Slovakia: thin capitalisation rule
From 1 January 2009, the thin capitalization rule is to be reintroduced in Slovakia.
The rule affects Slovak companies financed by loans from foreign dependent companies or people with a direct or indirect interest of 25% or more in the company's share capital.
The effect of the rule is that the company cannot get a tax deduction for any interest on those loans where:
- the average amount of the loan is more than SKK100 million
- the company has a debt/equity ratio of more than 6:1
The debt/equity ratio is based on the average loan balance at the end of each calendar month or quarter during the relevant tax period. The lender's equity holding is calculated at the end of the preceding tax period so, when the rule comes into effect, the rule will apply to a company's registered capital, statutory funds, profit/loss from previous years and profit/loss from the year ending 31 December 2008.
