Transfer pricing is no longer an issue only for multinational corporations. Today, it also applies to small and medium Slovak businesses with related-party transactions - and the consequences of non-compliance can be unpleasantly expensive.
So what are the rules? Who is affected? And why is the Tax Authority suddenly paying much closer attention than before?
What Does “Transfer Pricing” Actually Mean?
Transfer pricing is the process by which related parties set prices for transactions between themselves — in such a way that those prices reflect what would have been agreed between independent, unrelated entities (the so-called arm’s length principle).
Example? If Company A sells goods to Company B and both are owned by the same person, the state wants to know: Is the price fair, or has it been intentionally adjusted so that Company A shows a lower profit and pays less tax?
Why Does It Matter?
If such prices were set without control, companies could easily shift profits between entities or even between countries — simply to reduce their tax burden. That’s why the Slovak Tax Authority enforces strict transfer pricing rules and frequently adjusts tax bases when prices are not at arm’s length.
Who Does It Apply To?
You might think that if you don’t have international transactions, you don’t have to worry about transfer pricing. Wrong.
Since 2015, Slovak transfer pricing rules have also applied to domestic related parties, for example:
a company and its owner
two companies with the same shareholder
a managing director and a company where they serve as a statutory representative
close relatives (spouses, siblings, etc.) with interconnected businesses
This means that even “in-house” transactions — for example between your own companies or within your family — must comply with arm’s length conditions.
Which Transactions Are Affected?
Transfer pricing most often applies to:
sale of goods between related companies
provision of services within a group
intra-group loans or guarantees
rental of real estate or movable property
cash pooling arrangements
Even smaller but regularly repeated transactions are closely monitored, as they can collectively have a significant impact on the tax base.
Transfer Pricing Documentation
The Tax Authority has the right to request documentation showing how your intra-group prices were set - and you have only 15 days to submit it, with no extension allowed.
The documentation should be:
properly prepared and include market price comparisons
compliant with legal requirements and relevant guidance
ready in advance (not after you receive the request)
Since 2023, documentation can also be submitted in a foreign language, but upon request, you must translate it into Slovak within 15 days.
Common Transfer Pricing Methods
There are several accepted methods for determining an appropriate arm’s length price, for example:
CUP (Comparable Uncontrolled Price) – comparing with a similar independent transaction
RPM (Resale Price Method) – often used for distributors
CPM (Cost Plus Method) – costs plus a reasonable profit margin
TNMM (Transactional Net Margin Method) – comparing profitability ratios
PSM (Profit Split Method) – often used for R&D or joint ventures
Choosing the right method is essential. If you use the wrong one, or lack sufficient evidence (such as a benchmarking study), the Tax Authority may adjust your prices — often to the median of the market range.
What Happens If You Don’t Comply?
If the Tax Authority finds that prices between related parties are not at arm’s length, it can:
adjust your tax base
impose additional tax liabilities
issue fines – even double penalties for intentional underreporting
And this can happen even in cases of unintentional mistakes or insufficient documentation.
Professional Support = Less Risk, Less Stress
Transfer pricing is not just an accounting formality. It requires:
a detailed functional and risk analysis
consistent documentation
up-to-date knowledge of legislation
understanding of tax audit procedures
If you’re not sure where to start, it’s best to consult a tax advisor. Our company assists businesses throughout the entire process — from analysis to benchmarking and communication with the Tax Authority. This helps you avoid unnecessary sanctions and ensures your transfer pricing setup is fully compliant.
Today, the rules are designed so that many small and medium-sized Slovak companies are subject to the same strict requirements as multinational groups. And the Tax Authority has all the tools it needs to enforce them.
Don’t get caught off guard.
