Documents proving the beneficial owner of income in Slovakia

The Financial Directorate of the Slovak Republic in cooperation with the Ministry of Finance of the Slovak Republic and the Slovak Chamber of Tax Advisorsthe after an extensive discussion issued information on the manner, form, extent and periodicity of proving the identity of the ultimate recipient of income for the purposes of the Income Tax Act.

The purpose of this information is to assist taxpayers who are responsible for remitting withholding tax on payments to the tax administrator, by clarifying the concept of "ultimate beneficial owner of income" for the purposes of the Income Tax Act and advising taxpayers on examples of documents proving the identity of the beneficial owner of income. The documents are given by way of example, because each transaction needs to be assessed individually.

In cases where the Slovak Republic has concluded an international double taxation treaty, which takes precedence over Income Tax Act, the provisions of this treaty must also be considered for taxation.  Where a particular double tax treaty refers to the institution of the beneficial owner of the income, the taxpayer is responsible for assessing whether the person to whom it pays the income is the ultimate owner of the income. If the conditions are met, the recipient is entitled to a lower tax rate under this agreement and therefore, cooperation with the taxpayer is necessary. 

The presented information of the Financial Directorate is in the form of a recommendation without legal binding force and contains 3 annexes:

Annex No. 1: Affidavit of the recipient of income, who is a taxpayer with limited tax liability (non-resident), to prove the status of the beneficial owner of income for the purposes of the Income Tax Act

Annex No. 2: Questionnaire filled out by the recipient of income, who is a taxpayer with limited tax liability (non-resident), to prove the status of the beneficial owner of income for the purposes of the Income Tax Act

Annex No. 3: Examples of possible documents proving the income recipient's claims as stated in their affidavit and questionnaire

For the purpose of proving the person of the beneficial owner of the income by the taxpayer, the different annexes are divided according to possible risk indicators of cross-border cases, which are generally related to the taxable income paid to the final recipient of the income.

Examples of recommended documents include various corporate documents (such as transfer pricing documentation, the income recipient's tax return or the income recipient's business license) to which the income payer itself often does not/may not have access, particularly in the case of third parties.

Our recommendations for taxpayers

In general, taxpayers would therefore be advised, when proving the identity of the beneficial owner of income, to in particular have:

a)     the confirmation of the income recipient's tax residency,

b)     the signed affidavit/questionnaire from the income recipient to prove beneficial ownership status,

c)     in the case of a foreign recipient of income and it is possible to be one, it is advisable to have the affidavit in question signed by a local competent tax authority of the recipient of income abroad and

d)     secure as many documents as possible from publicly available databases in order to prove the identity of the beneficiary (e.g. business registers, annual reports or financial statements). Even the information of the Financial Directorate of Slovak Republic contains a brief statement in paragraph 25, which states: ”In applying the taxpayer's liability for the tax, the tax administrator may take into account the fact that the taxpayer can evaluate the information provided in the questionnaire, largely on the basis of information from publicly available sources, (e.g., financial statements, annual reports), which the taxpayer is able to obtain themself, if the taxpayer and the recipient of the income are independent persons."

Information of the Financial Directorate along with annexes is available here.