U.S. income tax treaty with Slovak Republic

Treaty documents and protocols

The convention was signed at Bratislava on October 8, 1993. The IRS lists an Income Tax Treaty and a Technical Explanation, and it shows no protocol or amending convention. The Technical Explanation is the Treasury's article-by-article explanation of the convention, including Article 17, Limitation on Benefits.^[1][2][5]

Article 29 applies the convention to taxes withheld at source from the first day of the second month after it entered into force, and to other taxes from January 1 of that year. IRS Table 3 and the heading of the treaty PDF both give January 1, 1993 as the general effective date.

Convention article structure

The convention has 30 numbered articles, beginning with General Scope and ending with Termination.

Dividends, interest, and royalties

The dividends article permits taxation in the recipient's residence state and also allows source-state taxation under stated limits when the beneficial owner resides in the other state. The source-state ceiling is 5 percent of gross dividends when a company beneficially owns at least 10 percent of the payer's voting shares. In other cases, the ceiling is 15 percent. Special rules apply to dividends paid by a U.S. regulated investment company or real estate investment trust. The 5 percent category does not apply to either vehicle, and the 15 percent category applies to a real estate investment trust only when its beneficial owner is an individual with less than a 10 percent interest.^[2]

Interest arising in one contracting state and beneficially owned by a resident of the other state is generally taxable only in that other state. The article excludes interest attributable to a permanent establishment or fixed base in the state where it arises from that rule. It also gives a source rule tied to the payer's residence, with a separate rule when a permanent establishment or fixed base bears the payment.^[2]

The royalties article distinguishes two categories. Royalties for copyrights and certain other listed rights, when beneficially owned by a resident of the other state, are taxable only in that other state.

Each of these articles uses beneficial ownership and the connection between the income and a permanent establishment or fixed base as conditions.

Residence under the convention

A resident is generally a person liable to tax in a state because of domicile, residence, place of management, place of incorporation, or a similar criterion. A person taxed there only on local-source income or locally situated capital is excluded from the definition. For income derived or paid by a partnership, estate, or trust, residence applies only to the extent the income is taxed as a resident's income.

For an individual treated as a resident of both states, the convention assigns residence in a sequence. A permanent home in one state controls; if homes are available in both, the closer personal and economic relations control. If that test does not settle the issue, habitual abode applies. If habitual abode is in both states or neither, nationality controls. If the individual is a national of both or neither, the competent authorities settle the question by mutual agreement.^[2]

Exchange of information

Article 27 directs the competent authorities to exchange information needed to carry out the convention or covered domestic tax laws, when the taxation under those laws is consistent with the convention. The exchange is not limited by the general-scope article. Received information is subject to rules about permitted recipients and uses. Limits apply to required assistance, including where information is unavailable under the relevant laws or ordinary administrative process.^[2]

When one state makes a request under the article, the other obtains information in the same manner and to the same extent as for its own tax. On a specific request, the competent authority can provide witness depositions and authenticated copies of unedited original records to the extent those materials can be obtained under that state's laws and practices. For this article, the convention applies to taxes of every kind imposed by a state.^[2]

Limitation on benefits

The convention contains a Limitation on Benefits article. It sets out categories of residents entitled to treaty relief in the other state, including individuals, a state or local authority, certain active businesses, qualifying publicly traded companies, qualifying not-for-profit organizations, and certain persons meeting ownership and income-payment tests. A competent authority may grant benefits to a person who does not qualify under those categories. The article also defines recognized securities exchanges and gross income for its specified tests.^[2]

The saving clause and U.S. citizens

Paragraph 3 of Article 1 states that a contracting state may tax its residents and citizens, including former citizens, under its laws as if the convention had not taken effect. The convention then lists exceptions to that paragraph for specified provisions.^[2]

Worked illustrations

Dividend rate category

The 5 percent ceiling applies to dividends beneficially owned by a company resident in the other contracting state that directly owns at least 10 percent of the payer's voting shares, excluding dividends paid by U.S. regulated investment companies or real estate investment trusts.

Related reading

Related treaty pages provide comparisons with other country conventions. U.S. income tax treaty with Slovenia is a nearby country treaty reference. U.S. income tax treaty with Lithuania covers another treaty in the region. U.S. income tax treaty with Switzerland provides another country treaty summary.

Questions and answers

Related resources

Related glossary terms

• Limitation on benefits: A limitation on benefits article sets conditions for entities in a treaty country to qualify for certain treaty benefits under the applicable U.S. tax treaty.
• Treaty rate table: A treaty rate table summarizes income categories and tax rates or exemptions under U.S. income tax treaties. The IRS explains the tables' scope and limits.

Related articles and guides

• U.S. income tax treaty with Switzerland: The U.S. income tax convention with Switzerland dates from 1996, and a Protocol in force since 2019 covers information exchange and binding arbitration.

Related pages

• Tax treaties: All treaty partners listed by the IRS.
• Treaty documents lookup: Find IRS-listed treaty documents by country.