Slovakia Approves Draft Pillar Two Amendments Implementing the New Tax-Incentive Safe Harbour

The Slovak Government has approved draft legislation that would make significant changes to Slovakia’s qualified domestic minimum top-up tax regime. The proposals would implement the OECD’s new Substance-Based Tax Incentives Safe Harbour, extend the Transitional CbCR Safe Harbour and introduce rules preserving Pillar Two filing and payment obligations where a Slovak taxpayer ceases to exist without a legal successor.

The Government approved the bill on 19 August 2026 through Resolution No. 320/2026. The draft, explanatory memorandum and an informative consolidated version of the legislation are included in the official government materials. The approval is recorded in the Government’s resolution register.

Background

Slovakia introduced its domestic Pillar Two rules through Act No. 507/2023. The legislation applies a qualified domestic minimum top-up tax, or QDMTT, to low-taxed profits of in-scope constituent entities located in Slovakia.

Slovakia has used the postponement available under Article 50 of the EU Minimum Tax Directive and has deferred the application of the Income Inclusion Rule and Undertaxed Profits Rule until 31 December 2029. Its current Pillar Two charging regime is therefore limited to the QDMTT. 

The latest bill responds primarily to the OECD/G20 Inclusive Framework’s Side-by-Side Package, published on 5 January 2026. That package introduced:

-a permanent Simplified ETR Safe Harbour;

-a one-year extension of the Transitional CbCR Safe Harbour;

-a new Substance-Based Tax Incentives Safe Harbour;

-the Side-by-Side and Ultimate Parent Entity Safe Harbours; and

-an evidence-based review process.

The Substance-Based Tax Incentives Safe Harbour permitscertain expenditure-based and production-based tax incentives to be treated as additions to Covered Taxes, subject to a limit based on economic substance. The package also confirms that the Side-by-Side system does not affect the operation of QDMTTs. 

On 12 January 2026, the European Commission recognised the safe harbours contained in the OECD package as qualifying international agreements on safe harbours for the purposes of Article 32 of the EU Minimum Tax Directive. This provides the EU-law basis for Member States to implement and apply the new rules. 

New definition of a Qualified Tax Incentive

The draft would add a definition of a “Qualified Tax Incentive”, or QTI, to section 2 of Act No. 507/2023.

A tax incentive would qualify where it is generally available and its amount is determined by reference to either:

1. expenditure or costs incurred in Slovakia, provided the value of the incentive does not exceed those expenditures or costs; or
2. the volume of production undertaken in Slovakia.

The explanatory memorandum makes clear that general availability requires the incentive to arise under published or statutory conditions. It must not be confined to a narrowly selected group – particularly by reference to an enterprise’s size or membership of an in-scope multinational or domestic group – and must not depend on discretionary government negotiation.

An administrative decision confirming that a taxpayer satisfies published eligibility conditions would not, by itself, prevent an incentive from qualifying. By contrast, an individually negotiated concession, decree or agreement under which a key element of the benefit remains subject to government discretion would generally fail the test.

Potentially qualifying expenditure-based incentives include tax credits, enhanced deductions, super-deductions and certain exemptions or preferential rates whose value is calculated directly by reference to qualifying expenditure.

The memorandum identifies the Slovak deductions under sections 30c and 30e of the Income Tax Act as incentives that may fall within the proposed rules. These provisions concern the deduction for research and development expenditure and the investment expenditure deduction.

Qualification would nevertheless require the relevant incentive and expenditure to satisfy all the statutory conditions. In particular, the draft and explanatory memorandum indicate that:

-the benefit must relate to expenditure actually incurred or production actually undertaken, rather than a commitment to incur expenditure or produce output in the future;

-the benefit of an expenditure-based incentive must not exceed the relevant expenditure, taking into account other incentives provided for the same costs;

-direct subsidies, grants and other cash payments are not QTIs;

-ordinary accelerated capital allowances that produce only temporary differences are not QTIs, although an enhanced or super-deduction exceeding the original cost may qualify to the extent of the additional permanent benefit;

-a production incentive must be linked to measurable domestic output; and

-a revenue-based incentive, such as an ordinary patent box, would not qualify merely because the relevant income arises from an economically substantive activity..

Substance-Based Tax Incentives Safe Harbour