On January 1, 2018, the amendment to Act No. 595/2003 Coll. on Income Tax became effective. The amendment added to the definition of the term “permanent establishment” provisions governing the conduct of business activities in the Slovak Republic through a “permanent place”, which is a prerequisite for the creation of a so-called standard permanent establishment in the Slovak Republic.

Pursuant to the third sentence of Section 16(2) of the Income Tax Act, “also repeated mediation of transport and accommodation services, including mediation via a digital platform, shall be deemed to be performance of activities with a permanent place in the territory of the Slovak Republic.”

According to the opinion issued by the Financial Directorate of the Slovak Republic on March 23, 2018, “the reason for amending the definition of a permanent place in the Income Tax Act is the response to new forms of business based on the provision of mediation services in the area of transport or accommodation via digital platforms, which, as opposed to traditional forms of business, are characterized by the absence of physical presence of a taxpayer with limited tax liability in the territory of the country where the services are provided. […] These intermediary services are performed through automated functions that are performed by a computer algorithm often located in a jurisdiction with a low or no level of taxation.”

Digital platform operators who have established a permanent establishment in the Slovak Republic and who are not registered for income tax are required to register their permanent establishment. In the event that digital platform operators do not do so, the tax administrator will register a permanent establishment ex officio.

Slovakia is thus one of the first countries that try to set out local rules for taxation of income from the digital economy.

As recently publicized (on July 30, 2018), according to the Slovak Chamber of Tax Advisors (SCTA), to date only one company has registered voluntarily, while other companies (e.g., Booking.com) are undergoing the official registration process. According to the SCTA, the said legislation may lead to double taxation and breach of double taxation treaties that should take precedence over Slovak law.