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Taxation in Slovakia

The tax system in Slovakia is compliant with the systems of taxation in other EU member states and includes corporate and personal income tax, standard value added tax (VAT), special taxes imposed on certain assets (such as real estates, vehicle-road tax) as well as a system of excise taxes levied on specific goods such as alcohol or tobacco products.

Income Tax

Slovakia considerably simplified its tax system and introduced flat 19% rate on both income tax of individuals and income tax of legal entities, irrespective of the amount of their income. The Slovak flat income rate of 19% is generally one of the lowest income taxes among EU Member States. Dividends as capital gains of shareholder are exempt from taxation. The profit acquired by legal entity and taxed with corporate income tax is no more subject to the taxation at the moment of profit distribution to the shareholders or members/partners of the entity.

Foreign entities may become subject to taxation for the performance of their business activities in Slovakia provided that they have established permanent business or employ employees in Slovakia for at least 183 days during the period of 12 consecutive months.

Certain deductable items may be deducted from the tax base of individuals and thus lower their tax duties (e.g. individual tax base is reduced by the amount of personal allowances being approximately 2.400/person per year, monthly tax bonuses for children etc.) In case of corporate tax, the law specifies the types of expenses that are considered as tax deductible expenses which may influence the tax base and specifies up to which amount they can be acknowledge as tax deductible.

For example, acquisition of a share in a company (except for shares in a joint-stock company having a different regime) is not a tax deductible expense in the year of its acquisition but only in a year of its sale (only up to the amount of the income received for such a sale.). Any "bad" unrecoverable debts may be written off only under the conditions of stipulated by law, especially in case of insolvency proceedings of the debtor, debt of value under SKK 1,000 may be written off if the cost of their recovery exceed the value of the debt. Marketing expenses spent for presentation of business activities are also tax deductible.

The tax proceedings have been substantially simplified within the new Slovak Income Tax system.

Corporate Tax

The corporate tax rate in Slovakia is 19%.

VAT

The VAT registration duty is imposed on those persons performing business activities who: (i) have their seat, place of business or establishment in Slovakia and (ii) have reached a turnover exceeding SKK 1,500,000 (approx. EUR 40,000) during twelve preceding consecutive calendar months. The same applies to persons having their seat, place of business or establishment in Slovakia and performing their business activities jointly on the basis of an association or similar agreement. In addition, any individual or legal entity performing business activities may upon its own decision apply for VAT registration (irrespective of the turnover reached). The supplies that are subject to VAT may be divided into four categories: (a) supply of goods for consideration performed in Slovakia by VAT liable entities, (b) provision of services for consideration performed in Slovakia by VAT liable entities, (c) acquisition of goods for consideration performed in Slovakia from other EU Member States, and (d) import of goods to Slovakia (from outside the EU territory).Certain types of supplies are exempt from VAT, including postal services, financial services or insurance services. All taxable supplies are subject to a flat 20% VAT. Reduced rate is 10%.

Excise Taxes

There is a standard system of excise taxes imposed on certain sorts of goods such as mineral oils, spirits, liqueurs, beers, wines and tobacco products in Slovakia. The tax is due by producers and importers of such goods, usually monthly by a lump sum depending on the volume of goods.

Real Estate Tax

Each owner of a real estate located in Slovakia is obliged to pay real estate tax, in case of lands at a rate of 0.25% of the value of the land determined by the expert's appraisal or, in case of agricultural land, by the relevant Decree of the Ministry of Agriculture and in case of buildings at a rate of SKK 1 per 1 m2 of built-up area. The tax is payable annually to the municipal authorities and its rate may be subject to changes by the decision of the municipal authorities.

Road Tax

Vehicles used for business purposes are subject to road tax at the progressive rate depending on the type of vehicle and ranging from SKK 1,600 to 6,160 for personal motor vehicles, and from SKK 1,800 to 75,400 for utility vehicles and buses.

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