Slovakia Issues a Draft Law to Implement June 2024 and January 2025 OECD Administrative Guidance

On June 16, 2025, Slovakia issued a draft law to amend its Minimum Tax Act to provide for the June 2024 and January 2025 OECD Administrative Guidance, as well as EU DAC 9 Directive amendments.

The amendments are proposed to enter into force on December 31, 2025 (except for the DAC 9 requirements).

June 2024 OECD Administrative Guidance

DTL Recapture Rules

The amended law includes amendments to Section 18, paragraph 1, letter b), Section 18, paragraphs 10 to 15 and Section 18b of the Minimum Tax Act to provide for the amended Deferred Tax Liability (DTL) recapture rules, including:

Article 1.2.1 – Aggregate DTL Category basis

Article 1.2.1 – Exclusion of certain types of general ledger (GL) accounts and separate tracking

Article 1.2.1 – Exclusion of GL accounts that generate standalone DTAs

Article 1.2.1 – Exclusion of swinging accounts and separate tracking

Article 1.2.2 – FIFO/LIFO basis

Article 1.2.2 – Aggregation of Short-term DTLs

Article 1.2.2 – Reversal of DTLs that accrued before the Transition Year

Article 1.2.2 – 5-year unclaimed accrual election

Divergences between GloBE and accounting carrying values

The amended law includes amendments to Section 18, paragraph 16 of the Minimum Tax Act to implement Article 2.1.2 of the OECD Administrative Guidance relating to:

– Recalculated deferred tax where GloBE carrying value differs from accounting carrying value

– GloBE and accounting carrying values and the Transition Rules

In particular, when calculating the deferred tax expense for GloBE purposes (which is included in adjusted covered taxes to determine the GloBE ETR), the deferred tax expense in the accounts will be excluded and a separate GloBE deferred tax calculation is required. This will be based on the substituted GloBE carrying value and determined using the financial accounting standard used for GloBE purposes.

Constituent Entities will therefore be required to maintain accounting records to support the computation of GloBE Income or Loss and Total Deferred Tax Adjustment Amount by reference to the GloBE carrying values.

Allocation of profits and taxes in structures including Flow-through Entities

The amended law includes amendments to Section 2ab, Section 2ac, Section 2 letter bs and Section 14(4) of the Minimum Tax Act to implement the OECD Administrative Guidance relating to:

(1) Determining GloBE status when a Flow-through Entity is held directly by another Flow-through Entity (Article 5.2.2).

This applies where the owner of tax transparent entity (i.e. an entity that is considered tax transparent according to the law of the state of its establishment) is an entity that is also a tax transparent entity. Given that the income of a tax transparent entity is not subject to tax, the tax transparency of the entity is determined at the level of the owners who are closest in the ownership chain to the tested entity and who are not tax transparent. The only exception is the case where all owners of the tested entity, including the main parent entity, are tax transparent entities. In that case, tax transparency is determined at the level of the owner who is the main parent entity

(2) Non-group owners: Partially owned Flow-through Entities (Article 5.2.2) and Non-group owners: Indirect minority ownership (Article 5.3.5)

Section 14(1) provides that the profit or loss of a tax transparent entity is reduced by the amount of profit or loss of that entity attributable to its direct or indirect owners who are not group entities. However, paragraph 1 contains a restriction where this will not apply if the tax transparent entity is either a) the ultimate parent entity, or b) is directly or indirectly held by the ultimate parent entity, which is also a tax transparent entity.

(3) Taxes allocated to a flow through entity (Article 5.4.2), Hybrid entities – Taxes pushed down include indirect owners (Article 5.5.2), Hybrid entities – Entities located in jurisdictions without a Corporate Income Tax system (Article 5.5.4) and Extension of taxes pushed down to include Reverse Hybrids (Article 5.6.2)

Tax paid or incurred by a Constituent Entity-owner under a CFC Tax Regime that is pushed down to a domestic Constituent Entity in the GloBE Rules must be excluded for QDMTT purposes, as provided in the OECD Administrative Guidance. This is included in Section 17(7) of the Minimum Tax Law.

Section 17(7) also prevents the pushdown of tax to hybrids, PEs and for taxes on distributions (aside from Slovakian withholding tax on distributions).

The proposed amendment to the Minimum Tax Act will also apply the above approach to a reverse hybrid entity. In addition, an exemption is introduced for income tax collected from the owner of a hybrid entity or a reverse hybrid entity on income from sources in Slovakia under the Income Tax Act.

January 2025 OECD Administrative Guidance

Section 32(10)-(12) and Section 46b of the proposed amendments includes the amendments to Article 9.1.1 from the January 2025 OECD Administrative Guidance.

The general rule under Article 9.1.1 of the OECD Model Rules, is that in the transition year, deferred tax assets and liabilities of the entity are recognised at the lower of:

-the domestic tax rate used in the accounts; and

-the 15% global minimum rate.

The restriction on deferred tax assets being recognised at a maximum of the 15% global minimum rate prevents an MNE group reducing top-up tax by creating large releases to the P&L on the utilisation of a high tax deferred tax asset.

A special transitional rule in Article 9.1.2 of the OECD Model Rules applies to deferred tax assets that arise from permanent differences that are included in calculating taxable income but not Pillar Two GloBE income.

Note that this can apply to both timing differences and permanent differences where they aren’t reflected in Pillar Two GloBE income.

This will frequently arise from a permanent difference.

Typical examples are many of the tax-specific deductions that don’t apply for accounting purposes, such as a specific enhanced tax deduction.

Where the deferred tax asset is created in a transaction that takes place after 30 November 2021 it is not included in adjusted covered taxes.

This means that on the release of the asset there is no debit to the deferred tax charge in the P&L and no increase in the Total Deferred Tax Adjustment Amount under Article 4.4 (ie adjusted covered taxes).

The amendment now includes deferred tax assets that are ‘not attributable to the prepayment of tax in relation to income that would or will be included in GloBE Income or Loss’. It also includes ‘tax benefits that are designed to achieve similar effects as the example described above, including tax credits based on future expenditure or activity’.

It also confirms that Article 9.1.2 is not limited to commercial transactions and it includes any agreement, ruling, decree, grant or similar arrangement with a General Government.

The new Section 8.5 inserted in the OECD Commentary by this Administrative Guidance confirms that this will apply to:

a. A deferred tax asset that is attributable to a governmental arrangement concluded or amended after 30 November 2021 where such governmental arrangement provides the taxpayer with a specific entitlement to a tax credit or other tax relief (including, for example, a tax basis step-up) that does not arise independently of the arrangement. This includes tax relief for recipients of investment aid under Section 30a of the Slovakian Income Tax Act.

b. A deferred tax asset that is attributable to an election or choice exercised or changed by a Constituent Entity after 30 November 2021 and that retroactively changes the treatment of a transaction in determining its taxable income in a tax year for which an assessment by the tax authority was already made or a tax return was already filed.

c. A deferred tax asset or a deferred tax liability arising from a difference in the tax basis or value and accounting carrying value of an asset or liability if the tax basis or value was established pursuant to a corporate income tax that was enacted by a jurisdiction that did not have a pre-existing corporate income tax and that was enacted after 30 November 2021 and before the Transition Year.

The new Articles 8.8-8.12 of the OECD Commentary inserted by this Administrative Guidance contains a grace period under which the deferred tax expenses, (subject to a cap of 20% of the original deferred tax asset at the lower of 15% or the domestic CIT rate), can be included in the Total Deferred Tax Adjustment Amount under Article 4.4 or Simplified Covered Taxes under the Transitional CbCR Safe Harbour.

For (a) and (b) above, the grace period applies to DTA reversals in fiscal years beginning on or after 1 January 2024 and before 1 January 2026 but not including a Fiscal Year that ends after 30 June 2027,

For (c) the grace period applies to DTA reversals in fiscal years beginning on or after 1 January 2025 and before 1 January 2027 but not including a Fiscal Year that ends after 30 June 2028.

The grace period does not apply to relevant arrangements that arise after November 18, 2024.

In addition, the Transitional CbCR Safe Harbour is amended to exclude the reversals from the definition of simplified covered taxes.

Tax Credits 

Section 6b(6)-(8) of the amendments provides for some addition technical amendments to the treatment of tax credits for Pillar Two purposes in Slovakia. In particular they apply to determine how the financial accounting profit or loss of the acquirer of a tax credit is adjusted if the acquirer uses the tax credit (paragraph 6), if the acquirer resells the tax credit (paragraph 7) and if the tax credit or part expires without being used.

DAC 9

Article II of the Amendment Act includes proposed changes to Act No. 442/2012 on international assistance and cooperation in tax administration.  In particular it provides for new Sections 22q-22t to implement the EU DAC 9 amendments. This simplifies reporting in-scope groups by enabling central filing of a top-up tax information return (TTIR) and introduces a standard form for filing the TTIR across the EU, in line with the GIR.