Slovak Republic
This report analyses the implementation of the AEOI Standard in the Slovak Republic with respect to the requirements of the AEOI Terms of Reference. It assesses both the legal frameworks put in place to implement the AEOI Standard and the effectiveness of the implementation of the AEOI Standard in practice.
The methodology used for the peer reviews and that therefore underpins this report is outlined in Chapter 2.
Overall findings
AEOI legal framework
The Slovak Republic’s legal framework implementing the AEOI Standard is in place and is consistent with the requirements of the AEOI Terms of Reference. This includes the Slovak Republic’s domestic legislative framework requiring Reporting Financial Institutions to conduct the due diligence and reporting procedures (CR1) and its international legal framework to exchange the information with all of the Slovak Republic’s Interested Appropriate Partners (CR2).
Effectiveness of AEOI in practice
The Slovak Republic’s implementation of the AEOI Standard is on track with respect to the requirements of the AEOI Terms of Reference to ensure the effectiveness of the AEOI Standard in practice. This includes ensuring Reporting Financial Institutions correctly conduct the due diligence and reporting procedures (CR1) and exchanging the information in an effective and timely manner (CR2). The Slovak Republic is encouraged to continue its implementation process accordingly, to ensure its ongoing effectiveness.
Overall rating in relation to the effectiveness in practice: On Track
General context
The Slovak Republic commenced exchanges under the AEOI Standard in 2017.
In order to provide for Reporting Financial Institutions to collect and report the information to be exchanged, the Slovak Republic:
enacted Act 359/2015 Coll., as amended by Act 300/2016 and Act 305/2019; and
introduced Decree 446/2015 Coll., as amended by Decree 348/2018.
Under this framework Reporting Financial Institutions were required to commence the due diligence procedures in relation to New Accounts from 1 January 2016. With respect to Preexisting Accounts, Reporting Financial Institutions were required to complete the due diligence procedures on High Value Individual Accounts by 31 December 2016 and on Lower Value Individual Accounts and Entity Accounts by 31 December 2017.
Following the initial Global Forum peer review, the Slovak Republic made various amendments to its legislative framework to address issues identified, the last of which was effective from 1 January 2021.
With respect to the exchange of information under the AEOI Standard, the Slovak Republic:
is a Party to the Convention on Mutual Administrative Assistance in Tax Matters and activated the associated CRS Multilateral Competent Authority Agreement in time for exchanges in 2017;
has in place European Directive 2011/16/EU on Administrative Cooperation in the Field of Taxation as amended by Directive 2014/107/EU; and
has in place European Union agreements with five European third countries.1
Table 1 sets out the number of Financial Institutions in the Slovak Republic that reported information on Financial Accounts in 2021 as defined in the AEOI Standard (essentially because they maintained Financial Accounts for Account Holders, or that were related to Controlling Persons, resident in a Reportable Jurisdiction). It also sets out the number of Financial Accounts that they reported in 2021. In this regard, it should be noted that the Slovak Republic requires the reporting of Financial Accounts based on a prescribed list of exchange partners and some accounts may be reported more than once (e.g. jointly held accounts or accounts with multiple related Controlling Persons), which is reflected in the figures below. These figures provide key contextual information to the development and implementation of the Slovak Republic’s administrative compliance strategy, which is analysed in the subsequent sections of this report.
Table 2 sets out the number of exchange partners to which information was successfully sent by the Slovak Republic in the past few years (including where the necessary frameworks were in place, containing an obligation on Reporting Financial Institutions to report information, but no relevant Reportable Accounts were identified). These figures provide key contextual information in relation to the Slovak Republic’s exchanges in practice, which is also analysed in subsequent sections of this report.
In order to provide for the effective implementation of the AEOI Standard, in the Slovak Republic:
the Financial Administration of the Slovak Republic (the tax authority) has the responsibility to ensure the effective implementation of the due diligence and reporting obligations by Reporting Financial Institutions as well as to ensure the exchange of information with the Slovak Republic´s exchange partners and the Ministry of Finance is responsible for legislation and international agreements for the purposes of the exchange of information;
the Financial Administration maintains a close working relationship with the financial regulators, the National Bank of Slovakia (NBS) and the Financial Intelligence Unit (FIU), in the discharge of its supervisory duties;
technical solutions necessary to receive and validate the information reported by Reporting Financial Institutions were put in place by the Financial Administration, which ensures the validation of the data reported by Financial Institutions before it is exchanged with the Slovak Republic’s exchange partners;
the Common Transmission System (CTS), and in the European Union (EU) the Common Communication Network (CCN), are used for the exchange of the information, along with the associated file preparation and encryption requirements.
It should be noted that the review of the Slovak Republic’s legal frameworks implementing the AEOI Standard concluded with the determination that the Slovak Republic’s domestic and international legal frameworks are In Place. This has been taken into account when reviewing the effectiveness of the Slovak Republic’s implementation of the AEOI Standard in practice.
Findings and conclusions on the legal frameworks
The detailed findings and conclusions on the AEOI legal frameworks for the Slovak Republic are below, organised per Core Requirement (CR) and then per sub-requirement (SR) as extracted from the AEOI Terms of Reference (see Annex C).
CR1 Domestic legal framework: Jurisdictions should have a domestic legislative framework in place that requires all Reporting Financial Institutions to conduct the due diligence and reporting procedures in the CRS, and that provides for the effective implementation of the CRS as set out therein.
The Slovak Republic’s domestic legislative framework is in place and contains all of the key aspects of the CRS and its Commentary requiring Reporting Financial Institutions to conduct the due diligence and reporting procedures (SRs 1.1 – 1.3). It also provides a framework to enforce the requirements (SR 1.4).
SR 1.1 Jurisdictions should define the scope of Reporting Financial Institutions consistently with the CRS.
The Slovak Republic has defined the scope of Reporting Financial Institutions in its domestic legislative framework in accordance with the CRS and its Commentary.
SR 1.2 Jurisdictions should define the scope of Financial Accounts and Reportable Accounts consistently with the CRS and incorporate the due diligence procedures to identify them.
The Slovak Republic has defined the scope of the Financial Accounts that are required to be reported in its domestic legislative framework and incorporated the due diligence procedures that must be applied to identify them in accordance with the CRS and its Commentary.
SR 1.3 Jurisdictions should incorporate the reporting requirements contained in Section I of the CRS into their domestic legislative framework.
The Slovak Republic has incorporated the reporting requirements in its domestic legislative framework in accordance with the CRS and its Commentary.
SR 1.4 Jurisdictions should have a legislative framework in place that allows for the enforcement of the requirements of the CRS in practice.
The Slovak Republic has a legislative framework in place to enforce the requirements in accordance with the CRS and its Commentary.
CR2 International legal framework: Jurisdictions should have exchange relationships in effect with all Interested Appropriate Partners as committed to and that provide for the exchange of information in accordance with the Model CAA.
The Slovak Republic’s international legal framework to exchange the information is in place, is consistent with the Model CAA and its Commentary and provides for exchange with all of the Slovak Republic’s Interested Appropriate Partners (i.e. all jurisdictions that are interested in receiving information from the Slovak Republic and that meet the required standard in relation to confidentiality and data safeguards) (SRs 2.1 – 2.3).
SR 2.1 Jurisdictions should have exchange agreements in effect with all Interested Appropriate Partners that permit the automatic exchange of CRS information.
The Slovak Republic has exchange agreements that permit the automatic exchange of CRS information in effect with all its Interested Appropriate Partners.
SR 2.2 Such an exchange agreement should be put in place without undue delay, following the receipt of an expression of interest from an Interested Appropriate Partner.
The Slovak Republic put in place its exchange agreements without undue delay.
SR 2.3 Jurisdictions should ensure that the exchange agreements in effect provide for the exchange of information in accordance with the requirements of the Model CAA.
The Slovak Republic’s exchange agreements provide for the exchange of information in accordance with the requirements of the Model CAA.
Findings and conclusions in relation to effectiveness in practice
The detailed findings and conclusions in relation to effectiveness in practice of AEOI for the Slovak Republic are below, organised per Core Requirement (CR) and then per sub-requirement (SR) as extracted from the AEOI Terms of Reference (see Annex C).
CR1 Effectiveness in practice: Jurisdictions should ensure that in practice Reporting Financial Institutions correctly implement the due diligence and reporting procedures, which includes a requirement for jurisdictions to have in place an administrative framework to ensure the effective implementation of the CRS.
The Slovak Republic’s implementation of the AEOI Standard is on track with respect to ensuring that Reporting Financial Institutions are correctly conducting the due diligence and reporting procedures and are therefore reporting complete and accurate information. This includes ensuring effectiveness in a domestic context, such as through having an effective administrative compliance framework and related procedures (SR 1.5), and collaborating with exchange partners to ensure effectiveness (SR 1.6). The Slovak Republic is encouraged to continue its implementation process to ensure its ongoing effectiveness.
SR 1.5 Jurisdictions should ensure that in practice Reporting Financial Institutions identify the Financial Accounts they maintain, identify the Reportable Accounts among those Financial Accounts, as well as their Account Holders, and where relevant Controlling Persons, by correctly conducting the due diligence procedures and collect and report the required information with respect to each Reportable Account. This includes having in place:
an effective administrative compliance framework to ensure the effective implementation of, and compliance with, the CRS. This framework should:
be based on a strategy that facilitates compliance by Reporting Financial Institutions and which is informed by a risk assessment in respect of the effective implementation of the CRS that takes into account relevant information sources (including third party sources);
include procedures to ensure that Financial Institutions correctly apply the definitions of Reporting Financial Institutions and Non-Reporting Financial Institutions;
include procedures to periodically verify Reporting Financial Institutions’ compliance, conducted by authorities that have adequate powers with respect to the reviewed Reporting Financial Institutions, with procedures to access the records they maintain; and
effective procedures to ensure that Financial Institutions, persons or intermediaries do not circumvent the due diligence and reporting procedures;
effective enforcement mechanisms to address non-compliance by Reporting Financial Institutions;
strong measures to ensure that valid self-certifications are always obtained for New Accounts;
effective procedures to ensure that each, or each type of, jurisdiction-specific Non-Reporting Financial Institution and Excluded Account continue to present a low risk of being used to evade tax; and
effective procedures to follow up with a Reporting Financial Institution when undocumented accounts are reported in order to establish the reasons why such information is being reported.
In order to ensure that Reporting Financial Institutions correctly conduct the due diligence and reporting procedures, the Slovak Republic implemented all of the requirements in accordance with expectations. The key findings were as follows:
The Slovak Republic implemented an overarching strategy to ensure compliance with the AEOI Standard developed after conducting a risk assessment that took into account a range of relevant information sources, such as a general overview of the financial sector, the recent MONEYVAL report, an analysis of the information submitted by Reporting Financial Institutions, results of the review activities and feedback received from peers. The Slovak Republic’s compliance strategy facilitates compliance and incorporates a credible approach to enforcement. The Slovak Republic intends to keep its compliance strategy and risk assessment under review to ensure its effectiveness on an ongoing basis.
The Slovak Republic has worked effectively to understand its population of Financial Institutions, including relevant non-regulated entities, utilising various relevant information sources and is taking action to ensure they are classifying themselves correctly under its domestic rules and reporting information as required. The information sources utilised include the register of financial entities maintained by the NBS, the Foreign Financial Institution list for FATCA purposes and the entities with relevant NACE codes (NACE is the industry standard classification system used in the European Union). The Slovak Republic intends to keep its understanding of its Financial Institution population up to date on a routine basis.
The Financial Administration, responsible for implementing the Slovak Republic’s compliance strategy, appears to have the necessary powers and resources to discharge its functions. With respect to resourcing, the Slovak Republic has assigned the equivalent of three full time staff to monitor and ensure compliance by Reporting Financial Institutions, which are supported by other teams, such as the Tax Office that conducts the onsite audits, the IT division and the Ministry of Finance for legal issues. The full time Financial Administration staff assigned to oversee the AEOI Standard, supported by other teams, have access to IT systems and tools to conduct risk assessments. Overall, they appear to have effectively implemented an operational plan to verify compliance with the requirements, incorporating appropriate compliance activities.
The Slovak Republic has conducted compliance activities, including desk-based and onsite checks. It accordingly identified some issues, resulting in further guidance being provided and the pre-selection of further Financial Institutions for onsite checks. The main issues related to the correct application of the procedures, the incorrect reporting of undocumented accounts, reminders about the reasonableness checks with respect to Citizenship and Residence by Investment schemes, the reporting of dual tax residencies, reminders about the EU and OECD portals as relevant resources for verifying Taxpayer Identification Numbers and the reporting of payments. The issues identified are being followed up on to ensure future compliance.
The Slovak Republic has also taken targeted measures to address the relatively high number of undocumented accounts through targeted guidance and systematically verifying the procedures applied during onsite visits. The onsite visits also cover whether Financial Institutions correctly follow the obligations with respect to self-certifications. So far, the targeted measures have not identified instances of non-compliance. The Slovak Republic is ready to take effective action to address circumvention of the requirements if such circumvention is detected.
Slovak Republic will also keep its jurisdiction-specific lists of Non-Reporting Financial Institutions and Excluded Accounts under review to ensure they continue to pose a low risk of being used for tax evasion purposes.
Table 3 provides a summary of the specific activities undertaken, or that are planned to be undertaken, in relation to each of the key parts of the framework described above.
With respect to the Financial Account information collected and sent by the Slovak Republic, the presence of the Tax Identification Numbers, which is one of the key data points, appeared to be in line with most other jurisdictions. However, the Slovak Republic reported a lower rate of collection of dates of birth when compared to other jurisdictions. The date of birth is key data point for exchange partners to effectively utilise the information. The information provided by the Slovak Republic previously showed a relatively high number of undocumented accounts reported by its Reporting Financial Institutions, when compared to other jurisdictions, meaning that was not possible for the Reporting Financial Institution to identify whether the accounts were held by Reportable Persons. However, following the related interventions, the number of undocumented accounts has reduced substantially over time and is now in line with most other jurisdictions.
Feedback was also received from the Slovak Republic’s exchange partners, highlighting some missing information in the files received from the Slovak Republic. More generally, many of the exchange partners that received a significant number of records from Slovak Republic indicated that they achieved a success rate when matching the information received from Slovak Republic with their taxpayer database that was broadly equivalent to, or better than, what they usually achieve.
Based on these findings it was concluded that the Slovak Republic is fully meeting expectations in ensuring that Reporting Financial Institutions correctly conduct the due diligence and reporting procedures, including by having in place the required administrative compliance framework and related procedures. The Slovak Republic is encouraged to continue its implementation process accordingly.
SR 1.6 Jurisdictions should collaborate on compliance and enforcement. This requires jurisdictions to:
use all appropriate measures available under the jurisdiction’s domestic law to address errors or non-compliance notified to the jurisdiction by an exchange partner; and
have in place effective procedures to notify an exchange partner of errors that may have led to incomplete or incorrect information reporting or non-compliance with the due diligence or reporting procedures by a Reporting Financial Institution in the jurisdiction of the exchange partner.
In order to collaborate on compliance and enforcement, the Slovak Republic implemented all of the requirements in relation to issues notified to them (i.e. under Section 4 of the MCAA or equivalent) in accordance with expectations. While no such notifications have yet been received, the Slovak Republic has the necessary systems and procedures to process them as required. It also appears that the Slovak Republic will notify its partners effectively of errors or suspected non-compliance it identifies when utilising the information received.
Based on these findings it was concluded that the Slovak Republic is fully meeting expectations in relation to collaborating with its exchange partners to ensure that Reporting Financial Institutions correctly conduct the due diligence and reporting procedures. The Slovak Republic is encouraged to continue its implementation process accordingly, to ensure its ongoing effectiveness.
CR2 Effectiveness in practice: Jurisdictions should exchange the information effectively in practice, in a timely manner, including by sorting, preparing, validating and transmitting it in accordance with the AEOI Standard.
The Slovak Republic’s implementation of the AEOI Standard is on track with respect to exchanging the information effectively in practice, including in relation to sorting, preparing and validating the information (SR 2.4), correctly transmitting the information in a timely manner (SRs 2.5 – 2.8) and providing corrections, amendments or additions to the information (SR 2.9). The Slovak Republic is encouraged to continue its implementation process accordingly, to ensure its ongoing effectiveness.
SR 2.4 Jurisdictions should sort, prepare and validate the information in accordance with the CRS XML Schema and the associated requirements in the CRS XML Schema User Guide and the File Error and Correction-related validations in the Status Message User Guide (i.e. the 50000 and 80000 range).
Feedback from the Slovak Republic’s exchange partners did not raise any specific concerns with respect to their ability to process the information received from the Slovak Republic and therefore with respect to the Slovak Republic’s implementation of these requirements. One of the Slovak Republic’s exchange partners reported rejecting more than 25% of the files received, but did not report rejecting more than 50% of the files received. This is a relatively low amount when compared to other jurisdictions. It was noted that the Slovak Republic has already successfully resolved the issue noted above.
Based on these findings it was concluded that the Slovak Republic is fully meeting expectations in relation to sorting, preparing and validating the information. The Slovak Republic is encouraged to continue its implementation process accordingly, to ensure its ongoing implementation.
SR 2.5 Jurisdictions should agree and use, with each exchange partner, transmission methods that meet appropriate minimum standards to ensure the confidentiality and integrity of the data throughout the transmission, including its encryption to a minimum secure standard.
In order to put in place an agreed transmission method that meets appropriate minimum standards in confidentiality, integrity of the data and encryption for use with each of its exchange partners, the Slovak Republic linked to the CTS and the CCN, which is used for exchanges within the European Union.
Based on these findings it was concluded that the Slovak Republic is fully meeting expectations in relation to agreeing and using appropriate transmission methods with each of its partners. The Slovak Republic is encouraged to continue to ensure the ongoing effectiveness of its implementation.
SR 2.6 Jurisdictions should carry out all exchanges annually within nine months of the end of the calendar year to which the information relates.
Feedback from the Slovak Republic’s exchange partners did not raise any concerns with respect to timeliness of the exchanges by the Slovak Republic and therefore with respect to the Slovak Republic’s implementation of this requirement.
Based on these findings it was concluded that the Slovak Republic is fully meeting expectations in relation to exchanging the information in a timely manner. The Slovak Republic is encouraged to continue to ensure the ongoing effectiveness of its implementation.
SR 2.7 Jurisdictions should send the information in accordance with the agreed transmission methods and encryption standards.
Feedback from the Slovak Republic’s exchange partners did not raise any concerns with respect to the Slovak Republic’s use of the agreed transmission methods and therefore with the Slovak Republic’s implementation of this requirement.
Based on these findings it was concluded that the Slovak Republic is fully meeting expectations in relation to sending the information in accordance with the agreed transmission methods and encryption standards. The Slovak Republic is encouraged to continue to ensure the ongoing effectiveness of its implementation.
SR 2.8 Jurisdictions should have the systems in place to receive information and, once it has been received, should send a status message to the sending jurisdictions in accordance with the CRS Status Message XML Schema and the related User Guide.
Feedback from the Slovak Republic’s exchange partners did not raise any concerns with respect to Slovak Republic’s receipt of the information and therefore with Slovak Republic’s implementation of these requirements.
Based on these findings it was concluded that the Slovak Republic is fully meeting expectations in relation to the receipt of the information. The Slovak Republic is encouraged to continue to ensure the ongoing effectiveness of its implementation.
SR 2.9 Jurisdictions should respond to a notification from an exchange partner as referred to in Section 4 of the Model CAA (which may include Status Messages) in accordance with the timelines set out in the Commentary to Section 4 of the Model CAA. In all other cases, jurisdictions should send corrected, amended or additional information received from a Reporting Financial Institution as soon as possible after it has been received.
The Slovak Republic appears ready to respond to notifications and to provide corrected, amended or additional information in a timely manner and no such concerns were raised by the Slovak Republic’s exchange partners and therefore with respect to the Slovak Republic’s implementation of these requirements.
Based on these findings it was concluded that the Slovak Republic appears to be meeting expectations in relation to responding to notifications from exchange partners and the sending of corrected, amended or additional information. The Slovak Republic is encouraged to continue to ensure the ongoing effectiveness of its implementation.
Note
← 1. Andorra, Liechtenstein, Monaco, San Marino and Switzerland.