Cloud and SaaS subscriptions — such as Microsoft 365, Google Workspace or accounting and design tools — are treated as a service in both Slovakia and the Czech Republic: they go straight into expenses and reduce the tax base as they are incurred, without creating an asset. Software bought outright is different. In Slovakia it becomes an intangible asset once its cost exceeds EUR 2,400 and is depreciated in line with accounting under Section 22(8) of the Income Tax Act; in the Czech Republic the separate tax category of intangible assets was abolished in 2021, so the deductible cost is simply the accounting depreciation. The accounting for SaaS and licences therefore depends on whether you are buying access to a service or a permanent right to use software.
What is the difference between a SaaS service and buying software?
With SaaS (software as a service) and cloud tools you do not pay for ownership of the program but for access to a service for a set period — a month, a year, or per user. Nothing becomes your property; when the subscription ends, so does the access. This covers office suites, e-mail and storage, CRM, invoicing and accounting apps and developer tools.
By contrast, if a company buys software under a perpetual licence or has it custom-built for long-term use, it acquires a property right to it. This seemingly minor distinction decides the entire accounting and tax treatment: a service goes directly into expenses, while an asset must be depreciated. Identifying what you are actually buying is always the first step.
How is a SaaS subscription accounted for?
A cloud subscription is a service recorded directly as an expense of the period, and monthly payments reduce the tax base as they arise — the treatment is the same in both countries. Where a subscription is paid in advance for a period that crosses the accounting year, accruals apply and the amount is spread over the months it actually covers. For example, a one-year subscription paid in October is split so that only the months falling in the current year are expensed now, and the rest moves to the following year.
When does software become an intangible asset — Slovakia vs the Czech Republic?
This is where the two regimes diverge. In Slovakia, software with an acquisition cost above EUR 2,400 and a useful life over one year is a long-term intangible asset, depreciated under Section 22(8) of Act No. 595/2003 Coll. in line with the accounting depreciation set in the depreciation plan. Cheaper software goes straight into expenses.
In the Czech Republic, a 2021 amendment abolished the separate tax category of intangible assets. Software recorded as a long-term intangible asset is now deducted through its accounting depreciation, and the threshold for capitalising it is set by the company itself in an internal directive (commonly CZK 60,000) rather than by law. The practical effect is similar — spreading the cost over time — but the Czech rules leave the boundary to accounting policy, while Slovakia keeps a fixed EUR 2,400 tax threshold.
How is VAT handled on SaaS from abroad?
Most cloud tools come from foreign providers in the EU or third countries. For business-to-business services the place of supply is the customer’s seat, so the domestic customer applies the reverse charge: the supplier invoices without VAT, and the customer self-assesses the tax and, if the service is used for business, deducts it in the same return. The rate is 23% in Slovakia (Section 15 of Act No. 222/2004 Coll.) and 21% in the Czech Republic (Section 9 of Act No. 235/2004 Coll.).
A point often missed: even a non-VAT-payer must register before receiving a service from another EU member state — as a Section 7a payer in Slovakia or an identified person in the Czech Republic — and account for the tax without the right to deduct. You can read more about how we support cross-border clients in our overview of Slovak tax advisory for companies.
Licences, modules and implementation costs
Time-limited licences, such as a yearly antivirus or graphics subscription, are close in nature to a service and are expensed, with accruals where needed. Perpetual licences to more expensive software instead form part of its acquisition cost and are depreciated with it.
Implementation and customisation costs deserve attention: where they extend the functionality of capitalised software they may increase its value and be depreciated, whereas ordinary updates, support and maintenance are expenses of the period. The line between the two should be assessed case by case in each jurisdiction.
What should you watch out for?
The basic condition is the same everywhere: the cost must relate to earning taxable income and the company must be able to prove it. For tools that could also serve private purposes, business use must be defensible, or the expense may be reduced.
Proper documentation matters too — an invoice, proof of payment and, for foreign services, correctly reported VAT. Because many SaaS payments are made by card in a foreign currency, watch the exchange-rate conversion and the completeness of the electronic-only documents providers issue. Sound records — ideally kept as part of professional accounting in Slovakia — are the best protection in an audit.
Not sure whether to expense a particular piece of software or cloud subscription, or to depreciate it? We are happy to set up your SaaS accounting and the correct VAT treatment of foreign services.
FAQ
Is a SaaS subscription a one-off expense or is it depreciated?
A SaaS subscription is payment for a service, not for an asset, so it is expensed directly in the period and not depreciated. It reduces the tax base as the payments arise. Only software bought outright as a long-term intangible asset is capitalised — in Slovakia above EUR 2,400, and in the Czech Republic through accounting depreciation since the 2021 reform.
How do Slovakia and the Czech Republic differ on capitalising software?
Slovakia keeps a fixed tax threshold: software above EUR 2,400 with a useful life over one year is an intangible asset depreciated in line with accounting under Section 22(8). The Czech Republic abolished the separate tax category in 2021, so the deductible cost is the accounting depreciation, and the capitalisation threshold is set by the company itself, typically at CZK 60,000.
Do I have to deal with VAT on SaaS from a foreign provider?
Yes. For a service from a foreign provider the place of supply is the customer’s country, and the customer applies the reverse charge — 23% in Slovakia, 21% in the Czech Republic. A VAT payer reports and simultaneously deducts the tax. A non-payer must first register (a Section 7a payer in Slovakia, an identified person in the Czech Republic) and account for the tax without a deduction.