On December 8, 2023, the National Council of the Slovak Republic adopted a new Act on top-up tax to ensure a minimum level of taxation for multinational enterprise groups and large-scale domestic groups (the “Top-up Tax Act“). The Top-up Tax Act is a transposition of Council Directive (EU) 2022/2523 of 15 December 2022 on ensuring a global minimum level of taxation for multinational enterprise groups and large-scale domestic groups in the Union.

Certain entities are, however, excluded from the scope of the Top-up Tax Act, such as public bodies, international organizations, non-profit organizations, pension funds and investment funds, including real estate funds, and other entities specified in the Top-up Tax Act (the so-called “excluded entities”).

In short, the new legislation applies to the following entities:

1. constituent entities located in the Slovak Republic which are members of a multinational enterprise group or a large-scale domestic group and which, in the consolidated financial statements of its ultimate parent entity, has an annual revenue of EUR 750 000 000 and more, including the revenues of the excluded entities mentioned above, in at least two out of four accounting periods immediately preceding the tested accounting period;

2. joint ventures and joint venture affiliates established in the Slovak Republic.

The principle of the Top-up Tax Act is that if the effective taxation of the income of the group entities in the Slovak Republic is below the minimum tax rate of 15%, the minimum taxation of these entities will be ensured by imposing top-up tax liability on them.

If there is more than one constituent entity within the same group established in the Slovak Republic for which top-up tax has been calculated in aggregate, such tax will be apportioned among all the entities according to the ratio of the income of the constituent entity of the group to the aggregate income of the constituent entities of the group in the Slovak Republic.

The Act became effective on December 31, 2023 and applies to accounting periods beginning on the effective date of the Act. The first tested period will therefore be the calendar year 2024.