The Ministry of Finance of the Slovak Republic issued new and important guidance to ensure a uniform approach when assessing the taxation of income of non-resident taxpayers from computer software. This methodological guidance introduces a significant change in the assessment and taxation of software payments made by Slovak payers to foreign taxpayers.
Below we summarise the key changes for businesses in this area.
◼ Key changes in the methodological guidance
The Slovak Republic has withdrawn its reservations regarding the interpretation of the OECD Model Tax Convention for the Avoidance of Double Taxation. Until now, this interpretation distinguished between standardised software and customised software for the taxation of royalties.
Payments for the right to use software, regardless of whether the software is customised or standardised, are considered royalties for withholding tax purposes from 2026.
From 2026, the guidance applies to all forms of payment, regardless of the payment method:
- sale
- licensing
- provision of services
- transfer of rights
◼ Classification of software payments
The new guidance distinguishes between different software payments and categorises them as follows:
| Software payments subject to withholding tax | |
| Granting the right to commercial use of copyrighted software | Includes payments for the right to commercially use, reproduce, process, translate, or modify software |
| Provision of software development know-how | Includes remuneration for the provision of knowledge, plans, and source codes for software development in the form of know-how |
| Software payments not subject to withholding tax | |
| Provision of software services | Includes payments for remote access to software or source code, or access for modification and copying (downloading) of software |
| Provision of software as a product | Includes payments for created copies of software with limited copyright rights, where the user is only entitled to install the software, create backup copies, or make specific modifications |
| Transfer of copyright | Represents the sale of copyright to software, clearly defined in the sale agreement, where the author agrees to the transfer of the result of their intellectual and creative activity. Such income is taxable in the country of residence of the recipient |
If any of the above forms of services, products, or rights are contractually defined as a “royalty”, such payments are subject to withholding tax.
◼ Impact of the guidance on businesses
If a Slovak company pays a foreign provider for the right to use software, such payments may be treated as royalties and may be subject to withholding tax or other taxation under the relevant international tax treaty.
We therefore recommend that businesses focus on the following areas:
- review the relevant software agreement and determine the type of payment involved
- assess the tax implications of the new guidance for both new agreements and existing agreements if income continues to arise after 31 December 2025
- properly structure contractual relationships with foreign software providers
