Slovakia Takes Steps Towards Beneficial Ownership Transparency

Increasing Transparency in Financial Sector

The Financial Directorate of Slovakia has issued guidance on proving the identity of beneficial owners of income, a move aimed at increasing transparency in the country’s financial sector. This development comes as part of efforts to comply with international standards and reduce the risk of tax evasion.

Guidance Issued by Financial Directorate

The guidance was developed in collaboration with the Ministry of Finance and the Chamber of Tax Advisors. It provides recommendations on how taxpayers can demonstrate the identity of their beneficial owners, including:

Categorizing transactions based on their risk level
Providing documentation such as affidavits and questionnaires for certain categories of transactions

Defining Beneficial Owner

According to the Slovak income tax law, a “beneficial owner” is defined as an individual who ultimately owns or controls more than 25% of the shares in a company or has the right to receive more than 25% of its profits. If a taxpayer fails to prove the identity of their beneficial owner, they may face higher taxation.

Importance of Identifying and Verifying Beneficial Owners

The guidance highlights the importance of identifying and verifying the beneficial owners of income, particularly for high-risk transactions. It recommends that taxpayers use a combination of documents such as:

Passports
Identification cards
Bank statements

to establish the identity of their beneficial owners.

Not Legally Binding but Valuable Insight

While the guidance is not legally binding, it provides valuable insight into the expectations of tax authorities in Slovakia and highlights the importance of transparency in financial dealings. By implementing these recommendations, taxpayers can reduce the risk of penalties and ensure compliance with Slovak tax laws.

Broader Effort to Combat Money Laundering

The move by the Financial Directorate comes as part of a broader effort to increase transparency and combat money laundering in Slovakia. The country has committed to implementing the European Union’s Anti-Money Laundering Directive, which requires member states to introduce measures to identify and verify the beneficial owners of companies and trusts.

KPMG, an international advisory firm, has issued a report highlighting the importance of beneficial ownership transparency in Slovakia. The report provides insights into the Slovak tax system and highlights the need for taxpayers to demonstrate the identity of their beneficial owners.

Conclusion

As the Financial Directorate continues to develop its guidance on beneficial ownership transparency, taxpayers in Slovakia can expect increased scrutiny from tax authorities. By implementing these recommendations, taxpayers can ensure compliance with Slovak tax laws and reduce the risk of penalties.