The facts
Coca-Cola HBC Česko a Slovensko s.r.o. (‘CCHBC SK’) is the Slovak bottling and distribution subsidiary of the Coca-Cola HBC Group. In 2005, management functions for CCHBC SK and its Czech sister company (CCB ČR) were integrated into a single organisational unit. From 2006, CCB ČR provided management services to CCHBC SK under a management services agreement, charging a fee based on a cost allocation using employee headcount as the allocation key — a 33:67 split corresponding to the relative headcount of the two companies.
CCHBC SK also received a loan from a Dutch group entity (BBF BV), with interest charged under the loan agreement. The tax authority challenged two aspects: the allocation key used for the management fees, arguing a sales-volume key was more appropriate; and the deductibility of interest on the Dutch loan, arguing it should be recharacterised as a shareholder contribution — hidden equity — rather than debt, on the basis that the loan was economically unwarranted given the taxpayer’s persistent losses.
A first-instance assessment added EUR 94,734.55 to CCHBC SK’s taxable income for 2006. On appeal, the Financial Directorate confirmed the assessment. Critically, the Financial Directorate commissioned a comparability analysis during the appeal proceedings to support its position — and included the findings of that analysis in its appeal decision without giving CCHBC SK any opportunity to review or respond to it before the decision was issued.
The issue
A critical procedural protection in Slovak tax proceedings is the taxpayer’s right to be informed of and respond to new evidence before a decision is issued. Under § 74(3) of the Tax Procedure Code (Daňový poriadok), where the appellate authority conducts additional investigation or produces new evidence during the appeals process, it must give the taxpayer an opportunity to review that evidence and make observations before the decision issues. This case turns entirely on whether that obligation was met.
The decision
The Administrative Court annulled the Financial Directorate’s decision and remitted the case for fresh consideration on procedural grounds.
Procedural violation — comparability analysis without notice
The court’s central finding was that the Financial Directorate had violated § 74(3) of the Tax Procedure Code. The comparability analysis was produced during appeal proceedings, was adopted in full in the appeal decision, and formed part of the evidential basis for both the management fee allocation issue and the loan recharacterisation. CCHBC SK was never shown the analysis before the decision was issued and had no opportunity to challenge it, propose additional evidence, or make observations.
The court treated this as a substantive procedural defect rather than a formality. The right to be heard before a decision that imposes a heavier tax burden is a fundamental protection in Slovak administrative law. An oral clarification by phone — as the authority claimed had occurred — is not an adequate substitute. This finding was sufficient to annul the entire decision, and the court declined to rule on the substantive merits.
Management fees — allocation key
On the allocation key, the court noted that the OECD Guidelines acknowledge multiple allocation keys as acceptable depending on the nature of the services. Both the headcount-based key used by CCHBC SK and the sales-volume key proposed by the authority were consistent with OECD guidance. The authority’s choice was not arbitrary — but the issue was rendered moot by the procedural annulment.
Loan recharacterisation — open
The court expressly declined to address the loan recharacterisation on the merits, as the comparability and industry analysis that underpinned the authority’s position had been produced without notice during the appeal. The substantive question — whether a loan to a persistently loss-making subsidiary can be recharacterised as equity without a specific debt capacity analysis — remains to be decided in the fresh proceedings.
ajiho commentary
The procedural lesson
The most transferable point from this case is the § 74(3) principle: in Slovak tax proceedings, any new evidence or analysis produced during the appeal stage must be disclosed to the taxpayer before the appellate authority issues its decision. This mirrors the general principle in most EU jurisdictions that the right to be heard (audi alteram partem) includes the right to know the basis on which an adverse decision will be made and to respond to it.
In transfer pricing cases, authorities frequently produce or commission comparability analyses during appeal proceedings, particularly when the first-instance assessment was based on a more intuitive analysis. The Slovak court’s ruling confirms that this practice creates procedural risk for the authority: if the analysis is not disclosed and the taxpayer is not given a meaningful opportunity to respond, the decision based on it may be annulled regardless of the substantive merits.
Loan recharacterisation — the open question
The court’s refusal to address the loan recharacterisation on the merits leaves an important question unanswered: when can a tax authority recharacterise an intercompany loan as a shareholder contribution — hidden equity — on the basis that a persistently loss-making borrower would not have been lent money by an independent creditor? The authority relied on an industry-level analysis comparing CCHBC SK’s financial ratios to independent comparables, but without conducting a specific debt capacity analysis for CCHBC SK itself.
This parallels the approach in other jurisdictions in this library: the Austrian BFG, the Luxembourg EQ LUX decision, and the Luxembourg AA SARL debt waiver case all address the conditions under which a loan is recharacterised as equity. In Slovakia, the next round of proceedings will need to determine whether the authority’s evidence base — an industry comparison rather than an entity-specific debt capacity analysis — is sufficient.
What this means for your business
Two lessons follow. First, groups facing a Slovak transfer pricing assessment should scrutinise the evidential trail: if the authority relied on a comparability or industry analysis that was never disclosed during the appeal, the decision is vulnerable to annulment on procedural grounds alone. Second, the substantive risk to loss-making borrowers remains live. An intercompany loan to a persistently loss-making Slovak subsidiary can be challenged as hidden equity — but on the current state of Slovak law, an industry comparison without an entity-specific debt capacity analysis may not be enough to sustain that challenge. Groups should ensure their financing arrangements are supported by a borrower-specific analysis that can withstand recharacterisation scrutiny.
Case reference
Coca-Cola HBC Česko a Slovensko s.r.o. v Finančné riaditeľstvo Slovenskej republiky · Správny súd v Bratislave · BA-1S/218/2020 · ECLI:SK:SpSBA:2025:1020201390.1 · 15 May 2025
Judgment in Slovak. First-instance administrative court decision; appeal to the Najvyšší správny súd (Supreme Administrative Court) available. Access via the Slovak court information system.