Ref. Ares(2015)3439308-19/08/2015 ROOM DOCUMENT # 3 Code of Conduct Group (Business Taxation) 7 May 2008 ORIGIN: Commission Services Standstill description Slovak Republic Investment aid tax credit General On 1 January 2008 new Act No. 561/2007 of Coll. on investment aid and amendments to certain acts (hereinafter Investment Aid Act ) became effective. The Investment Aid Act intends to provide for investment aid to support initial investment and the creation of jobs. Investment aid may be granted in several forms and one of them is a tax credit (section 30a of the Act No. 595/2003 of Coll. on Income Tax as later amended (hereinafter Income Tax Act )). The Investment Aid Act is a state aide scheme according to Commission Regulation (EC) No. 1628/2006 of 24 October 2006 on the application of Articles 87 and 88 of the Treaty to national regional investment aid and each form of investment aid (including tax credit) has to meet EU state aid rules. Conditions attached The investment aid tax credit is granted under the following conditions: The investment aid beneficiary has to be a legal person or a natural person-entrepreneur with a registered office in the Slovak Republic, incorporated in the Commercial Register or the Trade Licence Register, who will implement an investment plan in the Slovak Republic. The investment aid beneficiary is obliged to meet conditions set by Investment Aid Act and conditions set by Income Tax Act. Conditions stipulated by the Investment Aid Act depend on whether the aid is provided for purposes of industrial production, technology centers, strategic service centers or tourism. 1
In general, conditions for the granting of investment aid are: - the setting-up of a new establishment (new technology centre, new strategic service centre, new complex tourism centre), the extension of an existing establishment (technology centre, strategic service centre, complex tourism centre), diversification of the output of an establishment into new additional products or a fundamental change in the production program of an existing establishment, or purchase of an establishment, - the acquisition of non-current material and non-current intangible assets at least in amounts laid down in Investment Aid Act (the lowest amounts approximately are 6.15 mil. in case of industrial production, 1.23 mil. in case of technology centre, 1.08 mil. in case of strategic service centre and 3.08 mil. in case of tourism), - in case of industrial production and tourism, revenues earned from the business activities specified in the investment plan representing at least 80% of total revenues of the beneficiary, -at least 60% in case of technology centre, or 30% in case of strategic service centre, of the total headcount will be employees with an university education. A strategic service centre is a place where the beneficiary provides services with a high added value facilitating employment of qualified experts in software development centres, expert solution centres, high-tech repair centres, customer support centres and headquarters of multinational corporations. Providing of financial services (holding, group licensing, group financing, leasing, (re-)invoicing, (captive) insurance etc.) is excluded from the scope of the Investment Aid Act. These services are outside the scope of the Investment Aid Act (Sections 4 to 7) 2
Tax benefits The new regime offers a tax credit during a period of maximum five consecutive tax periods. The tax payer may claim the tax credit up to an amount not exceeding the tax to be paid from a pro rata portion of the tax base. The pro rata portion of the tax base is calculated as follows: TB = IPRP l + E Where: PRPTB = The pro rata portion of the tax base I = Eligible costs up to the aggregate amount of the acquisition cost of non-current material and noncurrent intangible assets of such investment purchased after the issuance of a written confirmation to the applicant that the investment plan complies with the conditions for the granting of investment aid until the end of the respective tax period for which the tax credit is claimed E = The value of the tax payer's equity reported in the financial statements for the tax period in which the written confirmation was issued The tax payer may claim the tax relief up to an amount that does not exceed, in aggregate, the value specified in the decision on the approval of investment aid. The value specified in the decision can not exceed investment aid intensity laid down for a particular region in the Regulation of the Government of the Slovak Republic Nr. 145/2008 of Coll. 1 Procedure The Investment aid application process is laid down in Section 12 of the Investment Aid Act. Before submission of the application, the applicant has to submit to the Ministry of Economy of the Slovak Republic (hereinafter Ministry ) an investment plan. The necessary information which should be included in the investment plan is laid down in Section 9 of the Investment Aid Act. 1 Investment aid intensity means the ratio of a total amount of investment aid to total eligible costs associated with the implementation of the investment plan expressed as a percentage. Depending on a region the maximum investment aid intensity is 50 % or less. In some regions it is not possible to withdraw investment aid. 3
Subsequently the Ministry shall examine the completeness of the investment plan and provided that it contains all data necessary for its examination, the Ministry will arrange for the preparation of an expert opinion. If the opinion indicates that the applicant is likely to comply with the conditions for the granting of investment aid under the Investment Aid Act, the Ministry prepares a proposal to grant investment aid, which specifies the forms of investment aid, the amount of investment aid by individual forms and conditions under which investment aid is granted. The Ministry shall send the proposal to the investment aid providers (the Ministry of Finance of the Slovak Republic, the Ministry of Labour, Social Affairs and Family of the Slovak Republic, an owner or administrator of the immovable property in jurisdiction of public administration bodies, or the Slovak Land Fund, a municipality, higher territorial unit or an organisation established by the aforementioned bodies), for examination of the likelihood that the applicant complies with the conditions for the granting of investment aid and the investment aid providers shall send to the Ministry, within 30 days, their written statements as to whether they agree or disagree with the granting of investment aid. If the opinion indicates that the applicant is unlikely to comply with the conditions for the granting of investment aid under the Investment Aid Act the Ministry informs the applicant in writing that he does not comply with conditions necessary for the granting of investment aid. Based on affirmative statements the Ministry shall confirm to the applicant in writing that the investment plan complies with the conditions for the granting of investment aid and prepare an investment aid offer within 30 days and send the offer to the applicant and to the investment aid providers. The applicant may submit an application for the granting of investment aid to the Ministry within 60 days from the receipt of the offer. The application must contain data and necessary annexes laid down in the Investment Aid Act (Section 12). If the applicant complies with the conditions for the granting of investment aid under the Investment Aid Act, the Ministry shall submit, based on the applicant s application, a proposal for the granting of investment aid for approval by the Government of the Slovak Republic. If the Government approves application, the Ministry will issue a decision on the approval of investment aid to the applicant within 15 working days from the approval of the proposal for the granting of investment aid by the Government. If the Government does not approve the proposal for the granting of investment aid, the Ministry will reject the application. 4
In the deliberation on the proposal for the granting of investment aid, the Government shall take into consideration particularly the significance of the initial investment for the national economy and the impact of the granting of investment aid on competition in the relevant market. If the investment aid is subject to the notification requirement pursuant to a separate regulation (Art. 7 of Commission Regulation (EC) No. 1628/2006), the Ministry will, within 15 working days from the approval of the proposal for the granting of investment aid by the Government, request the European Commission in line with the procedure laid down in a separate regulation (Commission Regulation (EC) No. 794/2004) to assess the compatibility of the proposed investment aid with the common market and notify the applicant to that effect in writing. If the European Commission decides that the proposed investment aid is compatible with the common market, the Ministry will issue a decision on the approval of investment aid for the applicant within 15 days of the receipt of the European Commission s final decision. If the European Commission decides that the proposed investment aid is incompatible with the common market, the Ministry will reject the application. There is no appeal possible against the decision rejecting the application for the granting of investment aid. There is no legal entitlement to the granting of investment aid. In general it is the responsibility of investment aid providers to decide, whether they will grant regional investment aid, and if yes, to what amount. Finally it is the Government of the Slovak Republic, which decide on granting of investment aid. 5