Pocket Tax Book 2023

Personal Income Tax (“PIT”)

Tax Residence

• Individuals are considered Slovak tax residents if they:
  • Have permanent residence in Slovakia; or
  • Are physically present in Slovakia for 183 days or more in a calendar year, either continuously or in total; or
  • Have a residence in Slovakia.

Subject of the Tax

• Slovak tax residents are subject to PIT on their worldwide income (possibility to apply applicable DTTs to avoid double taxation).
• Slovak tax non-residents are only subject to PIT on their Slovak source income.
• Income may be subject to PIT regardless of whether or not it is paid in Slovakia.
• The taxable period is the calendar year.

Tax Rate

• 
  The PIT rate is, with some exceptions, as follows:
  • 19% – for a tax base up to EUR 41,445.46+ and
  • 25% – for amounts exceeding this limit.
• Some types of income from business activities of individuals are taxed at 15%. Specific income from (holding) capital assets (i.e. interest) constitutes a separate tax base, which is taxed at 19%.
• Dividends paid from profit generated during a taxable period commencing on or after 1 January 2017 are taxed at 7% (or 35% if the individual is a resident of a non-contracting state). Dividends paid from profit generated during taxable periods from 2004 to 2016 are not subject to PIT.

Tax Base

• 
  An individual’s personal income tax base is calculated by adding income from different sources:
  • Income from employment;
  • Income from entrepreneurial activities, other self-employment activities, renting real estate, using a piece of work, and an artistic performance; and
  • Other income.
• The income tax base of an employee includes all income from employment less mandatory employee’s contributions to health and social insurance. The tax base may also be reduced by other tax allowances (see below).
• As a rule, expenses unavoidably incurred when generating, securing, and maintaining taxable income are deductible from such income (with some specific exceptions).

Income Exempt from Taxation

• Certain types of income (e.g. from the sale or rent of real estate, or from occasional activities) are, under certain conditions, fully or partially exempt from PIT.

Tax Allowances

• As a rule, basic tax allowances may only be claimed on income from employment and income from entrepreneurial or other self-employment activities.
• Such allowances include, for example, personal allowance, dependent spouse allowance, tax bonus for dependent children, or tax bonus for young people on mortgage interest paid. The entitlement and method of calculation of each of these allowances are legally defined.
• Basic tax allowances are summarized in the following tables:

Tax Losses

• Tax losses from entrepreneurial or other self-employment activities may be utilized during no more than 5 consecutive taxable periods, however, only up to 50% of the tax base on income from entrepreneurial or other self-employment activities (the 50% limit does not apply to micro-taxpayers).

Tax Registration

• Individuals who have i) obtained a business licence in Slovakia; ii) started performing other self-employment activities in Slovakia; or iii) rented real estate in Slovakia must register with the Slovak tax office for PIT by the end of the month following the month in which the relevant event occurred.
• Individuals are not obliged to register as taxpayers if they only receive income from employment, income from capital investments, other income, or income subject to withholding tax, or receive a combination of the above.

PIT Return and Tax Payment

• As a rule (with some exceptions), anyone liable for Slovak PIT whose taxable income for the year exceeds a specific amount (EUR 2,461.41 in 2023) must file a PIT return.
• The filing and tax payment deadline is 31 March of the calendar year following the year in which the income was earned. This deadline may be extended by 3 (under certain conditions by 6) calendar months.

Allocation of Tax Paid

• A taxpayer can allocate 2% (or 3% if certain conditions are met) of their tax liability for 2022 to a qualifying entity of their choice.

Health and Social Insurance

• Income from employment, entrepreneurial and other self-employment activities is subject to contributions to health and social insurance. As a rule, the assessment base is the total taxable income.
• Specific income (e.g. income from renting real estate or dividends paid from profit generated in a taxable period which begins on or after 1 January 2017) is not subject to contributions to health and social insurance in Slovakia.
• Health and social insurance contributions from employment income are summarized in the following tables.

Overview of health and social insurance contributions

• In addition to these social insurance contributions, an employer must also make injury insurance contributions of 0.8% of the employee’s assessment base.

Value-added Tax (“VAT”)

VAT Registration

• There is an obligation to register for VAT purposes for:
  • a taxable person with their seat or permanent address, place of business, or permanent establishment in Slovakia that
  • generated a turnover of EUR 49,790 for a maximum of the 12 previous consecutive calendar months. Voluntary registration is also possible before reaching this threshold.

As of 1 January 2023, this obligation does not apply to taxable persons who exclusively perform insurance services, financial services, and tax-exempt supply or rent of real estate. 

• A VAT registration obligation in Slovakia may arise for foreign persons, for example, prior to the supply of goods or service if the tax obligation is not transferred to the recipient.
• A taxable person who is not a VAT payer, or a legal entity which is not a taxable person must, in some cases, file an application for VAT registration for the purposes of paying VAT or reporting the supply of services (such as receipt/provision of certain services from/to another EU member state or acquisition of goods from another EU member state).
• Automatic VAT registration is applied for taxable persons who supply a building, or a part thereof, or building land, if they are not VAT exempt and a turnover of EUR 49,790 is expected to be achieved from such a supply.

VAT Group

• VAT groups may be created in Slovakia. Transactions between members of a VAT group are not subject to VAT.

Call-off Stock Simplification

• The call-off stock scheme, which has been harmonized in the EU, applies if a foreign supplier transfers its own goods from another EU member state to a warehouse in Slovakia for a known customer without transferring the right of ownership over these goods to that customer. The goods are only deemed to be delivered when withdrawn from the warehouse by the customer.
• When foreign suppliers meet the relevant conditions, they need not register for Slovak VAT when transferring their own goods to Slovakia.

VAT rates

• The basic VAT rate is 20%.
• A reduced rate of 10% applies to certain basic foodstuffs (e.g. meat, milk, and bread), some pharmaceutical products, certain medical aids, certain books and similar products, specific accommodation services, certain healthy foods (such as dairy products, bryndza (crumbly sheep milk cheese), honey, most fruits and vegetables, fruit and vegetable juices, etc.), and print media. As of 1 January 2023, the reduced rate will also apply to certain sports services (e.g. ski lifts) and to restaurant and catering services.

Special VAT Treatment – Cash Accounting

• Certain local taxpayers may use a special approach for claiming VAT on a sale based on the receipt of payment for goods or services (cash accounting).
• For the remote sale of goods from non-EU countries, a special iOSS regulation (import One-Stop Shop) applies. For transactions within the EU, the OSS regulation (One-Stop Shop) may be applied. 

Reverse Charge in the Construction Industry

• For certain supplies between two Slovak VAT payers in the construction industry, a transfer of the tax liability to the recipient has been introduced (reverse charge). This concerns, inter alia, the supply of construction work, the supply of buildings under a contract for work, and the supply of goods with assembly or installation, provided they are included in a special statistical classification.

Exempt Supplies

• Exempt supplies for which input VAT may not be deducted include postal services, financial and insurance services, educational services, radio and TV broadcasting services, health and social services, the supply and lease of real estate (with some exceptions), and lotteries and similar games.
• Exempt supplies for which input VAT may be deducted include, for example, intra-community supply of goods, financial and insurance services if provided outside the EU, triangulation transactions, transport of passengers in certain cases, and export of goods outside the EU.
• The sale of a building plot is not exempt from VAT. The sale of a building (including the building plot on which the building is situated), after five years from the issue of the official final inspection and occupancy approval (with certain exceptions), or from their first use is exempt from VAT.
• If the conditions for VAT exemption are met (with some exceptions), a VAT payer may elect not to apply such an exemption on such a supply. In such a case, the tax liability is transferred to the recipient.
• The rent of real estate (with some exceptions, such as parking places or residential buildings) is VAT exempt. A VAT payer may decide to charge VAT on the lease of a building to another taxable person.

Input VAT Deduction

• As a rule, a VAT payer may deduct input VAT relating to a received taxable supply intended for use for taxable supplies of goods and services on which a deduction may be claimed.
• A VAT payer may not deduct input VAT on goods and services to be used for exempt supplies for which input VAT may not be deducted.
• A partial deduction based on a coefficient calculated under the law applies to purchases of goods and services used on taxable supplies, on which input VAT deduction may be claimed, and also on those on which input VAT deduction may not be claimed.
• Input VAT deduction relating to the acquisition of certain non-current assets must be adjusted if the purpose of the use of such assets changes within five years of acquisition (20 years for real estate).
• If the scope of use is changed for business purposes or for a different purpose than business, there is also an obligation to adjust proportionately deducted VAT, under certain conditions, on services provided with regard to non-current assets and certain movable tangible assets.
• A VAT payer may not deduct input VAT for entertainment and refreshments costs.

VAT Compliance and VAT Return

• An invoice must be issued for every supply of goods or services to a taxable person and for a remote sale of goods (with some exceptions) within 15 days of the supply of goods, services, or receipt of payment prior to their supply. An invoice may also be issued and received in electronic form. An amending document must be issued within 15 days of the end of the calendar month in which the event occurred that gave rise to a change to the tax base.
• A VAT payer must be able to document the authenticity of origin, integrity of content, and readability of an invoice from its issue until the end of the invoice-archiving period.
• VAT returns must be filed on a monthly basis. A VAT payer may decide on a quarterly filing period, provided that more than 12 months have elapsed from the end of the calendar month in which they became a VAT payer, and their turnover was less than EUR 100,000 over the preceding 12 consecutive calendar months.
• VAT returns must be filed within 25 days of the end of the taxable period, and any VAT liability must be paid by the filing deadline.

EC Sales List

• VAT payers must submit EC sales lists if they made intra-community supplies of goods from Slovakia to another EU member state, transferred own goods from Slovakia to another EU member state, transferred or supplied goods in a call-off stock regime, participated in a triangulation trade as the first customer, or provided services with the place of supply in another EU member state to another taxable person and this person is obliged to pay the VAT.
• EC sales lists must be filed electronically within 25 days of the end of the period to which they relate.

Control Statement

• The control statement is a detailed list of all invoices issued and received. It must be presented by all VAT payers (including foreign persons registered for VAT in Slovakia).
• A control statement must be filed in electronic form by the 25th day after the end of the relevant taxable period.

VAT Refunds

VAT Refund to Slovak VAT Payers

• If the VAT refund cannot be fully offset in the following VAT period, the tax authorities will refund the excess input VAT, or part thereof, within 30 days of the filing of the VAT return for the following VAT period, provided that the tax authorities did not open a tax audit prior to that date.
• If certain conditions are met, the tax office must refund the VAT within 30 days of the deadline for filing a VAT return.

VAT Refund to Foreign VAT Payers from Another EU Member State

• A foreign VAT payer from another EU member state may claim Slovak VAT via the VAT refund scheme for foreign persons not registered for VAT in Slovakia.
• A VAT refund request must be filed by 30 September of the calendar year following the period for which the VAT refund is claimed (the maximum period is one calendar year) and the total amount of VAT claimed must be at least EUR 50.
• A foreign VAT payer is entitled to a deduction of input VAT via a VAT return provided that the above requirements for a VAT refund via the VAT refund system to foreign VAT payers are not met.

VAT Refund for Foreign Entities from Non-EU Countries

• An entity registered for VAT, or similar consumption tax, in non-EU countries may, under certain conditions, claim a refund of Slovak VAT paid on the purchase of certain goods or services.
• A VAT refund may be claimed by submitting a request to the Bratislava Tax Office by 30 June of the calendar year following the year for which the refund is claimed. The total amount of a VAT refund must be at least EUR 50.
• VAT may only be refunded to entities from non-EU countries which have concluded reciprocal VAT refund agreements with Slovakia.

Correction of the tax base in the event of failing to settle a liability / a bad debt

• As of 1 January 2023, customers are obliged to adjust the input VAT deducted from the purchased goods and services for which the input VAT deduction was applied if they fail to settle their obligation fully or partially within 100 days of its due date.
• In addition, conditions for bad debts arising at a supplier have been relaxed for receivables overdue by more than 150 days.

Electronic Cash Register

• Entrepreneurs who sell goods or provide defined services for which revenues are received in cash (or by other means of payment replacing cash) must record received revenues via the ‘e-register client’ system, which is either an online cash register or a virtual cash register.
• All entities that meet these conditions (irrespective of the nature and purpose of their business) must use the ‘e-register client’.

Excise Duties

Goods Subject to Excise Duties

• The following goods are subject to excise duties:
  • Mineral oils;
  • Alcoholic beverages (beer, wine, intermediate products, and spirits);
  • Tobacco products;
  • Electricity, coal, and natural gas.
• An excise duty liability arises upon the import of these goods into Slovakia from outside the EU, or when these goods are either released from a duty suspension regime for tax-free circulation in Slovakia, or upon delivery to the ultimate consumer.
• The rate of excise duty depends on the specific type of product.
• In certain cases, the products listed above may be exempt from excise duty.

Registration

• An excise taxpayer must be registered with the customs office.
• Entities wishing to produce, store, receive, or send products subject to excise duty under the duty suspension regime must register with the customs office and lodge the required tax guarantee before authorization may be granted.
• A company using products exempt from excise duty must register with the respective customs office and apply for a licence and a voucher. The company provides the voucher to its suppliers who may then supply products exempt from excise duty.
• Based on authorization from the customs office, the registered consignor is entitled to dispatch the goods under duty suspension regime after they are released into tax-free circulation. He may not receive or store excisable goods.

Excise Duty Compliance

• The excise duty administrator is the Customs Authority.
• The taxable period is usually a calendar month.
• Monthly excise duty returns must be filed (with certain exceptions) within 25 days of the end of the taxable period, and excise duty liabilities must also be paid by this deadline.

Custom Duties

General Principles

• Goods imported from non-EU countries or exported from the EU customs territory must be subject to customs clearance.
• The declarant is the person responsible for paying the customs debt who submits the customs declaration in his own name or in whose name the customs declaration is submitted.
• A customs debt arises when a customs declaration is accepted, or when the obligations set out in the customs regulations are not met.
• The customs authorities require declarants to provide a guarantee to cover a customs debt if a customs debt has arisen or may arise in future. A customs guarantee may be made in cash, or provided by a guarantor.
• For communication with the customs offices, each person must be identified by an EORI number (Economic Operator Registration and Identification Number) allocated by the customs authorities on request.
• Export, import, and transit customs clearance is based on the electronic information exchange.

Customs Procedures

• The declarant may propose to release goods into free circulation or place such goods under an export customs procedure. Depending on the intended purpose of the goods, the following special customs procedures may be applied:
  • Transit (external, internal);
  • Storage (customs warehousing, free zones);
  • Specific use (temporary use, final use); and
  • Processing (inward processing, outward processing).

Simplifications

• To simplify customs formalities and procedures, the customs authorities may grant permission to use a simplified customs declaration, centralized customs clearance, an entry in the declarant’s records, or self-assessment.
• The status of an Authorised Economic Operator allows the simplification of various customs procedures, and its holder is considered a reliable partner of the customs authorities.
• The Registered Exporter System (REX) enables economic operators to self-certify the preferential origin of goods.

Other Taxes, Levies, and Reports

Motor Vehicle Tax

• Taxable vehicles are those registered in Slovakia and used for business purposes. 
• As a rule, motor vehicle tax is payable by the car’s registered keeper. In specifi c cases, it is payable by the individual who uses the car for business purposes. 
• The annual tax rate depends on the type of the vehicle and the time since its fi rst registration. 
• The taxable period is a calendar year. 
• Taxpayers must fi le a tax return and pay the tax liability for the previous year by 31 January.

Real Estate Tax

• Real estate tax is governed by the Act on Local Taxes, and is divided into:
  • Land tax;
  • Building tax; and
  • Apartment tax.
• As a rule, real estate tax is payable by the owner, in certain cases by the administrator or the lessee, within 15 days of a tax assessment becoming valid.
• The basic tax rate varies depending on the type of real estate and is usually set by the municipality in a generally binding regulation.
• The taxable period is the calendar year. The tax liability arises on 1 January following the year in which the taxpayer became the owner, the administrator, or the lessee in the property subject to tax.
• Taxpayers must fi le a tax return by 31 January of the taxable period in which the tax liability arises, relating to their tax liability on 1 January of this period.

Special Levy in Regulated Industries

• This applies to a legal entity or branch of a foreign entity authorized to do business in regulated industries which expects to carry out its business activities over the entire levy period and whose total annual result of operations exceeds EUR 3 million.
• Regulated business sectors include: power industry, insurance, reinsurance, public health insurance, e-communication, pharmaceutical industry, postal services, rail transport, public water and drainage systems, air transport, and healthcare provision.
• The monthly levy rate is 0.00363. When we were preparing this overview, there was a draft amendment to the Act on a Special Levy from Doing Business in Regulated Industries in the Slovak Parliament which will amend the levy rate and the group of regulated areas the levy applies to. Due to editorial deadlines, we were not able to include this amendment in this brochure.

Insurance Tax

• The subject of the tax is non-life insurance if the insurance risk is located in Slovakia. The only exception is motor third party liability insurance where a levy of 8% from the accepted insurance premium continues to be applied.
• Entities liable to pay the tax are insurance companies, insurance companies from another EU state, and branches of foreign insurance companies. Domestic risk insurance charged by a foreign person with a seat outside the EU who does not have a branch in Slovakia is also subject to this tax. In this case, the person liable to pay the tax is the recipient of the service.
• A tax rate of 8% applies to insurance.

FATCA and CRS

• In connection with the automatic information exchange between tax administrators of individual countries, Slovakia acceded to the reciprocal exchange of information on fi nancial accounts for FATCA (the American Foreign Account Tax Compliance Act) and CRS (Common Reporting Standards) purposes.
• As a result, Slovak fi nancial institutions are obliged to collect and report selected information on fi nancial accounts to the Slovak tax authorities.
• Details are published on the Slovak Financial Directorate’s and the Slovak Ministry of Finance’s websites.

DAC6

• Taxpayers and intermediaries are required to notify the Financial Directorate of the Slovak Republic of all cross-border arrangements which meet at least one of the features set by the law which could be used for aggressive tax planning, tax avoidance, or misuse.
• As a rule, information about the notifi ed measures must be provided within 30 days of the day following the day on which the measures were made available (or prepared) for implementation, or the fi rst step in their implementation was made.

Tax Administration

Communication with the Tax Office

• All legal entities and individual entrepreneurs, or their representatives (tax advisors, attorneys, or other persons) must communicate with the tax offi ce in electronic form, either by using a qualifi ed electronic signature or an eID card (a citizen’s ID card with a chip), or on the basis of an electronic delivery agreement concluded with the tax administrator.
• The Financial Administration delivers documents to taxable entities electronically, as a rule via the Central Public Administration Portal (slovensko.sk).

Tax audit

• The tax offi ce may perform a tax audit and impose an additional tax (and the related fi nes) within 5 years of the end of the year in which the taxpayer was obliged to fi le the tax return. For cross-border transactions to which international agreements apply, a tax audit may be performed, and tax may be levied, for 11 years retrospectively.
• If a tax audit has been performed for a certain taxable period, this period remains open for an additional tax audit for 5 years after the end of the year in which the tax audit report was submitted. However, the total period may not exceed 10 years.
• A tax audit must be completed within one year, but may be extended by a further 12 months in certain cases.

Fines and Penalties

• The amount of a penalty for certain administrative tax offences is subject not only to the reported tax difference, but also to a signifi cant extent by the length of the period during which the tax was reported incorrectly. For example, this relates to situations where tax reported in the tax return is increased by an amended tax return, or if the tax authority initiates a tax audit, or imposes additional tax as a result of a tax audit.
• The imposed penalty will be at least 1%, but no more than 100% of the additionally assessed tax.
• Penalties for certain administrative offences are assessed at a fl at rate, such as for late fi ling, or a failure to meet other non-monetary obligations.
• In some cases, where a taxpayer intentionally reduces his tax liability by using incorrect pricing in controlled transactions, the tax authorities may double the penalty.

Tax Reliability Index

• It is an assessment (rating) of a taxable entity which is an entrepreneur registered for income tax based on criteria that include the fulfi lment of its duties towards the Financial Administration and based on its economic indicators.
• Based on published criteria, it categorises taxable entities into highly reliable, reliable, less reliable, and unrated.