Pocket Tax Book 2019

Opening speech: Christiana Serugová, Partner, Tax Leader, PwC

Dear Friends and Business Partners,

Last year was almost a unique one in our history – lawmakers almost succeeded in fulfilling what they had promised for 2018 – to keep the tax laws unchanged. In the end, the ruling coalition approved specific tax-related and political changes, including the contribution to recreation of employees and a separate levy for retail chains (the constitutionality of which is currently being considered by the Constitutional Court). So, we will have to wait a little longer for the first year in Slovak history without changes to tax legislation.

However, it is questionable whether such an expectation is realistic due to global tax events – a tightening of rules to reduce tax evasion and increase taxation transparency so that part of tax revenues in the country where value is generated ends up in the appropriate national budget. The most discussed issue internationally is a tax on digital services. Towards the end of 2018, the European Parliament endorsed the concept of a temporary digital tax of 3 % on sales revenues as of 2021 (the final wording of the EU Directive is expected to be published prior to the European Parliament elections in May this year).

In addition to the above tax-related and political changes, mainly cosmetic adjustments were introduced after the tax laws were amended (in the last quarter of the previous year). Amendments to the Act on Using Electronic Cash Registers are an exception, changing electronic cash registers into online electronic cash registers connected to the Financial Administration, the e-kasa client. Extensive public discussions were held on these amendments. After taking into consideration comments from the business sector and the professional public, the date on which these amendments will become effective has been postponed to 1 April and 1 July 2019.

The assignment of a tax reliability index, an innovation from last-year, was implemented. The tax reliability index should motivate taxpayers to fulfil their obligations, making doing business easier for those who observe the rules and sanctioning those who circumvent them. Since the end of the previous calendar year, the Tax Administration has begun sending messages about the benefits to those who meet the criteria– e.g. faster issuance of written confirmations, compliance with requests for the permission to postpone tax payments, longer intervals between tax audits, determination of the date on which an excess input VAT audit will commence upon mutual agreement, etc. This year, we will be able to assess whether the tax reliability index is meeting its purpose.

My colleagues and I will continue to help you navigate the labyrinth of local and international tax rules and, through our active work in professional organizations, keep working on shaping the legal environment so that it reflects everyday business practise and, as far as possible, meets your needs.

Christiana Serugová
Partner, Tax Leader, PwC


The Pocket Tax Book is one of our most popular annual publications. It provides a succinct yet informative summary of tax legislation and regulations and covers all aspects of taxation, including corporate income taxes, individual taxes, VAT, excise taxes and customs duty. Furthermore, it provides information about state aid opportunities when investing in Slovakia.

The publication was prepared by our team, which consists of 80 tax specialists. We will be pleased to answer all your specific questions.

Please consult the current tax rules and regulations or download our guide below.

 

Individuals

fyzicke osoby

 

General Principles

  • Slovak tax residents are subject to personal income tax on their worldwide income, taking into account relief under Slovak law or an applicable double tax treaty.
  • Slovak tax non-residents are subject to personal income tax on their Slovak source income.
  • The taxable period is the calendar year.
  • Personal income tax rates depend on the individual’s income. A tax base of up to 176.8 times the subsistence level (i.e. EUR 35,268.06) is subject to a 19% tax rate. Amounts in excess of this are subject to a 25% tax rate. Taxable income from dependent activities of selected constitutional officers is subject to a special tax rate of 5%.
  • The tax rate applicable for certain type of income from (holding) capital as-sets is unified at 19%.
  • Dividends paid from profit generated during the accounting period starting on or after 1 January 2017 are subject to a specific tax rate of 7% (or 35% if the individual is a resident of a non-contracting state).

Tax Residence

Slovak Tax Residents

  • Individuals are considered Slovak tax residents if they:
    • Have permanent residence in the Slovak Republic (“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 (i.e. accommodation not intended only for occasional use) and it is evident that the individual intends (due to personal and economic reasons) to stay here permanently.

Slovak Tax Non-residents

  • Slovak tax non-residents are subject to personal income tax on their Slovak source income such as:
    • Income from employment carried out in Slovakia;
    • Income paid by a Slovak company for acting as a statutory representative of that company;
    • Income from self-employment activities, or from provision of services in Slovakia;
    • Pocket Tax Book 2018 09
    • Income from interest, licence fees, sale or rental of property located in Slovakia, or from lottery winnings; and
    • Income from dividends.
  • Income may be subject to tax regardless of whether or not it is paid in Slovakia.

Personal Income Tax Base and Tax Losses

  • An individual’s tax base is calculated by adding income from different sources (from employment, entrepreneurial activities, other self-employment activities, rent, and other income).
  • Specific income from holding capital assets, i.e. interest, is included in a separate tax base from 2016.
  • Dividends paid from profit generated during a taxable period starting on or after 1 January 2017 are subject to a specific tax rate of 7% (or 35% if the individual is a resident of a non-contracting state).
  • Dividends paid from profit generated during taxable periods from 2004 until 2016 are not subject to tax.
  • Since 2018, the income from the sale of virtual currency is considered tax-able income. The sale of virtual currency is considered to be any exchange of a virtual currency, e.g. exchange of a virtual currency for assets, for the provision of services, for another virtual currency, or sale for a consideration. Taxable income may be reduced by tax-deductible expenses incurred to achieve the income, of a maximum up to the amount of the income achieved. This means the taxpayer cannot achieve a tax loss, which would be tax deductible.
  • The Income Tax Act specifies income that is tax exempt. From 2016, such income includes, subject to certain conditions, income from the sale of securities listed on a regulated market, provided the period between acquisition and sale exceeds one year, and income from long-term investment savings, after 15 years.
  • In May 2018, a tax-benefit for 13th and 14th salaries was introduced (subject to certain conditions) in an amount of up to EUR 500. The amount of such income must be at least equal to the average monthly earnings of the employee.
  • Since 1 January 2019, contributions for recreation are also tax exempt. Employers are obliged (subject to certain conditions) to provide employees with a contribution for recreation in the amount of 55% of qualified expenses up to a maximum of EUR 275 per year.
  • As a rule, expenses unavoidably incurred when generating and maintaining taxable income are deductible from such income. However, eligibility for a deduction must be analysed for each income type with regard to the individual’s specific circumstances.
  • Tax losses from entrepreneurial or other self-employment activities may be utilised equally during no more than four subsequent taxable periods, but only to offset taxable income from entrepreneurial or other self-employment activities. A tax loss cannot be utilised against, for example, rental income or income from capital investments.

Tax Allowances

  • Tax allowances may only be claimed on income from employment and income from entrepreneurial or other self-employment activities.

 

Personal Allowance

Entitlement:

Per taxpayer

Applicable for annual tax base:

Below EUR 19,948.00

From EUR 19,948.00 to EUR 35,268.06

Over EUR 35,268.06

Personal allowance:

EUR 3,830.02

Progressively decreased

EUR 0.00

 

Dependent Spouse Allowance

Entitlement:

  • Slovak tax residents sharing a household with a spouse; and
  • Slovak tax non-residents who receive more than 90% of their worldwide income from Slovak sources (if certain conditions are met).

Applicable for annual tax base:

Below EUR 35,268.06

From EUR 35,268.06
to EUR 50,588.13

Over EUR 50,588.13

Dependent spouse
allowance:

Positive difference between EUR 3,830.02 and
spouse's
income

Progressively
decreased

EUR 0.00

Spa Care Allowance

Entitlement:

Per taxpayer

Maximum non-taxable amount:

Allowance of no more than EUR 50 per year from verifiable payments for spa care. The taxpayer may also claim verifiable payments for spa care for his spouse and dependent children of EUR 50 per person, however, only one of these taxpayers may claim this tax allowance.

 

Tax Bonus for Dependent Children

Entitlement:

  • Slovak tax residents with dependent children living in their household, provided they earn the minimum taxable income; and
  • Slovak tax non-residents who receive more than 90% of their worldwide income from Slovak sources.

Applicable for taxable income of:

At least EUR 2,880.00

Tax bonus per
dependent child:

EUR 21.56 per month

(applied in 2018)

Tax Bonus for Young People on Mortgage Interest Paid

Entitlement:

  • Age limit - 18 to 35;
  • Average monthly income not exceeding 1.3x average monthly wage in the Slovak economy for the calendar year preceding the year in which the loan agreement was concluded.

Maximum non-taxable amount:

50% of the interest paid in the respective taxable period; up to EUR 400 a year from a loan not exceeding EUR 50,000.

 

Contributions to Supplementary Old-Age Pension Scheme

Entitlement:

After meeting specific conditions, the non-taxable part of the tax base also includes verifiably paid contributions to the supplementary old-age pension scheme.

Maximum non-taxable amount:

Verifiably paid contributions of up to EUR 180 during 2018

Tax Registration

  • Individuals must register with the Slovak tax office for income tax if they have a business permit in Slovakia, have started performing other self-employment activities in Slovakia, or have rented real estate in Slovakia. They must register by the end of the month following the month in which they started the above activity.
  • Individuals are not obliged to register as taxpayers if they only receive income from employment (§ 5), income from capital investments (§ 7), other income (§ 8), or income subject to withholding tax (§ 43), or receive a combination of the above.

Tax Returns

  • As a rule, anyone liable for Slovak personal income tax whose taxable income for the year exceeds a specific amount (EUR 1,915.01 in 2018) must file a personal income tax return, except for individuals:
    • Who have no other income than that which is taxed by withholding tax (such as bank interest);
    • Whose income is exempt from Slovak personal income tax; or
    • Who have their salary taxed via a Slovak payroll and the employer prepares an annual tax reconciliation for them, and the individuals have no other taxable income.
  • 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 three calendar months if the tax office is notified in advance. The maximum extension is six months if the individual also receives income from abroad.
  • Married couples must file separate, individual tax returns.

Allocation of Tax Paid

  • A taxpayer can allocate 2% (or 3% if certain conditions are met) of his tax liability for 2017 to a qualifying entity of his choice.

Penalties

  • Relatively high penalties may be imposed for failing to file a tax return or pay taxes, or for doing so late, and for failing to declare significant amounts or income sources in the tax return. Penalties for individuals are calculated in the same way as penalties for companies.

Health Insurance and Social Insurance

  • Health insurance contributions are compulsory for individuals who:
    • Have permanent residence in Slovakia;
    • Do not have permanent residence in Slovakia (e.g. only have temporary residence) and are not insured in another EU or EEA member state (or in Switzerland) and who have an employment contract with a Slovak employer or with a foreign employer who has a Slovak permanent establishment; or
    • Do not have permanent residence in Slovakia, are not insured in another EU or EEA member state (or in Switzerland) and are carrying out, or have a licence to carry out, business activities in Slovakia.
  • Income subject to health insurance contributions includes all types of taxable income (income under § 5, § 6, § 7, and § 8 of the Income Tax Act) including dividends paid from profit generated from 2011 to 2016. Health insurance is not paid on rental income.
  • The rate for health insurance contributions for individuals who receive dividends subject to health insurance contributions is 14% of the assessment base.
  • Health insurance contributions are not paid on dividends and shares traded on regulated local or international market.
  • Individuals with permanent residence in Slovakia who perform activities abroad, are not employed in Slovakia, and are insured in a state where they perform their activities are exempt from the obligation to pay contributions into the Slovak health insurance scheme.
  • Regular monthly contributions to the health insurance scheme are considered to be advances on the annual liability, and are subject to an annual reconciliation performed by the relevant health insurance company, if required, by 30 September of the year following the year for which the contributions were made.

Social Insurance

  • The Slovak social insurance system covers state old-age pensions, and insurance for sickness, permanent disability, unemployment, injury and employer insolvency, and contributions to the guarantee insurance and reserve fund.
  • The Slovak old-age pension insurance system consists of three pillars. The first and (with some exceptions) the second pillar are compulsory, while the third one is voluntary.
  • Any employment income and income from entrepreneurial or other self-employment activities (income pursuant to § 5 and § 6 of the Income Tax Act) is subject to social insurance contributions, however, only up to the amount of the maximum assessment base (EUR 6,384 per month for 2018).

Overview of Social and Health Insurance Contributions from employment income

 

 

EMPLOYEE

 

Rate

Maximum monthly contributions for 2018 (in EUR)

Sickness

1.4%

89.37

Retirement

4%

255.36

Permanent disability

3%

191.52

Unemployment

1%

63.84

Guarantee insurance

-

-

Reserve fund

-

-

Total

9.4%

600.09

 

EMPLOYER

 

Rate

Maximum monthly contribution for 2018 (in EUR)

Sickness

1.4%

89.37

Retirement

14%

893.76

Permanent disability

3%

191.52

Unemployment

1%

63.84

Guarantee insurance

0.25%

15.96

Reserve fund

4.75%

303.24

Total

24.4%

1,557.69

  • In addition to these social insurance contributions, an employer must also make injury insurance contributions of 0.8% of the employee’s assessment base.
  • Health insurance contributions are 4% for employees and 10% for employers. Contributions are paid from the employee’s gross income. The maximum assessment base for health insurance was cancelled in 2017.

Amount Deductible from the Assessment Base from 2017

annual assessment base:

EUR 4,560

from EUR 4,560

to EUR  6,840

EUR 6,840 + (incl.)

amount deductible:

EUR 4,560

progressively decreased

EUR 0.00

Companies

 

Entities Subject to Corporate Income Tax

  • Any legal entity with its seat or management in Slovakia is considered a Slovak taxpayer with unlimited tax liability (tax resident) and the taxpayer’s worldwide income is subject to Slovak tax. To avoid double taxation, tax treaties with relevant countries apply.
  • Taxpayers with limited tax liability (tax non-residents) are only taxed on income from Slovak sources.
  • Group taxation is not allowed.

Tax Rate

  • The corporate tax rate for 2018 is 21%.

Minimum Corporate Tax

  • The minimum tax (tax licence) was cancelled from 1 January 2018.
  • Taxpayers can claim a tax licence from previous periods even after 31 December 2017 at the amount of a positive difference between the tax licence and the tax calculated in the tax return for no more than three consecutive taxable periods for which the tax licence was paid.

Tax Base

  • As a rule, the tax base is the profit/(loss) as determined under the Slovak Accounting Act, adjusted for tax purposes.
  • If a taxpayer is obliged to report under International Financial Reporting Standards (“IFRS”), the tax base is derived from either:
    • The profit/(loss) under IFRS, adjusted for tax purposes using the IFRS bridge issued by the Slovak Ministry of Finance; or
    • The profit/(loss) that would be reported if double entry bookkeeping was applied in accordance with Slovak accounting standards.
  • For tax non-residents who are not obliged to keep accounting records and decide not to do so, the tax liability is calculated by looking at the difference between income and expenses. An alternative method can be used to calculate the tax liability if the tax office gives its consent.

Income not Subject to Tax

  • The following items are not subject to corporate income tax:
    • Dividends paid from profits reported after 1 January 2004 (except for dividends received and paid to taxpayers from countries with which Slovakia has not concluded a double tax treaty or tax information exchange agreement);
    • Shares on liquidation balances and settlement amounts paid to shareholders, to which the shareholders were entitled after 1 January 2004 (except for those received and paid to taxpayers from countries, with which Slovakia has not concluded a double tax treaty or tax information exchange agreement);
    • Income received by donation or inheritance; or
    • Income from acquiring new shares due to an increase in share capital from retained profits from previous years, or due to exchange of shares in mergers, fusions and demergers.

Income Exempt from Taxation

  • Exempt income includes:
    • Interest and certain other income from granted loans and borrowings, bonds, etc. and royalties paid from sources in Slovakia to a taxpayer from an EU member state, who is the beneficial owner of such income provided that a relationship has existed between the entities for at least two years preceding the date when the income is paid.
    • 50% of income from considerations for granting a right to use, or for using a protected patent, utility model, or software created by the taxpayer (basic patent box). A tax exemption refers only to assets created by own activities and applies to taxable periods in which amortisation of an intangible asset is included in tax expenses. A similar exemption also applies to a certain part of income from selling goods which were manufactured on the basis of a protected patent or a utility model (extended patent box). The tax exemption accounts for 50% of income attributed to the sales price, less related costs and less profit margin. If intangible research results acquired from another person are used to develop intangible assets, the tax exemption is reduced by a coefficient. Entities applying this tax exemption are entered in a register kept by the Financial Directorate of the Slovak Republic (“Financial Directorate”).

Tax-Deductible Items

  • As a rule, tax-deductible expenses are expenses a taxpayer incurs when generating, securing, and maintaining taxable income. Documentation, such as receipts, invoices, and specific forms of documentation on transactions with foreign related parties, must be kept to support tax deductibility.
  • When using an asset that qualifies as an asset for personal use, only the pro-rated part of related expenses/costs is tax deductible, which is verifiably incurred to generate, secure, and maintain tax deductible income; or a flat rate of 80% applies if the asset is also used for private purposes.
  • Some expenses are only tax deductible for a debtor upon payment (e.g. rent for the lease of movable properties, real estate properties, fees for the use of software, know-how, copyright, etc.).
  • From 1 January 2018, expenses incurred in so-called hybrid mismatches to related parties are tax non-deductible if such expenses are tax deductible for several entities; are not included in taxable income of other entities; or are (in)directly used for financing the other entity, which results in multiple tax deduction, or not including these expenses in the income of another entity.
  • From September 2015, a taxpayer providing a vocational contract-based education for a student may deduct a flat amount of EUR 3,200 per student from the tax base, together with the incurred related costs in a specified amount.
  • Tax expenses to related parties are tax deductible if they do not constitute a tax deductible item for another related party, or only to the extent they constitute a tax deductible income for another related party.
  • The employer’s expenses incurred on transporting employees to their place of work and back are tax deductible under the following conditions:
    • Public transport is either verifiably not carried out at all or not in the extent as the employer needs;
    • The employer uses a contract carrier or its own means of collective transport for 10+ persons for this purpose.
  • In addition, the Income Tax Act limits the tax deductibility of certain other types of expenses.

Allocation of Tax Paid

  • A taxpayer may donate 1.0% (or 2%, if certain conditions are met) of his tax liability for 2017 to a qualifying entity of his choice.

Dividends

  • Dividends paid from profits generated after 1 January 2004 are not subject to Slovak income tax, except for dividends:
    • Paid to legal entities which are residents of non-contracting states;
    • Received from residents of non-contracting states;
    • Paid to legal entities and the taxpayer cannot provide evidence of the beneficial owner of dividends;
    • Received by a general partnership or a limited partnership, subsequently “paid” to its partners of a non-contracting state. Such dividends are subject to a special tax rate of 35%.

Interest

  • Interest is generally tax deductible.
  • Interest (and the related costs) on borrowings and loans provided by related parties are tax deductible at no more than 25% of adjusted EBITDA (the total of the result of operations before tax, including depreciation charges, and the interest expense).
  • From 1 January 2018, interest on loans for the acquisition of shares is tax deductible only in the period of their sale, and the income from this sale is not tax exempt.
  • Interest paid by a Slovak tax resident to a Slovak tax non-resident is subject to withholding tax of 19%, unless it is tax exempt in accordance with the EU Directive on the common system of taxation applicable to interest and royalty payments as incorporated into Slovak tax legislation. A 35% tax rate is applied to interest* paid to a resident of a country not specified in the list published by the Slovak Ministry of Finance, or a country with which Slovakia has not entered into a double tax treaty, or an agreement on information exchange relating to taxes.

*The 35% tax rate also applies to other types of income.

Foreign Exchange Differences

  • Foreign exchange differences charged via profit and loss accounts and arising from the revaluation of unsettled receivables and payables at the balance sheet date are treated as taxable or tax deductible in accordance with their accounting treatment. However, they can be excluded from the tax base if the taxpayer states this in the tax return.

Tax Losses

  • A taxpayer can utilise a tax loss equally over four consecutive taxable periods.

Tax Depreciation

  • Tax depreciation (capital allowances) is generally available for expenditure incurred on non-current tangible and intangible assets. Tax depreciation may also be applied to assets acquired via a financial lease.
  • The tax depreciation charges of non-current intangible assets equal the depreciation for accounting purposes, except for some specific instances relating to goodwill.
  • Non-current tangible assets are classified into tax depreciation groups to which different tax depreciation periods apply, as follows:

Depreciation group

Depreciation period (years)

Examples

1

4

Motor vehicles, office machines, and computers

2

6

Engines, cooling and freezing equipment, some types of production equipment and machinery

3

8

Assets of a technological character, turbines, furnaces

4

12

Prefabricated buildings made of concrete and metals, air conditioning systems, elevators

5

20

Manufacturing and commercial buildings and constructions

6

40

Residential and administrative buildings and constructions

  • Certain types of assets are excluded from depreciation.
  • Tax depreciation may be interrupted for one or more taxable periods and continued subsequently as if no interruption occurred.
  • With regard to assets classified in depreciation groups 2 and 3, the taxpayer may select either the straight-line or accelerated depreciation method. A separate formula applies for calculating tax depreciation charges for each method. The straight-line depreciation method applies to the majority of other assets.
  • For non-current tangible assets placed in service, only a proportion of the depreciation charge may be applied. This is based on the number of months in which the asset was in use.
  • For some types of non-current tangible assets, where the tax written down value is only tax deductible up to the amount of income from their sale, taxpayers are entitled to apply tax depreciation charges in the year of sale in an amount corresponding to the number of whole months these assets were on their books. The interruption or changes to the interruption of depreciation of non-current tangible assets may not be applied during the tax assessment process.

Business Combinations

  • The amendments to the Commercial Code from November 2017 have strengthened the legal and administrative requirements for carrying out mergers, fusions and demergers of commercial companies (e.g. new obligation to submit a draft contract for a merger or demerger project to the tax authorities no later than 60 days before the date on which these transactions are to be approved by the company bodies).
    • In 2018, in-kind contributions, mergers, fusions, and demergers of commercial companies may only be performed for tax purposes in most cases at fair (market) values.
    • The historical price method may only be applied for mergers, fusions and demergers of commercial companies, in-kind contributions, or cross-border transactions, if certain conditions are met.

Capital Gains and Securities

  • Income from the sale of shares in joint-stock companies, ownership interests in limited liability companies, or limited partnerships (hereafter “participation”) may be exempt from corporate income tax if certain conditions are met. These conditions include the possession of at least 10% of shares or ownership interests for at least 24 months. A taxpayer who performs substantial functions in Slovakia, bears and manages the risks associated with the participation ownership, and has adequate personnel resources and material equipment to perform these functions may apply the tax exemption. However, the tax exemption does not apply to taxpayers who trade in securities, to the sale of companies in liquidation, bankruptcy or restructuring, or to taxpayers in liquidation.
  • A loss from the sale of securities is tax non-deductible.
  • The total costs related to derivatives are only tax deductible up to the total income from these derivatives arising in the same taxable period. However, costs related to hedging derivatives and derivatives incurred by insurance companies, reinsurance companies or by a taxpayer holding a license for trading in securities issued by the state authorities, are tax deductible in full.
  • Income from the transfer of an ownership interest in a commercial company or a membership interest in a cooperative with its seat in Slovakia is taxable in Slovakia. The relevant double tax treaty may provide for a different taxation of such income in Slovakia.
  • Income from the transfer of ownership interest in a commercial company or membership share in a cooperative, provided that the company or cooperative holds intangible assets in Slovakia, the carrying value of which amounts to more than 50% of the transferor’s equity, is taxable in Slovakia. The relevant double tax treaty may provide for a different taxation of such income in Slovakia.
  • In-kind contributions in the share capital of a commercial company or cooperative with its seat in Slovakia may be taxable in Slovakia. The relevant double tax treaty may provide for a different taxation of such income in Slovakia.

Taxable Period

  • The corporate taxable period is either:
    • A calendar year; or
    • A fiscal year (any 12 consecutive calendar months).
  • Special rules apply to winding up without liquidation, bankruptcy, and, in some cases, to a change of a taxpayer’s legal form.
  • The taxpayer must notify the tax office of a change of the taxable period from a calendar year to a fiscal year and/or a different 12-month period.

Filing

  • Corporate tax returns must be filed by the general filing deadline of three months from the end of the taxable period. This deadline may be extended by another three calendar months based on a notification to the tax authority. If the taxpayer’s income also includes income from sources abroad, the deadline may be extended by a maximum of six months.

Amended Tax Return

  • If a taxpayer discovers an error in their tax return resulting in a higher tax liability, or a lower tax loss, an amended tax return must be filed within one month of the month in which the error was discovered. Any additional tax must be paid by this deadline.
  • If the taxpayer discovers an error in his favour in a filed tax return, an amended tax return may be filed under certain conditions.
  • From 2016, an amended tax return may also be filed within 15 days of the start or extension of a tax control.

Payment

  • The tax balance due for a fiscal year is payable by the general or extended tax return filing deadline.
  • A company must also pay corporate income tax advances if its last known tax liability for the taxable period exceeded EUR 2,500
  • Advances are payable:
    • Quarterly (one-fourth of the last known tax liability) if the last known tax liability was between EUR 2,500 and EUR 16,600; or
    • Monthly (one-twelfth of the last known tax liability) if the last known tax liability exceeded EUR 16,600.
  • Withholding tax applicable to certain income types (e.g. dividends, bank interest, monetary and in-kind supplies received by healthcare providers, their staff and healthcare workers) is considered a final tax and cannot be treated as a tax advance. Withheld tax may be treated as a tax advance in some cases.

Fine and Penalties*

  • The amount of a penalty for some administrative tax delinquencies is subject not only to the reported tax difference, but also to a significant extent by the length of the period during which the tax was reported incorrectly. For example, this relates to situations where the tax reported in the tax return is increased by an amended tax return, or if the tax authority initiates a tax control, or imposes additional tax as a result of the control.
  • A penalty will be imposed of a maximum of 1% of the assessed amount, however, at a maximum of 100% of the assessed amount.
  • A penalty for certain administrative delinquencies will continue to be assessed at a flat rate, such as for a late filing or a failure to meet other non-monetary obligations.
  • A system of collective penalties is introduced for more than one administrative delinquency.
  • In some cases, where the taxpayer intentionally reduces his tax liability by using incorrect pricing in controlled transactions, the tax authorities may double the penalty.

* Based on the Tax Order, these sanctions also apply to other taxes than corporate income tax, e.g. VAT.

General Principles

  • Prices in controlled transactions between related parties must be set at fair market value (arm’s length principle) for income tax purposes.
  • A controlled transaction is a legal relationship or other relationship between two or more related parties, where at least one party is a taxpayer with income from entrepreneurial activities and other self-employment activities (§ 6) or a legal entity which gains taxable income (profit) from activity or from the use of its assets. When assessing a controlled transaction, the tax authority focuses on its substance.
  • A related party (an individual or a legal entity) is a relative, a party economically or personally related, or a party otherwise connected (an “other relationship” arises if the parties have established a legal relation or transaction, in particular for the purpose of decreasing the tax base or increasing the tax loss).
  • A taxpayer may request the tax authority for unilateral or multilateral approval of its transfer pricing method for recognition of a controlled transaction. Multilateral approval of the transfer pricing method for recognition of a controlled transaction is granted in accordance with the application of the particular double tax treaty. The fee for unilateral approval is EUR 10,000 and EUR 30,000 for multilateral approval based on application of a double tax treaty is.
  • The tax authorities may increase the tax base and assess penalties if they ascertain that arm’s length prices were not used in transactions between related parties, and this has resulted in a reduction of the Slovak entity’s tax base, or an increase of a tax loss. If a taxpayer intentionally did not use arm’s length prices, penalties on taxpayers may be doubled.
  • From 2017, the Income Tax Act sets out specific circumstances, when taxpayers with unlimited tax liability are obliged to automatically adjust their tax base for controlled transactions and inform tax authorities about such an adjustment in writing.

Transfer Pricing Documentation

  • Taxpayers must retain transfer pricing documentation in a specified scope. They must present such documentation to the tax authorities upon request within 15 days of a request. The tax authorities may only send a request to present the documentation after the deadline for filing the tax return for that taxable period.
  • The Slovak Ministry of Finance defines the content and scope of such documentation and taxpayers must keep one of the following types of documentation: shortened, basic, or full scope.
  • From 2015, maintaining transfer pricing documentation is mandatory for domestic and cross-border controlled transactions between related parties.

CbCR – Country-by-Country Reporting

  • Following the European Commission’s package of measures against tax evasion and profit shifting (“BEPS”), an amendment to the Act on International Assistance and Cooperation in Tax Administration introduced the Country-by-Country Reporting (“CbCR” or “CbC Report”) standard, effective as of 1 March 2017.
  • CbCR applies to a multinational enterprise (MNE) whose total consolidated revenues, according to its consolidated financial statements for the previous year, are a minimum of EUR 750 million. If this condition is met, the relevant Slovak company which is a member of such a multinational group and also meets the definition of a “basic entity” set out in the amendment and is not obliged to file the CbC Report itself must notify the Financial Directorate which affiliated company will submit the CbC Report for the financial year starting on 1 January 2016. The notification must be delivered to the Financial Directorate by the deadline for filing a corporate income tax return.
  • The parent or surrogate parent entity must submit the CbC Report within 12 months of the last day of the MNE’s notified financial year.
  • The amendment also introduces the concept of a secondary obligation, which delegates the obligation to submit the CbC Report to a surrogate parent entity, or to another basic entity of the MNE if the parent or surrogate parent entity that is not the Slovak company does not prepare and submit the CbC Report in the country of its tax residence. Therefore, Slovak tax residents may also be required to prepare a CbC Report.
  • A penalty of up to EUR 10,000 may be imposed on taxpayers if they fail to submit a CbC Report. A penalty of up to EUR 3,000 may be imposed for failure to meet the notification requirement. Both penalties may be levied repeatedly.

 

General Principles

  • Slovak tax non-residents are only subject to Slovak tax on income generated in Slovakia. This income also includes certain services provided via a digital platform.
  • A double tax treaty may wholly or partially eliminate double taxation of the income of Slovak tax non-residents earning income from Slovak sources.

Branch of a Foreign Entity

  • The founder of a branch must, to the same extent as a Slovak company, register for tax, file a tax return, and pay tax and tax advances. A branch must apply Slovak accounting procedures.
  • The rules for taxing a permanent establishment must also be appropriately applied to a branch.

Permanent Establishment

  • A permanent establishment need not be entered in the Slovak Commercial Register, but a foreign entity with a Slovak permanent establishment is a taxable entity in Slovakia.
  • A permanent establishment is created if:
    • A foreign company uses, either continually or repeatedly, a permanent place or facility for carrying out its business activities in Slovakia; or
    • A foreign company repeatedly mediates transportation and accommodation services via a digital platform; or
    • An individual acting on behalf and in the name of a foreign company repeatedly mediates or plays a leading role in concluding contracts or negotiating contract details; or
    • The period of providing services by the foreign company or by individuals working for this foreign company in Slovakia is longer than 6 months in any consecutive 12-month period.
  • The conditions for creating a permanent establishment may be regulated in more detail by a double tax treaty.
  • A foreign entity with a Slovak permanent establishment has the same tax registration, filing, payment, and tax advance payment obligations as a Slovak company.
  • The tax base of a foreign company’s permanent establishment may not be less than one that which would have been achieved if it performed similar activities under similar conditions as an independent entity (e.g. a Slovak company).

Withholding Tax and Tax Securement

  • The following payments are subject to withholding tax when made by Slovak companies to foreign parties.

 

Standard rate

Non-contractual state*

     

Dividends

7%**

35%

Fees for services provided in Slovakia
(unless provided by a permanent establishment)

19%

35%

Fees for advisory services (business, technical, other), data processing, marketing, management and intermediary activities, i.e. services provided without physical presence

19%

35%

Licence fees (royalties)***

19%

35%

Interest on loans and deposits***

19%

35%

Rental fee for movable assets

19%

35%

*    Income paid to a resident of a country not included in the list issued by the Slovak Ministry of Finance or a country that has neither a double tax treaty nor a treaty on the information exchange relating to taxes with Slovakia is subject to a 35% tax rate.
**  Only if dividends are paid to an individual.
*** Interest and licence fees paid to related parties resident in the EU are not subject to withholding tax if certain conditions are met.

  • However, a double tax treaty may reduce the withholding tax rate.
  • Some taxpayers (mostly EU tax residents in) may treat the tax withheld on certain types of income as a tax advance and deduct it in their tax return.
  • Individuals or legal entities may be obliged to withhold a securement tax on certain Slovak source income of Slovak non-residents if these persons are not tax residents in another EU member state.
  • The tax office will issue a confirmation of a withholding or security tax payment on request.

Investment Incentives

  • Investment incentives available under Slovak law are available for projects in the following areas:
    • Industrial production;
    • Technology centres;
    • Shared service centres; and
    • Tourism.
Industrial Production

Unemployment
rate*

Minimum
investment amount
(mil. EUR)

Percentage of new technological equipment
(%)

Minimum number of new jobs

Minimum investment amount that must be covered
by equity (%)

 

 

 

 

 

Lower than Slovak
average

10

60

40

50

Higher than Slovak
average

5

50

40

50

At least 35% higher
than Slovak average

3

40

40

50

Least-developed regions

0.2

30

10

50

* For the purpose of granting investment aid, the unemployment rate is calculated from the total number of job seekers published by the Head Office of Labour, Social Affairs, and Family for the year preceding the year in which the investment plan was filed.

Technology Centres

Minimum
investment amount
(mil. EUR)

Minimum percentage of employees with
a university education (%)

Minimum number of new jobs

Minimum investment amount that must be covered by equity (%)

 

 

 

 

0.5

70

30

50

Shared Service Centres

Minimum
investment amount
(mil. EUR)

Minimum percentage of employees with
a university education (%)

Minimum number of new jobs

Minimum investment amount that must be covered by equity (%)

 

 

 

 

0.4

60

40

50

Tourism

Unemployment
rate*

Minimum
investment amount
(mil. EUR)

Percentage of new technological equipment (%)

Minimum number of new jobs

Minimum investment amount that must be covered by equity (%)

 

 

 

 

 

Lower than Slovak
average

10

40

40

 

50

Higher than Slovak
average

5

20

40

50

At least 35% higher
than Slovak average

3

20

40

50

Least-developed regions

0.2

20

5

50

* For the purpose of granting investment aid, the unemployment rate is calculated from the total number of job seekers published by the Head Office of Labour, Social Affairs, and Family for the year preceding the year in which the investment plan was filed.

  • The following investment incentives, all of which are considered state aid, are available:
    • Cash grants for purchasing non-current tangible and intangible assets;
    • Corporate tax credit – this incentive may be applied over no more than 10 subsequent taxable periods. A tax credit may be applied for the first time for the taxable period in which the decision on granting the investment aid was issued (provided that all legal requirements are met).
    • Financial support for creating new jobs.
  • The main conditions that must be met by applicants for investment incentives are:
  1. Establishment of a new operation, extension of, diversification of, or major production change in an existing operation;
  2. Minimum investment costs, the level of which depends on the investment type and the region in which the investment will be implemented. For small and medium companies, the level of the minimum investment costs are reduced by half;
  3. Consideration of the required share of production facilities and/or the proportion of employees with a university education and depending on the type of project and specific region;
  4. Creation of required number 0f new direct jobs;
  5. For expansion projects in industrial production, increase of manufacturing capacity by at least 15%;
  6. The investment project must be implemented within 3 years of the approval of the investment incentives (major investment projects, i.e. projects with eligible costs exceeding EUR 50 million, must be implemented within five years);
  7. Work on the project may start only after submission of an investment plan to the Slovak Ministry of Economy, otherwise investment aid cannot be granted.
  • The maximum amount of investment aid is as follows:
    • Western Slovakia – 25% of overall eligible costs of the investment;
    • Central and Eastern Slovakia – 35% of overall eligible costs of the investment;
    • No investment incentives for the Bratislava region.

Super-deduction of R&D Costs

  • Taxpayers who perform R&D activities may apply for a special form of support – the super-deduction of R&D costs.
  • According to new legislation regarding R&D projects, the total of the following items may be deducted from the tax base adjusted by the tax loss deduction:

    • 100% of R&D costs incurred in the taxable period for which the tax return is filed;
    • 100% of positive difference between the average of the total R&D costs incurred:
      •  In the taxable period for which the taxpayer applies super-deduction, and in the immediately preceding taxable period, and
      • In two immediately preceding taxable periods.
         
  • If a tax loss is recorded or if the tax base after the tax loss deduction is lower
    than the available deduction, the deduction may be applied in the next taxable period in which the taxpayer reports a positive tax base, however, this may not exceed four taxable periods immediately following the period in which the entitlement to make a deduction arose.

Other Taxes

ostatne dane

VAT Registration

  • The threshold for obligatory VAT registration for taxable persons with their seat or permanent address, place of business, or permanent establishment in Slovakia, is a turnover of EUR 49,790 for the previous consecutive 12 calendar months. Voluntary registration is also possible, which may be subject to a tax securement.
  • A VAT registration obligation in Slovakia may arise for foreign persons (taxable persons without a seat or VAT establishment in Slovakia) if, for example, they supply goods to Slovakia as a mail order service, or prior to the supply of goods or services provided that the tax obligation is not transferred to the recipient.
  • Any taxable person who is not a VAT payer, or a legal entity who is not a taxable person must, in some cases, (such as receipt/provision of certain services from/to another EU member state and acquisition of goods from another EU member state) file an application for VAT registration for the purposes of paying VAT or reporting the supply of services.
  • Automatic VAT registration has been introduced for taxable persons who supply a building, a part thereof, or building land, who are not VAT exempt, and a turnover of EUR 49,790 will be achieved from the supply.
  • Taxpayers must notify the tax authority of the change in registration in the event of the creation/termination of a VAT establishment within 10 days of the change.
  • In some instances, VAT registration may be subject to tax securement.
  • Correction of the VAT treatment of transactions carried out before the registration and input VAT deduction is available in some instances.
  • From 1 January 2018, the possibility of special tax representation is available for foreign persons not registered for VAT in Slovakia.
  • The tax representative option may be used by a foreign person who acquires goods from another EU-member state in Slovakia with the purpose of delivering these goods to another EU member state or a third country with VAT exemption, or delivering them via mail order service with a place of delivery in another EU member state.
  • A foreign person represented by a tax representative need not to register for VAT in Slovakia if the following conditions are met. The tax representative files one common VAT return, Control Statement, and EC Sales List on behalf of the represented foreign persons.

VAT Group

  • A VAT group may be created in Slovakia. This option enables persons who are financially, economically, and organisationally interconnected and have their seat or permanent establishment in Slovakia, to register for Slovak VAT as a single VAT payer. As a result, transactions within the VAT group are not subject to VAT.

Call-off Stock Simplification

  • A simplified call-off stock scheme applies where a foreign supplier registered for VAT in an EU member state (other than Slovakia) transfers their own goods from another EU member state to a warehouse in Slovakia in order to supply them to a single Slovak VAT payer. If the foreign entity meets all the requirements set out in the Slovak VAT Act for applying a call-off stock regime, he need not register for Slovak VAT. In this case, the customer must apply a reverse charge and pay VAT on the acquisition of goods in Slovakia.

VAT Rates

  • The standard VAT rate of 20% applies to most goods and services. A reduced rate of 10% applies to certain basic foodstuffs (e.g. meat, milk, and bread), pharmaceutical products, certain medical aids, depending on the commodity code (as listed in Annex 7 of the VAT Act), certain books, and similar products.

Special VAT Treatment - Cash Accounting

  • From 2016, 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).
  • When using this scheme, a tax liability only arises to the supplier of goods or services on the day that payment for goods or services is received. Input VAT may be deducted by a VAT payer who applies this scheme on the day on which an invoice is paid. Similarly, a tax liability arises for all VAT payers who receive an invoice from a supplier who applies this special treatment, on the day their supplier receives the payment.

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, the supply of goods with assembling or installation, provided they are included in a special statistical classification.
  • When providing such supplies, the supplier does not charge VAT on the invoice, and the obligation to assess the VAT is transferred to the recipient (VAT payer), who may claim the input VAT deduction upon compliance with legal requirements.
  • Since 1 January 2017, a general pardon has been issued to provide a degree of certainty for entities in the construction sector when applying the reverse charge. The recipient of a service must automatically apply a reverse charge on received construction work, provided that the supplier could reasonably assume that the service was subject to a reverse charge mechanism, and a “reverse charge” reference was stated in the invoice.
  • Additionally, from 1 January 2017, suppliers of such construction work are obliged to report issued invoices for the supply of construction work in section A.2 of a VAT Control Statement, although they need not be reported in a VAT return.

Exempt Supplies

  • Exempt supplies for which input VAT cannot 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, the following transactions:
    • 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 construction land is not VAT exempt. The sale of buildings, including the construction land on which the building is to be built is VAT exempt, after five years from their official final inspection and occupancy approval, or from their first use. However, a VAT payer may decide not to apply such an exemption on such a supply (in such a case, the tax liability is transferred to the recipient). Since 1 January 2018, a VAT payer is obliged to notify a customer about such a decision in writing. The rent of real estate (with some exceptions, such as a parking space) is VAT exempt. A VAT payer may decide to charge VAT on the lease of a building to another taxable person.

Input VAT Deduction

  • A VAT payer may deduct input VAT relating to a received taxable supply that he intends to 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 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 use of such assets changes within five years of acquisition (20 years for real estate).
  • A VAT payer may not deduct input VAT for entertainment and refreshments costs.

VAT Compliance

  • VAT is administered by the tax authorities, except for import VAT, which is administered by the customs office.
  • A valid VAT document (invoice) must be issued for every supply of goods or services to a taxable person, and for mail order services within 15 days of the supply of goods or 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.
  • Since 1 January 2018, the VAT tax return form has been changed due to the introduction of a new tax representation option for foreign persons.
  • In some instances, a VAT payer is liable for the tax shown on an invoice if the supplier fails to pay the tax to the tax office, or if the supplier became unable to pay the tax and the taxpayer knew, or could have known, that the tax would not be paid. From 2018, a reason for being liable to pay the tax is no longer the fact that, at the time of the taxable supply, the supplier was stated on the list of taxpayers for whom reasons for deregistration have arisen.

EC Sales List

  • VAT payers must submit EC sales lists if they make intra-community supplies of goods from Slovakia to another EU member state, transfer own goods from Slovakia to another EU member state, participate in a triangulation trade as the first customer, or provide services with the place of supply in another EU member state to another taxable person and this person is obliged to pay the VAT.
  • A VAT payer may submit an EC sales list for a calendar quarter if the value of goods does not exceed EUR 50,000 in the respective quarter and the four previous concurrent calendar quarters. If the threshold is reached, a monthly EC sales list must be submitted.
  • EC sales lists must be submitted within 25 days of the end of the period to which they relate, and must be filed electronically.

Control Statement

  • All taxpayers (including foreign persons registered for VAT in Slovakia) must present a control statement in electronic form. The control statement is is a detailed list of all invoices issued and received.
  • A control statement must be filed in electronic form by the 25th day after the end of the relevant taxable period.
  • A control statement does not contain information about intra-community supplies of goods and services, or imports and exports of goods. A control statement need not be filed if only specific transactions are reported in the tax return (e.g. intra-community supply of goods, export of goods or supplies within triangulation) and where input VAT is not subject to deduction, or if only VAT deduction is reported on the import of goods.
  • The tax authority may impose a penalty of up to EUR 10,000 for not filing a control statement, its late payment or for incomplete or incorrect data in a control statement. The maximum penalty for a recurrent breach of this obligation is EUR 100,000.

Obligation of Electronic Filing

  • From 2014, all tax entities who are VAT payers or are represented by a tax advisor, attorney or other person, must deliver submissions to the tax authority in electronic form, whether signed by a guaranteed signature or without a guaranteed signature. In the latter case, an Agreement on Electronic Filing is obligatory.
  • Since 1 January 2018, the obligatory electronic communication with tax authorities is extended to all legal entities listed in the Slovak Commercial Register. As of 1 July 2018, this obligation will also apply to individual entrepreneurs.

VAT Refunds

VAT Refund for Slovak VAT Payers

  • A VAT payer is not automatically entitled to a cash VAT refund if he reports a VAT refund. If the VAT refund cannot be fully offset in the following VAT period, then the tax authorities will refund the excess input VAT, or part thereof, within 30 days of the filing of the VAT return for that following VAT period, provided that the tax authorities did not open a tax control prior to that date.
  • However, if certain conditions are met, the tax office must refund the VAT within 30 days of the day of the filing of the VAT return (i.e. in a shorter period).

VAT Refund for 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 request must be filed by 30 September of the calendar year following the period for which the VAT refund is claimed.
  • A VAT refund claim must be submitted for a period no longer than 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 stated requirements for a VAT refund via the VAT refund system to foreign VAT payers are met.

VAT Refund for Foreign Entities from Non-EU Countries

  • An entity registered for VAT, or a similar general consumption tax, in non-EU countries may claim a refund of Slovak VAT paid on the purchase of certain goods or services, under certain conditions stipulated by law.
  • 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 the VAT claim must be at least EUR 50.
  • A decision regarding a VAT refund must be issued to the foreign company within six months of the date on which the refund request was filed.
  • VAT is refunded to entities from non-EU countries which have concluded reciprocity agreements with Slovakia.

 

Goods Subject to Excise Duties

  • Slovak excise duty is payable on the import of the following goods into Slovakia from outside the EU, or when these goods are released from the duty suspension regime for tax-free circulation in Slovakia:
    • Mineral oil;
    • Alcoholic beverages (beer, wine, intermediate products, and spirits);
    • Tobacco products;
    • Electricity, coal, and natural gas.
  • An excise duty liability for electricity, coal, and natural gas arises at the moment the product is delivered for final consumption.
  • The rate of excise duty depends on the specific type of product.
  • In certain limited cases, the products listed above are exempt from excise duty.

Authorised Entities

  • An excise duty suspension arrangement enables the tax liability to be postponed until the day the product is released into a tax-free circulation regime.
  • The production, processing, storage, receipt, and dispatch of products under the duty suspension arrangement must be carried out by an authorised warehouse keeper.
  • Companies must register as a licensed recipient before obtaining excisable products from another EU member state under the duty suspension regime.
  • A tax guarantee must be lodged with the Customs Administration for transactions under the duty suspension regime (storage and transport).
  • The company must be authorised to use excisable products exempt from excise duty.

Registration

  • An excise taxpayer must be registered with the customs office. Entities to which a tax liability has not arisen, but which transact in goods subject to excise tax, must also register.
  • Entities wishing to produce, store, receive, or send products subject to excise duty under the suspension arrangement must register with the customs office and lodge the required tax guarantee before authorisation can be granted.
  • Companies using excisable products exempt from excise duty must register with the respective customs office, and apply for a licence and a voucher. The company then provides the voucher to its supplier, who may then provide the excisable products free of excise duty.
  • Based on authorisation from the customs office, the registered consignee is entitled to dispatch the goods under suspension 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. Communication with the Customs Authority must be in electronic form if the company is a VAT payer registered in Slovakia, or if it is represented by a tax adviser or attorney.
  • Communication with taxpayers regarding excise duties is undertaken by e-mail.
  • The taxable period is usually a calendar month.
  • Monthly excise duty returns must be filed within 25 days of the end of the taxable period, and excise duty liabilities must also be paid within this period. However, this obligation does not arise in certain specific cases.

Excise Duty Refunds

  • In certain circumstances, a tax warehouse keeper, or another authorised entity, may claim a refund of Slovak excise duty on a product that has been taxed. As a rule, this applies if excisable products released for tax-free circulation in Slovakia are supplied for use in another EU member state, or are used for purposes exempt from excise duty.

General Principles

  • Goods imported from non-EU countries are subject to import customs clearance.
  • Goods exported from the EU customs territory must be declared for export customs clearance.
  • The person responsible for paying the customs debt is the declarant.
  • The declarant is the person submitting the customs declaration in his own name, or the person in whose name the customs declaration is submitted.
  • A customs declaration must be submitted in the prescribed form and manner (electronically, in writing, or otherwise).
  • Import or export duties are customs duties and other charges payable on the import or export of goods (import VAT, excise duties, and charges with similar effect).
  • 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. EORI registration is mandatory for customs clearance.
  • Export, import, and transit customs clearance is based on the electronic information exchange. Import customs clearance using paper customs declarations may be carried out in Slovakia until 2019.

Right of Representation

  • Any person may appoint a representative in his dealings with the customs authorities. Such representation may be direct or indirect.

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 goods, the following special customs procedures may be applied:
    • Transit (external, internal);
    • Storage (customs warehousing, free zones);
    • Specific use (temporary admission, end-use); and
    • Processing (inward processing, outward processing).

Customs Debt

  • A customs debt arises at the time of acceptance of a customs declaration by:
    • Releasing goods liable to import duties into free circulation, including the release of goods according to the final usage provision; or
    • Placing such goods under the temporary import procedure with partial relief from import duties; or
    • Re-exporting goods after terminating the drawback custom regime.

A custom debt also arises when failing to meet obligations or to comply with the terms and conditions set out in the custom regulations.

  • The debtor is the declarant and, in case of indirect representation, the representative is also the declarant. As a rule, the debtor must pay customs duty within 10 days from the day on which the notification of the customs debt was delivered to the debtor.

Simplifications

  • To simplify formalities and procedures, the customs authorities may grant permission to use the following simplified procedures:
    • Simplified customs declaration;
    • Centralised customs clearance;
    • Entry in the declarant’s records;
    • Self-assessment.
  • The status of an Authorised Economic Operator allows the simplification of customs procedures in various areas and its holder is considered a reliable partner of the customs authorities.
  • The Registered Exporter System (REX) enables economic operators to self-certify preferential origin of goods. This certificate replaces the certificates used until now (certificates on the A and EUR.1 forms).

Violation of Custom Regulations

  • If a legal entity commits a customs offence (e.g. non-compliance with the customs regime conditions), the customs office may impose the following sanctions:
    • Penalty; or
    • Seizure of goods or property.
  • For a customs offence, a fine of up to EUR 99,581.75 may be imposed, depending on the seriousness of the violation (in specific cases, up to EUR 331,939.18).
  • If an individual commits a customs offence (e.g. illegal import of goods), the customs office may also reprimand the person (in addition to imposing fines or seizing goods or property). The imposed fine may be up to EUR 3,319.39, depending on the seriousness of the violation (in specific cases, up to EUR 33,193.91).

 

  • Motor vehicle tax is payable to the tax office where a car was registered at 31 December of the preceding year. Employee motor vehicle tax is subject to the employer’s tax jurisdiction.
  • Taxable vehicles are those registered in Slovakia and used for business purposes.
  • As a rule, motor vehicle tax is payable by the car holder. In specific cases, it is payable by the individual who uses the car for business purposes even if he is not the car holder (e.g. the car holder’s employer).
  • Annual tax rates are set for:
    • Passenger cars, based on engine capacity in cm3; and
    • Utility cars and buses, based on the number of axles and the vehicle’s total weight.
  • The annual tax rate is uniform across Slovakia. The rate changes depending on the time since the first registration. A reduced tax rate applies to cars used for intermodal transportation and/or using an eco-engine.
  • The taxable period is a calendar year.
  • A taxpayer must file a tax return and pay the tax liability for the previous year by 31 January. The taxpayer must enter the commencement and termination of the tax liability in the tax return.
  • The taxpayer must pay monthly and/or quarterly tax advances depending on the amount of expected tax to a single tax administrator, provided the expected tax exceeds EUR 700.
  • The Act on Administration Fees regulates the fee for initial and each subsequent vehicle registration by a car holder in the L, M1, and N1 categories in the Slovak vehicle register. The fee ranges from EUR 33 to EUR 3,900 depending on the engine power of the registered car, its age, and other details.
  • Real estate tax is governed by the Act on Local Taxes, and is divided into:
    • Land tax;
    • Building tax; and
    • Apartment tax.

Land Tax

  • As a rule, the land’s registered owner pays the land tax. In certain cases, it is paid by the land manager or the lessee.
  • The basic tax rate is 0.25% of the land value set by law. The municipality usually modifies this rate, and different rates apply to different land types.

Building Tax

  • As a rule, the building’s registered owner pays the building tax. In certain cases, it is paid by the property manager or a lessee.
  • The basic tax rate is EUR 0.033 per m2 of land occupied by the building. The municipality usually modifies this rate (within the set limits) in a generally binding regulation.
  • Car parks, including underground car parks, are also subject to building tax.

Apartment Tax

  • As a rule, the apartment’s registered owner pays the apartment tax. In certain cases, it is paid by the property manager.
  • The basic annual tax rate is EUR 0.033 per m2 of the apartment’s floor area. The municipality usually modifies this rate in a general binding regulation.

Common Provisions for Land, Building, and Apartment Tax

  • The taxable period is the calendar year.
  • The tax liability arises on 1 January following the year in which the taxpayer obtained an interest in the property subject to tax.
  • Taxpayers must file a tax return by 31 January of the taxable period in which the tax liability arises, relating to their tax liability at 1 January of this period. If a change occurs in the next taxable period, such as the acquisition of new property, a change of the type or area of declared property, the taxpayer must file a partial tax return by the same deadline. The obligation to file a tax return during the taxable period arises upon acquisition of property by inheritance.
  • If the taxpayer finds out that the data in a filed tax return based on which the tax liability is calculated is incorrect, then he is obliged to file an amended tax return no later than four years after the end of the year in which the obligation to file a tax return or a partial tax return arose.
  • As a rule, a tax liability is payable within 15 days after a tax assessment became valid.
  • Since 2012, banks and branches of foreign banks must pay a special levy payable by certain financial institutions (the bank levy). The bank levy for 2017 - 2020 is 0.2% p.a. of the base set by law.
  • A bank is obliged to pay the levy in four quarterly payments by the 25th day of the respective calendar quarter.
  • The tax office is the bank levy administrator.
  • A legal entity or branch of a foreign entity authorised to do business in regulated industries (such authorisation must be issued in Slovakia or another EU or EEA member state) which expects to carry out its business activities over the entire levy period and whose total annual result per accounts exceeds EUR 3 million is obliged to pay a special levy on doing business in regulated industries. 
  • 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.
  • Monthly levies are calculated by multiplying the levy base, i.e. the pre-tax operational result by a coefficient, which from 1 January 2019 is 0.00545%. 
  • It is planned to decrease the levy rate from 2021 to 0.00363%
  • The levy will apply to retail chains where at least 25% of net turnover is from food sales to final customers and which have subsidiaries in more than 15% of all districts of the Slovak Republic. 
  • The base for levy calculation is net turnover, for the respective levy period. The levy rate is 2.5%. 
  • The levy period is three consecutive calendar months of the relevant accounting period. The first levy period will be the first three months of the accounting period beginning after 31 December 2018.
  • The subject of the tax is non-life insurance if the insurance risk is located in the Slovakia. 
  • Entities liable to pay the tax to the Tax Office are insurance companies, insurance companies from another EU state and branches of foreign insurance companies. Domestic risk insurance charged by a foreign person who has not established a branch in the Slovak Republic is subject to this tax. In this case, the person liable to pay the tax is the recipient of the service (the insurer or legal entity who the insurer recharged the cost of the insurance). 
  • The tax obligation may be determined in several ways. The taxation period is the calendar quarter and the payer is obliged to file a tax return by the end of the calendar month following the end of the tax period and pay the tax by the same deadline. 
  • A tax rate of 8% applies to insurance. Liability for damage caused by a motor vehicle has a 0% tax rate, as this insurance is subject to an 8% insurance tax under certain rules.
  • In the context of the global fight against tax evasion, Slovakia participates in administrative cooperation with other countries regarding automatic information exchange between the tax administrators of individual countries. 
  • In connection with the above, under FATCA (i.e. U.S. Foreign Account Tax Compliance Act) and CSR (Common Reporting Standards) Slovak financial institutions are obliged to collect and report selected information on financial accounts. 
  • For FATCA purposes, Slovakia has adopted a bilateral intergovernmental agreement for mutual cooperation between Slovakia and the US on Pocket Tax Book 2019 43 reciprocal exchange of information on financial accounts. As part of this cooperation, Slovak financial institutions are obliged to report information on American accounts to the Slovak Financial Directorate. The Slovak Financial Directorate provides such information to the US Internal Revenue Service.
  • For CRS purposes, Slovakia has acceded to a multilateral agreement on mutual exchange of information on financial accounts with EU member states and contractual states. The basic requirement is that if Slovak financial account holders are tax residents of certain countries, our financial institutions are obliged to report selected information to the respective tax authorities – the list of such countries is available on the Slovak Financial Directorate’s and the Slovak Ministry of Finance’s websites. CRS-related obligations result from local legislation and the DAC2 EU Directive.
  • The Local Fee for Development Act gives municipalities the right to introduce and collect a local fee for development. A municipality is entitled to set this fee for its entire territory, or part thereof, by adopting a generally binding regulation. 
  • The local development fee is payable by a builder who has been issued: a building permit, a decision to permit a change to the building before its completion, a decision on an additional permission for the building in the municipality, or if the builder has notified the building to the municipality. 
  • The basis for calculating this fee is the size of the above-ground floor area of the construction in square metres. The fee is calculated as the product of the base reduced by 60 square metres and the rate of the development fee set by the municipality. If a building serves multiple purposes and the municipality has set different rates for the development fee, the fee base is determined from the floor area with the largest share of the total area of the building. 
  • The fee rate can range from EUR 3 to EUR 35 per square metre. 
  • The local fee for development is administered by the municipality which imposed it on its territory.

Contact us

Christiana Serugová

Partner, Tax & Legal Leader

Tel: +421 259 350 614

Dagmar Haklová

Partner

Tel: +421 259 350 619

Rastislava Krajčovičová

Director

Tel: +421 2 59350 616

Radoslav Krátky

Director

Tel: +421 2 59350 569

Margaréta Bošková

Director

Tel: +421 2 59350 611

Eva Fričová

Senior Manager

Tel: +421 903 268 048

Zuzana Maronová

Senior Manager

Tel: +421 2 59350 634

Shabab Khan

Senior manager

Tel: +421 911 061 109

Gabriela Kubicová

Lawyer

Tel: +421 911 679 229

Zuzana Šátková

Manager

Tel: +421 2 59350 675