General Information
Country Name: Slovakia
Currency: Euro (€) (EUR)
Primary Tax Authority: Financial Administration of the Slovak Republic (Finančná správa Slovenskej republiky)
Key Legislation:
- Income Tax Act 2004
- VAT Act 2004
- Tax Administration Act 2012
Fiscal Authority Allocation
Centralized Fiscal System:
Slovakia operates a centralized tax system, where all taxes, including corporate income tax, personal income tax, and VAT, are collected by the Financial Administration. There are no local or regional income taxes, though municipalities receive portions of tax revenues for local services.
Corporate Income Tax (CIT)
Standard Rate: 21%
Slovakia applies a flat corporate income tax rate of 21% on resident companies, which are taxed on their worldwide income. Non-resident companies are taxed only on income sourced from Slovakia.
Corporate Forms and Taxation:
- Limited Liability Company (Spoločnosť s ručením obmedzeným – s.r.o.): The most common corporate form, taxed at the standard 21% rate.
- Joint-Stock Company (Akciová spoločnosť – a.s.): Typically used by larger enterprises, taxed at the same 21% rate.
- Branches of Foreign Companies: Taxed on Slovakia-sourced income at the 21% rate.
Exemptions and Incentives:
- Tax Holidays: Certain companies in designated regions or industries, such as manufacturing or research, may qualify for CIT holidays or reductions.
- Investment Tax Credit: Slovakia offers tax relief on investments in specific sectors such as R&D, innovation, and renewable energy.
- Loss Carryforward: Tax losses can be carried forward for up to 5 years, with equal distribution across the period.
Goods and Services Tax (GST) / Value-Added Tax (VAT)
Standard Rate: 20%
Slovakia applies a VAT rate of 20% to most goods and services. A reduced rate of 10% applies to selected goods, such as medicines, books, and medical equipment.
Exemptions:
Education, healthcare, financial services, and certain real estate transactions are VAT-exempt. Exports are zero-rated, allowing companies to reclaim VAT on inputs.
Personal Income Tax (PIT)
Progressive Rates:
Slovakia uses a progressive income tax system for individuals:
- Income up to €49,790: 19%
- Income above €49,790: 25%
Dividends:
Dividends received by individuals are subject to a 7% withholding tax.
Additional Mandatory Contributions
Social Security Contributions:
Slovakia has a comprehensive social security system, covering pensions, healthcare, and unemployment benefits. Employers and employees must contribute:
- Employer Contribution: 35.2% of gross salary.
- Employee Contribution: 13.4% of gross salary.
Self-Employed Contribution: Self-employed individuals contribute around 47.2% of their taxable income, covering healthcare and social security.
Withholding Taxes
- Dividends: 7%
- Interest: 19%
- Royalties: 19%
Withholding tax rates may be reduced under Slovakia’s double taxation agreements (DTAs).
Transfer Pricing Rules
Slovakia follows OECD guidelines for transfer pricing, requiring related-party transactions to adhere to the arm’s-length principle. Documentation must be provided for cross-border related-party transactions exceeding certain thresholds.
Special Tax Regimes
- Investment Incentives: Companies investing in high-tech industries, research and development, or renewable energy may qualify for tax incentives, including partial or complete CIT exemptions for several years.
- Small Business Incentives: Simplified tax regimes and lower tax rates are available for micro-businesses with limited turnover.
Other Taxes
- Real Estate Tax: Levied by local municipalities at rates set by local authorities based on the value of land and buildings.
- Capital Gains Tax: Capital gains are taxed as ordinary income, subject to the progressive PIT rates (19% or 25%).
- Excise Duties: Imposed on certain goods such as fuel, tobacco, and alcohol.
Double Taxation Agreements (DTAs)
Slovakia has signed over 65 double taxation agreements with countries around the world, including major trading partners such as Germany, the United States, and China. These agreements reduce withholding taxes on dividends, interest, and royalties and prevent double taxation.
Local Taxes
While Slovakia’s tax system is primarily centralized, local municipalities are entitled to impose property taxes and certain local fees, such as real estate and waste management taxes.
Compliance and Reporting
Annual Filing:
Corporate tax returns must be filed by March 31st of the following tax year. Personal income tax returns must be filed by April 30th. The tax year coincides with the calendar year.
Penalties for Late Filing:
Penalties for late filing or underpayment of taxes include interest on overdue tax amounts and administrative fines. The penalty rate is generally 0.05% of the unpaid tax per day.
Recent Developments
Green Tax Reforms:
Slovakia is implementing green taxation policies, including higher excise duties on carbon-intensive fuels and tax incentives for renewable energy investments and energy-efficient infrastructure projects.
Digital Services Tax:
The Slovak government is considering introducing a digital services tax in line with broader EU discussions on taxing large technology companies that provide digital services within the country.
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