European Union will probably suspend the new Slovak financial transaction tax

There are several problems with the legislation that will come into force in January 2025.

By: sme.sk

Oct 21 2024
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2921 Views

European Union will probably s

The new Slovak Act on Financial Transaction Tax (further FTTA) was signed by the president on Friday and should come into force as of January 1, 2025, with the first tax period being April 2025. Businesses are already trying to adapt to the new reality, however, experts are still intensively discussing many technical details of the law. Its quality is poor as it has not passed the standard legislative procedure and was approved within two weeks of its first presentation based on the model of a similar Hungarian FTTA of 2012.

The Slovak law goes further than the Hungarian one; it is problematic mainly from the European law perspective, as the new transaction tax will also apply to bank transactions carried out by Slovak businesses on foreign bank accounts and impose higher taxation in respect of cross-border settlements when compared to direct bank transfers through a Slovak bank where the limit of €40 does not apply. Such measures are even more controversial than the similar Hungarian FTTA of 2012 that only targeted domestic bank accounts and has not imposed higher taxation in respect of foreign settlements compared to the domestic ones.

The requirement for Slovak businesses to self-calculate and remit the tax on a monthly basis in respect of foreign bank accounts should be seen as a disproportionate and discriminatory administrative burden under the EC treaty. Moreover, additional higher effective taxation on cross-border transactions as compared to domestic ones is also clearly discriminatory. For many absurd situations let me illustrate just one:

Example: Purchase of goods by a Slovak business for €10 million:

if purchased directly by a bank transfer through a Slovak bank, the tax is €40;
if settled by a central purchase in Austria, the tax is €40,000, i.e. 1,000 times higher.

In addition, both Hungarian and Slovak FTT policy are potentially against the VAT principles and competitiveness of the European market, and could even impact its overall fiscal stability if more and more countries imitate Hungarian and Slovak FTT policy.

Last but not least, the overall impact of the new Slovak FTTA contradicts the free movement of capital under the EC treaty. The advisory firm BMB Partners TAXAND has prepared an in-depth-analysis focusing on international tax law that was provided to the German Chamber of Commerce in Slovakia and other international business chambers of EU countries here, so that these can address the issue with the European Commission.

Renáta Bláhová is partner at BMB Partners TAXAND and member of the Advisory council of the German Chamber of Commerce in Slovakia