Financial Transaction Tax: The Amendment to the Act and Its Main Changes

The National Council of the Slovak Republic has approved an extensive amendment to the Financial Transaction Tax Act. The amendment to the Act is already valid and will be effective since 1 January 2025. We have already informed you in detail about the original wording of the law in the article  Financial Transaction Tax from 2025: What to Prepare For?

The amendment to the Act brings clarifications regarding tax payers, exemptions from the subject of tax, taxpayers' obligations and others. In this article, we will look at the most significant changes resulting from this amendment.

• The amendment extends the circle of taxable person to include foreign entrepreneurs and legal entities that have a bank account in Slovakia or that carry out activities in Slovakia (e.g. foreign VAT payers who are not established in Slovakia).
• The amendment expands the transactions that will be exempt from the subject of tax, including payments related to customs debt, and transactions of securities dealers.
• The list of persons and organizations that will not pay this tax, such as Matica Slovenská, the Slovak Academy of Sciences, and other non-profit and public benefit organizations, is expanding.
• The amendment to the law allows for the application of a maximum limit of EUR 40 per transaction when recharging costs, if the taxpayer can prove a financial transaction of a third party.

The amendment introduces the reporting obligation of all taxpayers who have Slovak bank accounts.

Who is affected by the new financial transaction tax?

The new wording of the Act expands the circle of taxpayers: entrepreneur, legal entities, registered branches, who have a bank account and the following person:

• has its registered office or place of business in the Slovak Republic,
• has a Slovak bank account – e.g. foreign persons who do not do business in Slovakia, but have a bank account here, e.g. due to joint financing projects,
• or performs activities in the Slovak Republic – e.g. foreign persons who are not established in Slovakia, e.g. VAT payers pursuant to Article 5 of the Slovak VAT Act.
• non-profit organizations, churches and religious societies, interest associations of POs, research and development entities, civic associations and foundations, Slovak Red Cross, SAS and Matica slovenská, tourist information centers, territorial tourism organizations, are excluded from taxpayers by the amendment.

Who is the payer of the Financial Transaction Tax?

The determination of the taxpayer in the case of a payment service provider with a registered office outside the territory of the Slovak Republic is also changing. The taxpayer is always the taxable person in this regard. Banks will only tax Slovak bank accounts. In the case of foreign bank accounts, the tax will be declared by the taxable person himself.

Which transactions will not be taxed?

The amendment extends payment transactions exempt from the subject of tax by:

• payments linked to customs debt and customs debt guarantees, VAT or excise duty guarantees on importation, guarantees for compliance with obligations under EU agricultural legislation;
• the operations of investment firms, branches of foreign traders and crypto-asset service providers, which include the custody, administration, holding management of securities, financial instruments or crypto-assets, portfolio management and any payouts associated with those operations;
• payment operations of a dealer in securities, financial instruments, foreign exchange and crypto-assets associated with their purchase or sale;
• payment operations of a payer with a foreign exchange license for trading in foreign exchange values,
• reimbursements from the Investment Guarantee Fund;
• operations on special accounts of administrators, bailiffs or state funds kept with the State Treasury;
• operations relating to collateral in auctions, public procurement or tenders;
• payments of administrative and court fees through accounts designated by the central register of fees;
• operations of public higher education institutions from subsidies from the state budget,
• operations of financial institutions on accounts intended for the maintenance of client funds;
• transactions related to the purchase or sale of financial instruments in EU countries where the transaction is subject to financial transaction tax;
• transfers of funds between collective investment funds managed by the same company;
• certain payments by health insurance companies related to the provision of health care.

Payment operations within the postal payment system are no longer limited only to the Slovak Post, which is replaced by a postal company. Thus, the exemption now also applies to courier companies if they carry out financial transactions intended to mediate the crediting or transfer of funds from the sender to the recipient, including cash withdrawals as part of this intermediation.

What will be the tax base?

Transactions carried out by a person other than the taxable person are included in the tax base if these transactions relate to the taxpayer's activity carried out in the Slovak Republic and are recharged to the taxable person, and  the taxable person must be able to prove them. The tax rate of this transaction will be 0.4%, with a maximum limit of EUR 40 per financial transaction. In the event of failure to prove a financial transaction of another person, a  rate of 0.4% will be applied to the transaction with no limit of EUR 40 (e.g. allocation of costs for a permanent establishment).

The taxpayer can reduce the tax by the amount of tax withheld by the bank when paying the another person for recharged costs.

Reporting obligations:

The amendment also defines the reporting obligation of all taxable persons towards Slovak banks that have a Slovak bank account.

A legal entity that is excluded from the scope of the law (e.g. foundations, state institutions and others) notifies the bank that it is not a taxable person under this Act.

A taxable person whose financial transactions are not subject to tax (e.g. card payments, payment of taxes and levies, transfers between the taxable person's accounts in the same bank) shall notify the bank of the separate account from which such financial transactions are carried out.

The Bank shall not levy tax on financial transactions of a legal person pursuant to the first sentence or on financial transactions carried out on accounts pursuant to the second sentence from the day following the date of notification. The method and form of proof and notification will be determined by the taxpayer.

This wording currently means that the taxable person must notify the bank of the majority of Slovak bank accounts (as each of them also includes transfers between the taxable person's accounts in the same bank or card payments), from which the bank will subsequently stop deducting tax. In this case, the taxable person cannot pay the tax himself, because he is not a taxpayer in financial transactions on Slovak bank accounts. This was probably not the intention of the legislator, so we expect an adjustment of the reporting obligation.

The extension of the circle of taxable persons to foreign entities that carry out activities in Slovakia or have a bank account here will cause a significant administrative burden and additional costs for these entities, especially if they do not have Slovak bank accounts. Taxable persons should prepare for this monthly reporting, which will take place from April 2025.

The amendment to the Financial Transaction Tax Act brings certain improvements, such as clarifying the rules for determining the taxable person, the taxpayer, exempting certain transactions from the tax base and setting out the obligations for taxable person more clearly. However, despite these adjustments, many questions and uncertainties still remain. The law has still not solved all the problems associated with double taxation, the lack of interpretation of several terms, the possible negative impacts on the business and investment environment in Slovakia, and the expected growth of the grey economy motivated by the effort to avoid paying this tax. 

Grant Thornton will keep you informed about the further development of the new transaction tax law and help you prepare for the changes it brings. We will be happy to provide you  with tax advice in connection with new obligations, help with the correct maintenance of accounts and transaction records to meet all legislative requirements. Do not hesitate to contact us for effective and trouble-free implementation of the new rules.