Tax Holiday Legislation and Investment Incentives
Slovakia has historically had extensive tax holiday legislation which gave automatic entitlement to a tax relief if certain conditions were met, and subsequently were subject to compliance with EU State Aid rules. However the availability and entitlement to such tax holidays has been significantly reduced. An Investment Incentive Act, effective as of 1 January 2008 has introduced new conditions.
Under the new Act on Investment Aid investors can apply for the following investment incentives:
cash grant for the procurement of fixed assets corporate tax relief cash grants for new jobs transfer of real property at a price lower than the market value.
The Act on Investment Aid formalizes the procedures applying to investment incentives. The legislation is aimed to boost investment in the regions with high unemployment rates and particularly supports investments in technological and strategic centers. It also supports investments in the tourism sector. Conditions on provision of investment aid vary depending on type of the investment, location and other parameters of the project.
Investment incentives granted by the Slovak Government are considered state aid and should therefore be fully compatible with the European Union State Aid regulations. There are many detailed provisions and exceptions, which need to be taken into account when applying for investment incentives.
It should be stressed that:
For a temporary period of 1 April 2009 to 31 December 2010 acquisition of assets from related parties form part of the eligible investment expenditure, which serve as a basis for the investment incentive amount. The investment incentive amount is determined on the basis of a percentage of the eligible investment expenditure. It is crucial that one cannot start an investment project before receipt of a provisional approval to be issued by the Slovak Ministry of Economy. There is no automatic entitlement to (tax) incentives or other grants under this legislation in Slovakia:
all incentives need to be agreed with the Slovak Government and have to be formally applied for and approved by the Government; and
all incentives are subject to limits set by the EU state aid law and in specific cases must be notified to the European Commission.
Different conditions are applicable to investments in the manufacturing industry, technology and strategic investment centers and the tourism sector. For example, an investor in the manufacturing industry, submitting the investment project before 2011,