole traders and small enterprises - were met with opposition from the Ministry of Finance. The Ministry highlighted the technical and legal infeasibility of the proposed changes and emphasized the potential risks to fiscal stability. Forecasts suggest that repealing the tax without compensatory measures could cost the state up to €175 million annually.
Furthermore, the Ministry dismissed concerns about the burden on small businesses, noting that the average FTT for self-employed individuals with flat-rate expenses is below €7 per month, and around €33 for companies earning up to €100,000 annually.
Conclusion
Slovakia’s financial transaction tax represents a significant evolution in the country’s tax landscape. With the newly issued guidance, the Ministry of Finance aims to establish greater clarity and legal certainty for businesses. Companies operating in or with Slovakia should closely review their transaction structures, banking arrangements, and cost-sharing mechanisms to ensure compliance and optimize their tax positions under the new FTT framework.
