The Slovak Republic has overhauled its rules for taxing software payments to nonresidents from 1 January 2026, abandoning its OECD reservations in favour of a dynamic treaty interpretation that ties tax treatment to the specific nature of each software transaction.
The Slovak Republic’s Ministry of Finance has issued Guidance No. MF/016959/2025-724, which provides updated rules for the taxation of income derived by nonresidents from computer programs (software).
This guidance, effective from 1 January 2026, aims to ensure a uniform procedure in assessing whether such payments are subject to withholding tax in Slovakia.
A fundamental shift in this guidance is Slovakia’s decision to no longer apply reservations to Article 12 (Royalties) of the OECD Model Tax Convention or its Commentary regarding software. Instead, the state will now follow a dynamic approach to interpreting double taxation treaties (DTTs) in line with the current OECD Commentary.
The guidance distinguishes between several specific types of software-related income to determine their proper tax qualification:
Provision of software as a service (SaaS)
The customer only gains remote access to the software’s functionality. They do not receive the source or machine code and have no control over copying or modifying the software. This is treated as income from a service rather than a royalty. Under DTTs, this generally falls under Article 7 (Business Profits). It is taxable only in the provider’s state of residence unless they have a permanent establishment in Slovakia to which the profits are attributable.
Right to personal use of software as a product
The user receives a copy of the software but only obtains the limited rights necessary for its operation, such as installation and creating backup copies. No rights for modification or commercial redistribution are granted.
Under the Slovak Income Tax Act, this is classified as an “industrial” royalty. It falls under Article 12 (Royalties) of a DTT only if the treaty’s definition of royalties explicitly includes software. If not, it is treated as business profits under Article 7. Furthermore, for DTT purposes, this income is only taxable in Slovakia if the software is used for the user’s industrial, commercial, or scientific activity.
Right to commercial use of copyright
The author grants the right to copy, process, translate, adapt, or incorporate the software into another work. This is considered a “cultural” royalty under the Slovak Income Tax Act. This income falls under Article 12 (Royalties) of DTTs and may be taxed in Slovakia at the reduced treaty rate.
Provision of know-how (secret formulas or processes)
Provision of know-how (secret formulas or processes) refers to sharing proprietary information — such as the logic, algorithms, or techniques underlying software development — that falls outside the scope of copyright or patent protection. This type of payment is classified as an “industrial” royalty and is governed by Article 12 (Royalties) of the applicable tax treaty. As a result, such payments are generally subject to withholding tax in Slovakia, with the applicable rate capped in accordance with the relevant treaty provisions.
Transfer (alienation) of copyright
Transfer (Alienation) of Copyright involves a complete transfer of rights (sale or gift), not a license. It is not taxable for nonresidents under Slovak law (Section 16), and under tax treaties falls under Article 13 (Capital Gains) — taxable only in the owner’s country of residence.
The new rules apply to any payments made after 31 December 2025, even if the underlying contracts were signed before that date.
For income paid before 2026, the previous 1998 guidance and the older 2017 OECD reservations still apply.
