You can defend intra-group services and management fees during a tax audit if you prove three things at once: that the service was actually rendered, that the recipient gained a genuine benefit (the benefit test), and that the price meets the arm’s length principle. For simple administrative and support services, a simplified approach with a mark-up of usually 5% on costs is enough. The key is documentation that ties the invoice to a concrete deliverable and an allocation key. The rules follow the same OECD logic in Slovakia and the Czech Republic, but sit on different statutes.
What are intra-group services and management fees
Within a group of related companies, part of the functions is centralised. A parent or shared-service entity provides accounting, IT support, HR, legal, controlling or marketing to its sister companies and charges management fees for them. In both jurisdictions this is a controlled transaction between related parties. In Slovakia related persons are defined in Section 2 letters n) to r) of Act No. 595/2003 Coll. on income tax; in the Czech Republic connected persons are defined in Section 23(7) of Act No. 586/1992 Coll. In both countries a 25% share in capital or voting rights is enough to create the link.
To the tax authority, management fees are a risk item because they shift profit between companies. If the fee is overstated or unsupported, it lowers the recipient’s tax base. These transactions are therefore governed by the arm’s length principle – in Slovakia through Sections 17 and 18 of the Income Tax Act, in the Czech Republic through the usual (arm’s length) price under Section 23(7).
How the benefit test and proof of actual supply work
The auditor’s first question is whether the recipient received real value for the money. The benefit test asks whether an independent company would have been willing to pay for the same service, or whether it would have performed it in-house. If the service merely duplicates an activity the recipient already carries out, or if it consists of so-called shareholder costs (for example the parent’s costs of exercising ownership rights, consolidation or investor reporting), it cannot be recharged.
The second layer is proof of actual supply. You must show that the service genuinely took place, not just that it was invoiced. Contemporaneous evidence helps: timesheets, meeting minutes, e-mail correspondence, IT deliverables and service agreements with a defined scope. An invoice reading “management fee for Q1” with no supporting file is virtually indefensible on audit. For who must keep documentation in each country, see our overview of transfer pricing documentation.
When the simplified approach and 5% mark-up apply
For ordinary low value-adding support services, Chapter VII of the OECD Transfer Pricing Guidelines introduced a simplified regime. These are services of an administrative, technical, financial, advisory or commercial nature that are not the group’s main business, do not use unique intangibles and do not carry significant risk. For them a mark-up of 5% on the relevant direct and indirect costs is accepted, without a detailed comparability analysis.
The two countries apply this OECD approach through their own instruments. Slovakia recognises it via the Financial Directorate’s methodology alongside Ministry of Finance guidance no. MF/012879/2025-724 on documentation content. The Czech Republic implements it through Instruction GFŘ D-10, which adds volume limits: the provider must stay below 10% of revenue and CZK 50 million, and the recipient below 20% of operating costs and CZK 50 million. Costs are allocated through a key that reflects actual usage, such as headcount, turnover or the number of documents processed.
What costs you must exclude
Whichever country you sit in, the cost base of the fee cannot include everything. You must leave out shareholder costs and the provider’s own internal costs, and you cannot recharge services that duplicate what the recipient already does. A defensible cost base typically contains:
- direct costs of delivering the service (staff time, subcontractors);
- a fair share of indirect and overhead costs;
- an appropriate mark-up, usually 5% for low value-adding services;
- an allocation key documented and applied consistently across recipients.
Example: a shared-service company spends EUR 60,000 a year on accounting for three sister companies. With a 5% mark-up it recharges EUR 63,000, split by the number of invoices each company generates.
How to prepare for a tax audit
An audit of transfer prices looks at the whole chain of evidence, not just the price level. Have ready the service agreement, the pricing method, the cost base calculation, the allocation key and proof of actual delivery. If you claim the price is at arm’s length, you must show how you arrived at it.
The three failures that most often collapse under audit are the same in both countries: a lump-sum fee with no link to costs, a missing benefit test, and the recharge of shareholder costs. Well-prepared documentation can shift the burden of proof back to the tax authority.
What penalties apply if the setup is wrong
If the tax authority finds the management fees unreasonable or unsupported, it adjusts the tax base by the difference against the arm’s length price. In Slovakia the additional tax carries late-payment interest and a penalty that is usually higher for transfer pricing adjustments than for ordinary errors; in the Czech Republic it triggers a penalty and late-payment interest as well. The risk grows when a fee is invoiced into a loss-making company or paid out of a highly profitable one, and cross-border charges add a VAT layer to get right – see our guide on invoicing abroad from a VAT perspective.
Intra-group services are a legal and common tool in both jurisdictions – but only as long as a real deliverable and a defensible price stand behind the invoice.
Are you setting up management fees between related companies, or facing a transfer pricing audit in Slovakia or the Czech Republic? We help you set the price, the allocation key and the documentation so they hold up.
FAQ
What profit mark-up on management fees is acceptable?
For low value-adding services, both Slovak and Czech tax authorities accept the OECD simplified approach with a mark-up of 5% on the relevant direct and indirect costs, without a detailed comparability analysis. Slovakia applies this through the Financial Directorate’s methodology, the Czech Republic through Instruction GFŘ D-10. Services with higher added value or significant risk require a separate benchmarking analysis.
How do Slovakia and the Czech Republic differ on the legal basis?
The economic principle is shared, but the statutes differ. Slovakia defines related persons in Section 2(n-r) and applies the arm’s length principle through Sections 17 and 18 of Act No. 595/2003 Coll. The Czech Republic works with connected persons and the usual price under Section 23(7) of Act No. 586/1992 Coll., supplemented by Instructions GFŘ D-34 and D-10. Never mix the two sets of rules within one entity.
What is the benefit test and why is it decisive?
The benefit test asks whether an independent company would have paid for the same service or arranged it itself. If the service only duplicates the recipient’s existing activity, or represents the parent’s shareholder costs, it cannot be recharged. Without proven benefit the tax authority disallows the cost and adjusts the tax base, regardless of the country.