Slovakia: Related persons in transfer pricing

16. June 2017

The amendment act to the Income Tax Act taking effect in 2017 has, in addition to other important changes, brought changes in transfer pricing. Multiple changes have been made in transfer pricing since 2017, but the most significant cover the changes in the definition of related persons.

Definiton of related persons in transfer pricing changed effective as of 2017

A substantial change affects, since 2017, the economic or personal interrelation which is defined in a quite extensive Section 2 sub-section o) of the Income Tax Act, and therefore they allow for the combination thereof. Moreover, compared to its previous language, the economic (through ownership) and personal interrelation may also arise through the relation of close persons.

Other interrelation establishing a relationship of related person between entities originally applied to a business relation only, but since 2017 it may arise basically based on any legal or similar relationship. The typical features of other interrelation may include obviously inappropriate conditions of a transaction without economic grounds leading to a purposeful reduction of the tax base or increase in the tax loss, this being the primary goal of such interrelations.

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