Measures for the consolidation of public finances

Corporate Income Tax Act

During its first session on 19 December 2023, the Slovak National Parliament (“Parliament”) approved an act amending laws, with the goal of improving public finances, including the Income Tax Act (“ITA”). The ITA amendment implements new legislative provisions and amends or cancels provisions approved by Parliament in June 2023 which have not yet become effective, as their effectiveness was 1 January 2024.

New ITA provisions:

• With effectiveness from 1 January 2024 the personal income tax rate will increase from 7% to 10% as regards the tax base for dividends, settlement shares, liquidation surpluses, shares in business results paid to a silent partner and shares (in profits and assets) of a member of a land association with a legal personality.
  • The above applies for shares in profits generated in taxation periods starting on 1 January 2024 onwards, the liquidation surplus if the company, or cooperative, enters into liquidation from 1 January 2024 onwards, or if a court decides on a winding-up of a bankrupt company from 1 January 2024 onwards, and for a settlement share if it is based on the regular individual closing of accounts for an accounting period from 1 January 2024 onwards.
• A new upper threshold of EUR 60,000 is set with effectiveness from 1 January 2024 for the taxable income of a micro-taxpayer, either a legal person or a physical person generating income as an entrepreneur (the current upper threshold on micro-taxpayer income is linked to the VAT registration threshold). The tax base of a micro-taxpayer remains subject to the current 15% tax rate, and the other current ITA provisions applicable for this type of the taxpayer remain effective.
  • The new income threshold for advantageous taxation of micro-taxpayers may be applied for the first time for the tax period starting on 1 January 2024.
• A minimum corporate income tax will be introduced from 1 January 2024. This means that the tax will also be paid by corporate taxpayers if they generate a tax loss or a small profit. The minimum tax (after deducting tax allowances or tax paid abroad) will be from EUR 340 to EUR 3 840, depending on the taxable income generated in the respective taxation period:

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  • The minimum tax will not be paid by taxpayers in the year of their establishment, taxpayers under bankruptcy or liquidation, taxpayers that have not been established or funded for undertaking business, and taxpayers operating a sheltered workshop.
  • The minimum tax will be applied for the first time for the taxation period starting on 1 January 2024. A positive difference between the minimum tax and the tax reported in the tax return will be available for crediting against the tax liability (before the tax advances deduction) up to three consecutively following taxation periods after the tax period in respect of which the minimum tax is paid. This credit may only be applied against the part of the tax liability which exceeds the minimum tax. 

• The current legislative provisions on the tax bonus (“bonus”), available for certain physical persons in connection with received loans for accommodation will be amended and extended:
  • For loans on accommodation concluded from 1 January 2024, the current conditions for entitlement to a bonus for paid loan interest will be amended, including an increase in the maximum annual bonus from EUR 400 to EUR 1200, and an increase in the coefficient applied to the average monthly employee’s salary in the Slovak economy for calculating the threshold for the bonus entitlement from 1.3 to 1.6.
  • A new one-off bonus on the increase of the paid instalment of a loan on accommodation due to the increase of the loan interest is introduced. This bonus will be applicable for 2023 and will be 75% of the difference between the paid (lower) average annual instalment in 2022 and paid (higher) annual instalment in 2023, up to a maximum of EUR 1800 per year.

Amended ITA provisions:

• As we informed you in our Newsletter of 7 July 2023, with effectiveness from 1 January 2024, a new type of a personal income tax exempt non-monetary benefit is introduced where the benefit is in the form of shares in a joint stock company or a limited liability company, and is received either by the employees of the respective company in connection with their employment activities for this company, or by the company’s contractors in connection with their business activities for such a company. 
  • The currently approved amendment of the above tax exempt income specifies that a condition for the entitlement to this exemption is no dividend distribution by the respective company within the period from the registration of the company for corporate income tax purposes up to the end of the taxation period in which the non-monetary income / shares were received by the respective individual (employee or contractor).

Cancelled ITA provisions:

The following ITA provisions, which would have become effective on 1 January 2024, have been cancelled with effectiveness from 31 December 2023:

• Personal income tax exemption on the sale of securities (not traded on a regulated market, or a similar foreign market), sale of shares in a limited liability company and disbursement of participation certificates if the sale of the shares, or disbursement of the participation certificates, occurs at least three years form the acquisition / issue.
• Amendments relating to virtual currencies:
  • inclusion of the income generated from the sale of a virtual currency (if the currency was not included in business assets), undertaken after at least one year since its acquisition, into a special tax base subject to a 7% tax rate;
  • setting out of definitions of a virtual currency, stablecoin and staking and an amendment of the definition of the sale of a virtual currency stating that it is the exchange of a virtual currency for a stablecoin; and
  • tax exemption of the income of physical persons generated from the exchange of a virtual currency for goods or provision of service if the aggregate income, less related costs, does not exceed EUR 2 400 in a taxation period.
• Tax deduction of costs incurred by a physical person in respect of financial asset acquisition if this asset is used to generate income from capital assets in the form of interest or other revenues from provided loans and credits, and interest income from paid contributions of the partners in the unlimited partnerships.

VAT and excise duties

On 19 December 2023, as part of the package of measures for the consolidation of public finances (Lex Consolidation), Parliament also approved measures on VAT and excise duties:

• With effect from 1 January 2024, the VAT rate is increased from 10% to 20% for alcoholic beverages served in restaurant and catering services (alcohol content of more than 0.5% by volume)
• With effect from 1 January 2024, the excise duty on alcohol is increased from 130% to 138%, and the reduced rate will be 50%. When calculating the consumption tax, the rate of EUR 1080 will be multiplied by the indicated higher % rates.
• With effect from 1 February 2024, the excise duty on tobacco and tobacco products will be increased.

Social and health security contributions

As part of the package of measures for the consolidation of public finances (Lex Consolidation), on 19 December 2023, Parliament also approved measures on social and health security contributions:

• The rate of health insurance contributions will increase with effect from 1 January 2024 for employers from 10% to 11%. If the employer employs persons with disabilities, the premium rate is increased from 5% to 5.5% of the assessment base. Health insurance contributions for self-employed persons will also increase from 14% to 15% of the assessment base (self-employed persons with disabilities from 7% to 7.5%) and for self-payers from 14% to 15%.
• Social insurance levy rates will not change, however the ratio between contributions to private / state old-age pension will be adjusted. From 2024, contributions to old-age pension savings are reduced from 5.5% to 4% of the assessment base. The 4% rate will also apply in the following years, ie the gradual increase of the share to 5.75% and 6% is cancelled.

Act on the top-up tax

On 8 December 2023, Parliament approved the Act on the top-up tax for ensuring a global minimum level of taxation for multinational enterprise groups and large-scale domestic groups with effectiveness from 31 December 2023. This law transposes Council Directive (EU) 2022/2523 of 14 December 2022 on ensuring a global minimum level of taxation for multinational enterprise groups and large-scale domestic groups. The act reflects comments raised during the commentary process, including the extension of the deadline for submitting a tax return for the top-up tax and the submission of a notification with information for determining the top-up tax up to 15 months from the end of the tax period, specifying the effectiveness of the law for tax periods starting after 31 December 2023, the option to calculate eligible income or an eligible loss from profit or loss reported in individual financial statements under the Slovak Accounting Act. More information on the draft of this act is given in our tax and legal newsletter published on 4 October 2023.

Act on the special levy

On 19 December 2023, Parliament approved an amendment to the Act on a special levy from business in regulated industries. Inter alia, the amendment expands the scope of regulated persons from 1 January 2024 to include regulated entities that undertake their activities in the Slovak Republic in this area under a permit issued or granted by the NBS in accordance with special regulations (e.g. banks and collective investment entities). It also introduces a higher monthly levy rate for banks in the amount of 0.025, which is set to decrease every year until 31 December 2027, after which the amount of the monthly levy will be the same as for all regulated entities, i.e. 0.00363.

Other changes in Lex Consolidation

Other measures from the Lex Consolidation ratified by Parliament on 19 December 2023:

• Solidarity contribution from activities in the oil, natural gas, coal and refinery sectors will also be paid in 2024
• The public holiday of September 1 will no longer be a day of rest (from 2024)
  
• The benefit for family building savings is cancelled
  
• The contribution from state budget to public media is reduced from 0.17% to 0.12% of GDP.
  
• Increase in selected administrative fees