New short form of transfer pricing documentation

In December 2018, the Ministry of Finance of the Slovak Republic issued an amendment to the Guidelines, which modifies the requirements for the content of transfer documentation. This guideline introduced several new features that are important to be aware of in connection with the preparation of transfer documentation.

In the first part of our “mini-series” on transfer pricing, we looked at the criteria for preparation of documentation and materiality of transactions. In the second part, we looked at the principles of the documentation obligation and the exemption from the documentation obligation.

Structured abridged transfer documentation

One of the most significant changes in the new guidance is the introduction of structured shorter documentation. The purpose of introducing the abbreviated documentation as an annex to the transfer documentation was to simplify the preparation of the transfer documentation for the least risky taxpayers, where the taxpayer only lists the transactions with dependants and the value of the transactions.

However, the Ministry of Finance of the Slovak Republic has forgotten that the taxpayer may also be interested in drawing up abbreviated documentation and at the same time, in the specific documentation for individual transactions, would like to indicate the method of setting the price and demonstrate the compliance of the set prices with the principle of arm’s length relationship.

Structure of the abridged documentation

The Ministry of Finance of the Slovak Republic issued together with the Guideline also the Annex to Guideline No. MF/019153-724, an overview of transactions with dependants. The summary of transactions is to be filled in separately for each dependent person. On the first page of the summary of transactions, information on the taxpayer is filled in. On the second and third pages, the taxpayer identifies the dependent and also fills in the individual boxes according to the type of transaction he or she has with the dependent.

The individual rows of the table shall show the total volume of transactions recorded in the accounts, depending on whether the taxpayer had a particular type of transaction in the tax year concerned. The transactions are divided into eight tables according to the type of transaction, namely :

• Table A ⇒ Transactions with a dependent party – intangible, tangible and financial assets
• Table B ⇒ Transactions with dependent person – stocks
• Table C ⇒ Transactions with a dependent – services
• Table D ⇒ Transactions with a Dependent – Royalties
• Table E ⇒ Transactions with a Dependent – Interest
• Table F ⇒ Transactions with a dependent – cost contribution agreements
• Table G ⇒ Transactions with a dependent – additional information
• Table H ⇒ Transactions with a related party – balance of long-term receivables and payables

If you find it difficult to classify certain transactions into individual tables, please do not hesitate to contact us contact and we will be happy to help you.

Finally, it should be noted that regardless of the simplification or complete waiver of the documentation preparation requirement, taxpayers must continue to comply with the arm’s length principle for audited transactions, i.e. have arm’s length pricing. The guidance only sets out the minimum scope of transfer documentation and the tax administrator may request the taxpayer to submit additional information to demonstrate that the prices used in the controlled transactions comply with the arm’s length principle.