(a) For tax years beginning on or after 1 January 2021, the 15% rate applies to so-called micro-entities whose taxable income does not exceed EUR60,000.
(b) The 7% rate applies to the dividend income of individuals paid rom profits generated in tax periods beginning on or after 1 January 2017 up to and including 2023. For profits generated in tax periods beginning on or after 1 January 2024, the dividend income of individuals will be taxed at a rate of 10%. The 35% rate applies if either of the following circumstances exists:
• The dividends are paid out from profits generated in tax periods beginning on or after 1 January 2017 and the dividends are paid to or received from a taxpayer of a non-cooperative state, that is, an entity having its registered seat or individual having permanent residence in a state not listed on the approved list published by the Ministry of Finance of the Slovak Republic
• The payer is not able to demonstrate who is the beneficial owner of the dividends.
(c) This tax applies to nonresidents only. For resident companies, interest is included in taxable income subject to corporate tax (an exception is, for example, interest on the funds of bank account). The higher rate of 35% applies if either of the following circumstances exists:
• The payments are made to taxpayers of a non-cooperative state.
• The payer is not able to demonstrate who is the beneficial owner of the interest payments (see Section B).
Exemption from or reduction of local withholding tax on the interest payments may be provided by the following:
• A relevant double tax treaty
• Provisions of the Income Tax Act implementing the European Union (EU) Interest-Royalty Directive.
(d) This tax applies to nonresidents only. For resident companies, royalties are included in taxable income subject to corporate tax. The higher rate of 35% applies if either of the following circumstances exists:
• The payments are made to taxpayers of a non-cooperative state.
• The payer is not able to demonstrate who is the beneficial owner of the royalties (see Section B).
Exemption from/reduction of local withholding tax on the interest payments may be provided by the following:
• A relevant double tax treaty
• Provisions of the Income Tax Act implementing the EU Interest-Royalty Directive
(e) This tax applies to income received by authors (individuals) for contributions to newspapers, radio and television. It is possible for the author and the payer of the income to agree that no withholding tax be applied; in such case, the income is taxed through the tax return of the author at tax rates of 15%, 19% and 25%. See Section B for details on when the 35% rate applies.
(f) A tax loss incurred in a tax year beginning before 1 January 2020 may be carried forward proportionally for a period of four consecutive years. The tax loss incurred in a tax year beginning on or after 1 January 2020 or later may be carried forward for a period of five consecutive years and a tax loss may be utilized up to 50% of the calculated tax base. Special rules apply to socalled micro-entities.
B. Taxes on corporate income and gains
Corporate income tax. Slovak (resident) companies are subject to corporate income tax on their worldwide income. Slovak companies are those incorporated or having their place of management in the Slovak Republic. Foreign (nonresident) companies are subject to corporate income tax only on their Slovak-source income, such as income attributable to a permanent establishment.
Under Slovak law, a permanent establishment is a fixed place or facility for nonresidents to carry out activities in the Slovak Republic. A permanent establishment includes an administrative location, branch, office, workshop, sales location, technical facility or location for research and extraction of natural resources. The fixed place or the facility is considered to be permanent if the activities are carried out continuously or repeatedly. Repeated intermediary services related to transportation and accommodation that are rendered through a digital platform (a hardware or
software platform required to create and administer applications) are also deemed to have their fixed place in the Slovak Republic. In the case of one-off activities, the place or facility is considered to be permanent if the duration of the activities exceeds six months, either continuously or divided into 2 or more periods in the course of 12 consecutive calendar months. A building site, construction site or assembly works site (as described in the Commentary to Article 5, Paragraph 3 of the Organisation for Economic Co-operation and Development [OECD] Model Tax Treaty) is regarded as a permanent establishment only if the duration of the activities performed by a tax nonresident and its related parties exceeds six months. The provision of services in the Slovak Republic by an enterprise through its employees or other personnel is considered to create a “service permanent establishment” if the provision of services exceeds 183 days in any consecutive 12-month period. A permanent establishment also includes the activity of an agent if both of the following conditions are satisfied:
• The agent negotiates, enters into agreements, acts as an intermediary in the conclusion of contracts or plays a principal role leading to the conclusion of contracts that are routinely concluded without material modification by the enterprises.
• These contracts are concluded in the name of the enterprise, or for the transfer of the ownership of, or for the granting of the right to use, property owned by that enterprise or that enterprise has the right to use, or for the provision of services by that enterprise.
Rates of corporate tax. The corporate income tax rate is 15% or 21%, except for withholding tax (see Section A). For tax years beginning on or after 1 January 2021, the 15% rate applies only to so called micro-entities whose taxable income does not exceed EUR60,000.
Incentives. To promote investments, the Slovak government provides potential local and foreign investors with investment incentives that are proportionate to their activities in the Slovak Republic. The maximum limits for state aid are determined by the EU regulations and are driven by the relative development of the country or region in which an investment project is located and the unemployment rate in that region. The limits are set as a percentage of eligible costs of an investment project.
Under the Slovak Regional Investment Aid Act, investment aid may be granted to support the realization of investments in manufacturing productions, technology centers and sharedservice centers.
The Slovak Republic provides the following indirect forms of incentives:
• Tax relief
• Transfer of immovable assets owned by the state or municipality at a price lower than the market price
The Slovak Republic provides the following direct forms of incentives:
• Cash grants on acquisitions of fixed assets
• Cash grants on newly created jobs
• Cash grants on training
Municipalities are entitled to use state budget funding for the development of industrial parks. At the predevelopment stage, investors are typically requested to sign a letter of intent with the relevant municipality. Benefiting from advantages offered by industrial parks does not, in general, qualify as state aid.
Patent Box. Fifty percent of the income derived from the commercial use of certain intangible assets and embedded royalties is exempt from tax. This affects income from compensation for the use of software, patents and utility models as well as income from the sale of products that were manufactured using patents or technical solutions protected by a utility model. To apply the income exemption in both of these cases, the intangible assets (for example, software or patents) must be the result of an R&D activity of a resident or a nonresident legal person performing the activity in the Slovak Republic through a permanent establishment.
Capital gains. Capital gains are subject to income tax at a rate of 15% or 21%. For tax years beginning on or after 1 January 2021, the 15% rate applies only to so-called micro-entities whose taxable income does not exceed EUR60,000.
The income of legal entities, Slovak tax residents or nonresidents with a Slovak permanent establishment, arising from the sale of shares may be exempted from tax if the following conditions are satisfied:
• These persons perform substantial function and manage and bear risks connected to the ownership of these shares in the Slovak Republic.
• They possess the required personal and material equipment necessary to perform these functions.
• They have a direct shareholding of at least 10% in the company, the share capital of which is being sold.
• At least 24 consecutive calendar months have passed since the shareholding was acquired.
The exemption does not apply to income from the sale of securities and shares by securities dealers, as this represents their principal activity; nor is it available to taxpayers subject to liquidation proceedings. In addition, income arising from the sale of shares is not exempt if the company of which shares were sold has gone into liquidation, declared insolvency or had its restructuring approved.
Capital gains realized by Slovak tax nonresidents on the sale of shares of companies established in the Slovak Republic are considered Slovak-source income and are generally taxable unless the relevant double tax treaty stipulates otherwise.
Administration. The tax year is usually the calendar year. However, if a company informs the tax authorities in advance, it may change its tax (accounting) year.
Tax returns for each tax year must be filed within three months after the end of the tax year. The filing period may be extended by a maximum of three months based on a written announcement filed with the tax authority before the expiration of the regular filing deadline. Another extension of an additional three months is possible if the company received income from foreign sources.
In general, monthly or quarterly prepayments of tax are required, depending on the amount of tax liability for the preceding year.
Dividends. Profits distributed by companies to their holding companies are not subject to tax in the Slovak Republic unless either of the following circumstances exists:
• The distribution is deductible for tax purposes at the level of the subsidiary.
• The distribution is a transaction (or part of a series of transactions) that is (are) not business driven, and the purpose or one of the main purposes is to gain a tax advantage.
The 7% rate applies to the dividend income of individuals paid out from profits generated in tax periods beginning on or after 1 January 2017 up to and including 2023. For profits generated in tax periods beginning on or after 1 January 2024, the dividend income of individuals will be taxed at a rate of 10%. The 35% rate applies if the either of the following circumstances exists:
• The dividends are paid from profits generated in tax periods beginning on or after 1 January 2017 and the dividends are paid to or received from a taxpayer of a non-cooperative state.
• The payer is not able to demonstrate who is the beneficial owner of the dividends.
Special rules apply to dividends distributed out of profits realized before 2004.
Interest and royalties. Under Slovak law, interest and royalty payments satisfying the conditions contained in Council Directive No. 2003/49/EC are exempt from Slovak withholding tax.
Foreign tax relief. Under applicable double tax treaties, a foreign tax relief is available to Slovak residents for foreign tax paid on income earned abroad.
C. Determination of trading income
General. Corporate tax is based on the statutory accounting profit as adjusted for certain items prescribed by the tax law.
In general, dividends are not included in the tax base.
Items that are specifically deductible for tax purposes include, among others, tax depreciation (see Tax depreciation) and certain expenses relating to health and safety at work and environmental protection.
Nondeductible items include, among others, the following:
• Entertainment and travel allowances in excess of the statutory limits
• Taxes paid on behalf of other taxpayers
• Damages exceeding compensation received, unless the damage arose as a result of natural disaster, or it was caused by a person or persons unknown and this is confirmed by the police
• Most accruals and provisions (see Provisions)
• Write-offs of debts, unless specific conditions are met
Inventories. Inventories may be valued using the first-in, first-out (FIFO) or average-cost methods. Costs include all costs necessary to convert the inventory to its current condition and to transport
solidarity reserve fund; imposed on monthly wages with a monthly cap on wages of EUR9,128; contributions are deductible for employers; paid by
Social security contributions for accident insurance; imposed on monthly wages without a monthly cap; contributions are deductible for employers; paid by
Health insurance contributions; imposed on monthly wages without a monthly cap; paid by
Local taxes (tax on land, tax on buildings and apartments, and motor vehicle tax); rates vary depending on location
E. Miscellaneous matters
Thin-capitalization rules. Thin-capitalization rules apply to domestic and foreign related parties, effective from 1 January 2015. The maximum amount of tax-deductible interest is set at 25% of earnings before interest costs, tax, depreciation and amortization. These rules also apply to contracts signed before 1 January 2015. They do not apply to financial institutions.
Interest limitation rule. As a result of transposition of the European Anti-Tax Avoidance Directive into the Slovak tax legislation, effective from 1 January 2024, a new interest limitation on deductibility of interest expenses will apply to all taxpayers, not only to related parties with a de minimis exception to a threshold of interest expenses up to EUR3 million. The rule will not apply to financial institutions. The new legislation will not result in the abolition of the current thin-capitalization rules, but the applicability of the new limitation on the deductibility of interest expenses will be applied as a matter of priority in determining the tax base.
Transfer pricing. If the price agreed between related parties differs from the usual market price and if this difference cannot be satisfactorily justified, the tax authorities may adjust the tax base to reflect the usual market price. Effective from 1 January 2023, if prices in controlled transactions do not comply with the arm’slength principle, the tax authorities may levy additional tax on the difference between the actual value of the transaction and the established median value during a tax audit. The tax authorities consider prices to be at market level when they are within the interquartile range determined by a comparability analysis. However, the taxpayer is given the option to adjust the difference to another value within the range if the circumstances make such an adjustment more appropriate.
The transfer-pricing rules apply to close family relatives (for example, direct family relatives, spouse and siblings) personally or economically related persons, as well as to other related persons.
Persons are economically or personally related if one person participates in the ownership, control or administration of another person, if such persons are under the control or administration of the same person or a close family relative of the person, or if the same person or a close family relative of the person has a direct or indirect equity interest in the persons. Participation in ownership or control exists if the direct or indirect participation in the basic capital of, or voting rights in, one company by another company is higher than 25%. Participation in the administration is a relationship between members of statutory bodies or supervisory boards of the companies. Other relationships are defined as relationships created for the purpose of decreasing the tax base or increasing the tax loss.
Under the Slovak transfer-pricing measures, an advance ruling on the transfer-pricing method may be obtained through an agreement with the tax authorities at least 60 days before the tax year in which the transfer-pricing method will be used. Effective from 1 January 2023, for bilateral and multilateral advanced ruling requests, the option of the Slovak tax authorities agreeing with another jurisdiction’s tax authorities to issue a ruling for more than five tax years is added, even if the taxpayer has not requested it. Under the new rules, advanced ruling requests can also be applied retrospectively, for tax periods preceding the application.
The Slovak transfer-pricing measures specify the acceptable transfer-pricing methods, which conform to the methods included in the OECD Transfer-Pricing Guidelines. Effective from 1 January 2023, the OECD Transfer Pricing Guidelines are considered by law as the official technical guidelines in the field of transfer pricing and are officially translated.
Taxpayers must provide transfer-pricing documentation within 15 days after an official request by the tax authorities.
Tax regime for business combinations. The Slovak Income Tax Act addresses in detail the taxation of the sale of all or part of an enterprise, the taxation of non-monetary contributions to registered capital and the taxation of mergers and divisions of companies.
Effective from 1 March 2024, a spin-off has been introduced as a new type of business combination in the Slovak Republic.
In general, business combinations can be made only in real values for tax purposes, with the exception of certain cross-border business combinations meeting specific criteria.
Exit tax. Assets are subject to an exit tax at a rate of 21% if a taxpayer moves them, with no change of ownership, to a jurisdiction outside of the Slovak Republic or if the taxpayer changes its tax residence.
The exit tax base equals the difference between the fair market value of the moved assets and their tax residual value (that is, the fiction of the sale of these assets is applied, and this difference
in the EU. The purpose of the legislation is to ensure that large business groups are taxed globally at least at the 15% tax rate.
Top-up tax is applicable to companies that are part of the group whose consolidated revenues reach a minimum of EUR750 million in at least two out of the four accounting periods immediately preceding the period under analysis. Entities within the scope of the law are required to evaluate whether their effective tax rate is equal at least to 15%. In this case, the effective tax rate is calculated as the ratio of covered taxes (among others, deferred tax, withholding tax or a specific contribution in regulated sectors should be included within covered taxes) and the profit/loss in the given jurisdiction after the adjustment by specified items indicated in the legislative proposal. If, as a result of the calculation, the effective tax rate is lower than 15%, the taxpayer must pay a topup tax corresponding to the relevant difference.
F. Treaty withholding tax rates
The Slovak Republic honors the bilateral tax treaties that were concluded by the former Czechoslovakia. The withholding rates under these treaties, and the treaties entered into by the Slovak Republic are listed in the table below.
In general, treaty rates apply if the recipient is the beneficial owner of the income. To obtain the benefit of the reduced treaty rates, the beneficial owner must be in a position to provide a tax residency certificate.
In general, dividends paid by Slovak companies to legal entities are exempt from tax. Consequently, the treaty rates do not apply to these dividends.
Multilateral Instrument. The Slovak Republic signed and ratified the Multilateral Instrument (MLI). It implemented “minimum standard” changes to existing treaties in the areas of treaty abuse, mutual agreement procedures and treaty preambles. In addition, depending on the reservations and notifications made by each party, the MLI facilitates optional changes to modify tax treaties with respect to permanent establishments, transparent entities, residence tiebreakers, double tax relief, minimum shareholding periods, capital gains derived from immovable property and a jurisdiction’s right to tax its own residents.
For example, with respect to withholding tax rates for dividends, Paragraph 1 of Article 8 of the MLI introduced an additional condition that the tax rate limited by the treaty can be used if the company is a beneficial owner that holds at least a certain amount of the capital, shares, stock, voting power, voting rights or similar ownership interests of the company paying the dividends throughout a 365-day period that includes the day of the payment of the dividend.
8/10 (a) 0/8 (n)(v) 5/10 (w)(ii)
0/5 (x)
Belarus 10/15 (a) 0/10 (n)(v) 5/10 (w)(dd)(ii)
Belgium 5/15 (a)(m) 0/10 (o)(v) 5 (ii)
Bosnia and Herzegovina 5/15 (a) 0 10
Brazil 15 (l) 0/10/15 (n)(p)(v) 15/25 (y)(ii)(cc)
Bulgaria 10 (l) 0/10 (n)(v) 10 (cc)(ii)
Canada 5/15 (b)(m) 0/10 (n)(v) 0/10 (x)(ii)
China Mainland 10 (l) 0/10 (n)(v) 10 (ii)
Croatia 5/10 (a) 10 (v) 10 (ii)
Cyprus 10 0/10 (n)(v) 0/5 (x)
Czech Republic 5/15 (b) 0 (v) 0/10 (x)(ii)
Denmark 15 (l) 0 0/5 (x)
Estonia 10 (l) 0/10 (n)(v) 10 (ii)
Ethiopia 5/10 (b) 0/5 (n)(v) 5 (ii)
Finland 5/15 (a) 0 (v) 0/1/5/10 (x)(aa)(ii)
France 10 0 0/5 (x)
Georgia 0 (l) 5 (v) 5 (ii)
Germany 5/15 (a)(e) 0 5
Greece – (g) 0/10 (n)(v) 0/10 (x)
Hungary 5/15 (a) 0 (v) 10 (ii)
Iceland 5/10 (a) 0 10 (ii)
India 15/25 (a)(m) 0/15 (n)(q)(v) 30 (cc)(ii)
Indonesia 10 (l) 0/10 (n)(v) 10/15 (bb)(ii)
Iran 5 (l) 5 (v) 7.5
Ireland 0/10 (a)(m) 0 (v) 0/10 (x)(ii)
Israel 5/10 (b)(k)(m) 2/5/10 (r) 5 (ii)
Italy 15 (l) 0 (v) 0/5(x) (ii)
Japan 10/15 (a) 0/10 (n) 0/10 (x)
Kazakhstan 10/15 (f)(m) 0/10 (n)(v) 10 (ii)
Korea (South) 5/10 (a) 0/10 (n)(v) 0/10 (x)(ii)
Kuwait 0 (l) 0/10 (n)(v) 10 (ii)
Latvia 10 0/10 (n)(v) 10 (ii)
Libya 0 (l) 0/10 (n)(v) 5 (ii)
Lithuania 10 (l) 0/10 (n)(v) 10 (ii)
Luxembourg 5/15 (a) 0 0/10 (x)
Malaysia 0/5 (b) 0/10 (n)(v) 10 (cc)(ii)
Malta 5 (i) 0 5 (ii)
Mexico 0 0/10 (n)(v) 10 (ii)
Moldova 5/15 (a) 10 (v) 10 (ii)
Mongolia (jj) 0 0 0
Montenegro 5/15 (a) 10 (v) 10 (ii)
Netherlands 0/10 (a) 0 5
Nigeria 12.5/15 (b) 0/15 (n)(v) 15 (ii)
North Macedonia 5 (l) 10 (v) 10 (ii)
Norway 5/15 (a) 0 0/5 (x)
Oman 0 (l) 0/10 (n)(v) 10 (ii)
Poland 0/5 (b) 0/5 (n)(v) 5 (ii)
Portugal 10/15 (a) 10 (v) 10 (ii)
Romania 10 0/10 (n)(v) 10/15 (ee)(ii)
Russian Federation 10 (l) 0 (v) 10 (ii)
Serbia 5/15 (a)(m) 10 (v) 10 (ii)
Singapore 5/10 (b) (c) 0 (v) 10 (ii)
Slovenia 5/15 (a) (m) 10 (v) 10 (i)
South Africa 5/15 (a)(m) 0 (v) 10 (ii)
(h) The 15% rate applies to dividends paid by Slovak companies to Sri Lankan recipients. The 0% rate applies to dividends paid by Sri Lankan companies to Slovak recipients, except for Sri Lankan income tax and additional tax under Sri Lanka’s tax law. A maximum tax rate of 6% applies to the additional tax.
(i) The tax in Malta on dividends may not exceed the tax on the profits out of which the dividends are paid.
(j) The 5% rate applies if the recipient is a company that holds directly at least 70% of the capital of the payer of the dividends.
(k) If the profits out of which a dividend is paid are profits that have been subjected to tax at a rate not exceeding 15%, in accordance with tax laws of the contracting state in which the company is a resident, the gross amount of the dividend shall be subject to a tax in that state at a rate of 10%.
(l) The lower rate applies if the recipient is a beneficial owner of the dividend payment.
(m) The lower rate applies if the conditions of ownership specified in the given provisions are met during the entire period of 365 days, which includes the day of the payment of dividends (for the purpose of calculating this period, changes in ownership that would directly result from the reorganization of the company, such as a merger or division of a company that holds shares or that pays out the dividends, are not taken into account).
(n) Under the Albania treaty, the 0% rate applies if the interest is derived and beneficially owned by the following:
• The government of the Slovak Republic, its local authorities, the National Bank of Slovakia, the Export-Import Bank of the Slovak Republic, the Slovak Guarantee and Development Bank or the Debt and Liquidity Management Agency
• The government of Albania, its local authorities or the National Bank of Albania
Under the Armenia treaty, the 0% rate applies if the interest is received from the other contracting state and beneficially owned by the government, including its administrative units, local authorities, central bank or other financial institutions owned by the government of the other contracting state or if interest is received and guaranteed by this government. Under the Azerbaijan treaty, the 0% rate applies if the interest is derived and beneficially owned by the following:
• The government of Azerbaijan, political or administrative-territorial subdivision or a local authority, the Central Bank of the Republic of Azerbaijan or the State Oil Fund and the State Oil Company of the Republic of Azerbaijan
• The government of the Slovak Republic, political or administrativeterritorial subdivision or a local authority, the National Bank of Slovakia, Export-Import Bank of the Slovak Republic, the Slovak Guarantee and Development Bank or the Debt and Liquidity Management Agency
Under the Belarus treaty, the 0% rate applies if the interest is received from the other contracting state and beneficially owned by the government or national bank of a contracting state. Under the Brazil treaty, the 0% rate applies to interest paid in either of the following circumstances:
• It is paid to the government of the other contracting state, a political subdivision thereof or any agency (including a financial institution) owned by that government or political subdivision.
• It arises from securities, bonds or debentures issued by the government of a contracting state, a political subdivision thereof or by any agency (including a financial institution) owned by that government or political subdivision.
Under the Bulgaria treaty, the 0% rate applies if the interest is received from the other contracting state and owned by the government or a statutory body thereof, or national bank of a contracting state. Under the Canada treaty, the 0% rate applies to the following types of interest:
• Interest paid with respect to indebtedness of the government of the other contracting state or of a political subdivision or local authority thereof
• Interest paid with respect to a loan made, guaranteed or insured, or a credit extended, guaranteed or insured by any entity wholly owned and controlled by the government of that other state, provided this loan or credit is with respect to imports or exports
Under the Cyprus treaty, the 0% rate applies if the interest arising from credits or loans accorded by the government of a contracting state or by a bank or other institution in the name or on behalf of that government. Under the China Mainland treaty, the 0% rate applies if the interest arising in a contracting state and derived by the government of the other contracting state, a political subdivision, a local authority and the central bank thereof or any financial institution wholly owned by that government, or by any other
resident of that other contracting state with respect to debt claims indirectly financed by the government of that other contracting state, a political subdivision, a local authority and the central bank thereof or any financial institution wholly owned by that government. Under the Estonia treaty, the 0% rate applies if the interest is received from the other contracting state and beneficially owned by the government of the other contracting state or the central bank or any financial institution wholly owned by that government, or interest derived on loans guaranteed by that government. Under the Ethiopia treaty, the 0% rate applies to the following types of interest, if paid to its beneficial owners resident in the other contracting state:
• Interest paid to the government, an administrative territorial unit or a local authority thereof or to the central bank
• Interest paid in connection with a loan or a credit guaranteed or insured by the government, an administrative-territorial unit or a local authority thereof or by the central bank
Under the Greece treaty, the 0% rate applies if the interest is received from the other contracting state and owned by the government of the other contracting state or the bank or any financial institution wholly owned by that government. Under the India treaty, the 0% rate applies if the interest is received from the other contracting state and beneficially owned by the government of the other contracting state or a political subdivision or a local authority of the other contracting state or the central bank of the other contracting states. Under the Indonesia treaty, the 0% rate applies if the interest is received from the other contracting state and owned by the government of the other contracting state including local authorities thereof, a political subdivision, the central bank or any financial institution controlled by that government, the capital of which is wholly owned by the government of the other contracting state, as may be agreed upon between the governments of the contracting states. Under the Japan treaty, the 0% rate applies if the interest is derived by the government of the other contracting state including local authorities thereof, the central bank of that other contracting state or any financial institution wholly owned by that government, or by any resident of the other contracting state with respect to debt claims guaranteed or indirectly financed by the government of that other contracting state including local authorities thereof, the central bank of that other contracting state or any financial institution wholly owned by that government. Under the Kazakhstan, Latvia and Lithuania treaties, the 0% rate applies if the interest is derived and beneficially owned by government of the other contracting state or the central bank (national bank) or any financial institution wholly owned by that government. Under the Korea (South) treaty, the 0% rate applies if either of the following circumstances exist:
• The interest is derived and beneficially owned by the government of the other contracting state including political subdivisions and local authorities thereof, the central bank of that other contracting state or any financial institution owned by that government, or by any resident of the other contracting state with respect to debt claims guaranteed or indirectly financed by the government of that other contracting state including political subdivisions and local authorities thereof, the central bank of that other contracting state or any financial institution owned by that government
• The interest is paid in connection with the sale on credit of any industrial, commercial or scientific equipment, or paid in connection with the sale on credit of any merchandise by one enterprise to another enterprise
Under the Kuwait treaty, the 0% rate applies if the interest is derived and beneficially owned by the following:
• The government of a contracting state, a political subdivision or a local authority thereof, or the central (national) bank of a contracting state
• Institutions established under public law the capital of which is wholly owned by the government of a contracting state as based upon the exchange of diplomatic notes between both contracting states In the case of the Slovak Republic, the following qualify:
• Eximbanka SR
• The Slovak Guarantee and Development Bank; In Kuwait, the following qualify:
• Kuwait Investment Authority
• Kuwait Petroleum Corporation
• Public Institution for Social Security
• Kuwait Fund for Arab Economic Development
Under the Libya treaty, the 0% rate applies if the interest is derived and beneficially owned by the other contracting state itself or by a political subdivision or local authority of the other contracting state or by the central (national) bank of that other contracting state. Under the Malaysia treaty, the
• Interest paid to the government of the other contracting state, a political subdivision or local authority thereof or the central bank of the other contracting state
• Interest paid by a company to a company of the other contracting state if the recipient company was affiliated with the company paying the interest by a direct minimum holding of 25% in the capital for at least two years before the payment of the interest or if, for at least two years before the payment of the interest, both companies were held by a third company that held directly a minimum of 25% in both the capital of the first company and the capital of the second company
The 5% rate applies to other interest payments.
(t) The 0% rate applies if the interest is paid in respect of loans granted by a contracting state.
(u) The lower rates apply only if the recipient is one of the following:
• An individual
• A contracting state or a political subdivision or local authority of the state
• A recipient engaged in the active conduct of a trade or business in the United States (other than the business of making or managing investments, unless these activities are banking or insurance activities carried on by a bank or insurance company) if the income derived from the Slovak Republic is derived in connection with, or is incidental to, that trade or business
• A company whose principal class of shares is substantially and regularly traded on a recognized securities exchange or is wholly owned, directly or indirectly, by a resident of the company’s state whose principal class of shares is substantially and regularly traded on a recognized securities exchange
• A not-for-profit organization
• A person if more than 50% of the beneficial interest in such person is owned, directly or indirectly, by persons entitled to the lower rates according to the treaty and if not more than 50% of the gross income of such person is used directly or indirectly, to meet liabilities (including liabilities for interest or royalties) to persons not entitled to the lower rates according to the treaty
(v) The treaty rate applies if the recipient is a beneficial owner of the interest payment.
(w) The lower rate applies to royalties, which are defined as the use of, or the right to use the following:
• Patents, trademarks, designs or models, plans, secret formulas or processes, software, industrial, commercial, or scientific equipment, or information concerning industrial, commercial or scientific experience under the Azerbaijan treaty
• Copyrights of literary, artistic or scientific works, including cinematographic films or films or tapes and other means of image or sound reproduction under the Belarus treaty
• Copyrights of literary, artistic or scientific works, including cinematographic films and films or recordings for radio and television under the Tunisia treaty
• Industrial, commercial or scientific equipment under the Taiwan treaty
(x) The 0% rate applies if the source state does not possess the right to tax royalties, which are defined as the use of, or the right to use the following:
• Copyrights of literary, artistic or scientific works, including cinematographic films under the Austria treaty
• Literary, dramatic, musical or other artistic works (but not including royalties with respect to motion picture films nor royalties with respect to works on film or videotape or other means of reproduction for use in connection with television broadcasting) under the Canada treaty
• Copyrights of literary, artistic or scientific works, including cinematographic films, and films or tapes for television or radio broadcasting under the Cyprus, Denmark, Greece, Japan, Korea (South), Luxembourg, Norway and United Kingdom treaties
• Copyrights of literary, artistic or scientific works, including cinematographic films, and films or recordings on tape and any other media for visual and audio reproduction used for radio or television broadcasting, with the exception of computer programs (software) under the Czech Republic treaty
• Copyrights of literary, artistic or scientific works, under the Finland, France and Sweden treaties
• Copyrights of literary, artistic or scientific works, including motion pictures or films, recordings on tape or other media used for radio or television broadcasting or other means of reproduction or transmission under the Ireland treaty
• Copyright of literary, artistic or scientific works, including cinematographic films and television films under the Italy treaty
• Copyright royalties, and other similar payments with respect to the production or reproduction of literary, dramatic, musical or artistic works, except for royalties relating to motion picture films and works on film or videotape for use in connection with television under the Spain treaty
• Copyrights of literary, artistic or scientific works, including cinematographic films or films or tapes and other means of image or sound reproduction under the United States treaty
(y) The 25% rate applies to royalties paid for trademarks.
(z) The 5% rate applies to royalties paid for the use of, or the right to use, patents, designs or models, plans, secret formulas or processes, or for information concerning industrial or scientific experience, or for the use of, or the right to use industrial, commercial or scientific equipment. The 10% rate applies to royalties paid for the use of, or the right to use, trademarks or for information concerning commercial experience. The 15% rate applies in all other cases.
(aa) The 1% rate applies to payments under a financial lease of equipment. The 5% rate applies to payments under an operating lease of equipment, as well as to payments for the right to use cinematographic films and software for personal computers.
(bb) The lower rate applies to payments for the use of, or the right to use, copyrights of motion picture films, films or video for use in connection with television, tapes for use in connection with radio broadcasting, or total or partial forbearance regarding the use or supply or any property or right.
(cc) This rate also applies to fees for technical services.
(dd) The higher rate also applies to payments for the right to use transport vehicles.
(ee) The lower rate applies to industrial royalties, which are defined as payments for the use of or the right to use, patents, trademarks, designs or models, plans, secret formulas or processes, or industrial, commercial or scientific equipment, or for information concerning industrial, commercial or scientific experience.
(ff) The 0% rate applies to royalties relating to copyrights and films derived from sources within one of the contracting states.
(gg) The 0% rate applies if the royalties are derived and beneficially owned by the following:
• The government of the Slovak Republic, its local authorities, the National Bank of Slovakia, the Export-Import Bank of the Slovak Republic, the Slovak Guarantee and Development Bank, and the Debt and Liquidity Management Agency
• The Central Bank of the United Arab Emirates, the Emirates Investment Authority, the Abu Dhabi Investment Authority, the International Petroleum Investment Company, the Abu Dhabi Investment Council, the Investment Corporation of Dubai, the Abu Dhabi National Energy Company, the Mubadala Development Company, the Abu Dhabi Retirement Pensions and Benefits Fund, and the General Pension and Social Security Authority
• Any other institutions that are agreed upon between the two contracting states through an exchange of letters
(hh) The 0% rate applies to cultural royalties, which are defined as the right to use copyrights of literary, artistic or scientific works, including cinematographic films. The 0% rate also applies to other royalties if, for a period of at least two years before the royalty payment, the payer and recipient of the royalty were mutually connected by a direct share of at least 25% in ownership or if a third entity had a direct share of at least 25% in both the payer and recipient for a period of at least two years before the royalty payment. The 5% rate applies to industrial royalties, which are defined as the right to use patents, trademarks, designs or models, plans, secret formulas or processes, and to consideration for information concerning industrial, commercial or scientific experience, provided Switzerland does not under its internal law levy a tax at source on royalties paid to nonresidents. The 10% rate applies to other royalties.
(ii) The treaty rate applies if the recipient is a beneficial owner of the royalty payment.
(jj) These rates are based on a multilateral treaty, which the former Czechoslovakia entered into with the other members of the Council for Mutual Economic Assistance (Comecon or CMEA).
(kk) See Section B.