Slovakia’s GloBE Law Applies the EU’s IIR/UTPR Postponement Provision

Overview

On December 4, 2023, the Slovakian Government approved the ‘Draft Act on the Equalization Tax to ensure a minimum level of taxation for multinational enterprise groups and large national groups’. The draft law was approved by the Legislative Council on December 8, 2023.

Slovakia has made use of the derogation under Article 50(1) of the EU Minimum Tax Directive, which allows EU member states which have up to 12 in-scope UPEs in their jurisdiction to postpone the implementation of the income inclusion rule (IIR) and the under-taxed profits rule (UTPR) up to December 31, 2029.

As such, the draft law does not contain provisions for an IIR or UTPR, but does implement a domestic minimum tax (intended to be a Qualified Domestic Minimum Top-Up Tax) for  accounting periods beginning on or after December 31, 2023.

Whilst the draft law is based on relevant provisions in the GloBE rules/EU Minimum Tax Directive, as the IIR and UTPR are not being implemented, numerous aspects are not included because they either relate to the IIR/UTPR or they are not relevant to Slovakia’s domestic tax regime.

For instance, the draft law does not include relevant GloBE provisions for:

-Partially-owned parent entities

-Intermediate parent entities

-IIR/UTPR

-Refundable tax credits

-Deemed distribution tax systems

-Ultimate parent entities subject to a deductible dividend regime

-The stock-based compensation election

-The consolidation election

-The GloBE loss election

OECD Administrative Guidance