Tax securing

What it means

Tax securing is an amount a Slovak payer withholds from a payment to a tax non-resident and remits to the tax office before the recipient files a tax return. It is not an extra tax but a prepayment against the future Slovak liability.

What separates it from withholding tax is where the money ends up: tax collected by withholding is usually final, while a secured amount is credited later and the difference refunded. The duty also spares recipients resident in the EU or the EEA.

The duty to secure tax arises only on income that Slovakia is entitled to tax. Where a double taxation treaty gives the right to tax that income solely to the recipient’s state of residence, there is nothing to secure. The payer must still be able to prove that the recipient really is resident in the treaty state, and an address on the invoice is not enough.

How it works in practice

The payer remits the withheld amount to its tax administrator by the fifteenth day of the month following the payment and files a notification on the prescribed form within the same period. Without the notification the payment is hard to match and needless notices follow.

The non-resident then claims the secured amount in a Slovak return as a prepayment, and any excess is refunded. Nothing is withheld if the recipient produces a tax office confirmation that it pays tax advances, and nothing is withheld from employment income.

With an invoice from a supplier outside the EU and the EEA, we check before payment what kind of income it is and whether the treaty lets Slovakia tax it. If securing applies, we advise agreeing it in the contract up front and asking the partner for a certificate of tax residence, so the reduced payment surprises neither the partner nor us at an audit.

What to watch out for

If the payer does not withhold, the tax office collects the amount from the payer, not from the foreign supplier. By then the invoice has been paid in full, the shortfall is rarely recoverable from a partner in a third country, and the company pays the tax a second time out of its own funds.

Companies assume that no bank transfer means no withholding. The duty, however, attaches to paying, remitting and crediting a payment, so a set-off of mutual claims with a non-resident triggers it too. A company that settles by set-off without securing the tax receives a demand from the tax office for an amount there is no longer anything to withhold from.