Mazars in SLOVAKIA

Corporate taxes and other direct taxes

In Slovakia, the corporate income tax is charged at a flat rate 21%. The tax base is calculated from an accounting profit or loss modified by certain increasing and decreasing items. The tax losses can be deducted evenly for four years, i.e. a maximum one quarter from the total amount annually. Tax incentives may be provided in cases of starting new production or modernizing existing production, doing research or development. Taxpayers undertaking a research and development project are eligible for an extra allowance by applying a so-called “super deduction”.

Transfer pricing in Slovakia
Arm’s lenght principle since 1999
Documentation liability since 2009
APA since 2004
Country-by-Country liability from FY 2016
Master file-local file (OECD BEPS 13) applicable Applicable for specific taxpayers
Penalty
Lack of documentation up to EUR 3 000 / missing documentation (recurrent basis)
Tax shortage 10% p.a. of tax underpayment
Related parties 25% < direct or indirect control or common managing director, close relatives or other control aimed purely on circumvention of tax
Safe harbours Not officially published/accepted - but generally accepted: Low value added services: 5% mark-up

Level of attention paid by Tax Authority:

9/10

Starting from 1 January 2015 thin capitalization rules are applied. The maximum amount of tax-deductible interest and related expenses from loans provided by related parties is calculated as 25% of EBITDA. In general, between 2014 - 2017 taxpayers (legal entities) generating tax losses or tax base below minimal amount have been obliged to pay tax licenses ranging from EUR 480 to EUR 2,880, which represented the minimum current tax. As of 2018, the tax licenses are abolished.

A withholding tax of 19% is applicable to interest, winnings and other income from passbook deposits, income of authors for their articles, etc. A 35% withholding tax rate applies for payments to taxpayers from non contracting states which do not have either a double tax treaty or a treaty on information exchange with Slovakia. Interests and royalties paid by Slovak tax residents to closely related EU entities are under specific rules exempted from taxation.

Dividends and other incomes paid to legal entities being Slovak tax residents by taxpayer from a non-contracting state are subject to taxation within the separate tax base at rate of 35%. Dividends and other income are also subject to taxation if paid to a taxpayer from a non-contracting state by a Slovak legal entity. Taxation does not apply to the dividends paid from the profit from 2004 until 2016, i.e. such dividends shall not be subject to tax even if paid after 1 January 2017.

Country-by-Country (CbC) Reporting obligations are applicable in Slovakia for periods from 1 January 2016.

In 2018, exit tax and patent box special regime were introduced in Slovakia. Starting from 2018, business restructurings (mergers, acquisitions, in-kind contributions, de-merges) can be carried out solely in fair market values (only for some specific cases historic value method can be applied)

VAT and other indirect taxes

The options/limits based on the EU Directive:

VAT Options in Slovakia Applicable / limits
Distance selling EUR 35,000/year
Call-off stock
VAT group registration*
Cash accounting - yearly amount in EUR (approx.) appr. EUR 100,000/year
Import VAT deferment
Local reverse charge construction works; deliveries of goods and certain types of services in the Slovakia by a taxable person who is not established in Slovakia (foreign VAT payers); sale of waste, specific metal products, emission quotas; sale of agricultural products; sale of specific electronic devices if the tax base on the invoice exceeds 5 000 EUR, etc.
Option for taxation
- letting of real estate
- supply of used real estate
VAT registration threshold EUR 49,790

* Available only for domestic related parties

The general VAT rate is 20%, while the reduced rate is 10% (e.g. pharmaceutical products, books, music, spectacle and contact lenses, basic food items such as bread, butter, milk and cream, freshwater fish and meat). As of 2019, the reduced rate of 10% is applied to accommodation services.

Starting from 1 January 2016 a special tax voluntary arrangement based on the receipt of payment for goods and services (called “cash accounting”) can be applied by certain VAT payers.

Other indirect tax types in Slovakia are excise taxes on wine, beer, tobacco, spirits, mineral oils, electricity, coal and natural gas.

Personal income tax / Social security system

The personal income tax rate is progressive in Slovakia and it is based on the amount of income. The income tax rate of 19% is applicable on the tax base below 176.8 times the amount of the subsistence minimum in effect (for year 2019, that amount is EUR 36,256.37 per year) and 25% for the part of the tax base exceeding 176.8 times the valid subsistence minimum.

Dividends and other income (including shares on liquidation balances of business companies and/or cooperatives) and shares of members of land communities paid out after 01 January 2017 are subject to taxation at rate 7% (capped by DTAT rate) or 35% if recipient or payer of dividend is from a non-contracting state. Further, dividends distributed to employees without participation on the registered capital of the company and/or cooperative are classified as employment income taxable by tax advances.

Both employers and employees are subject to social security and health contributions on the employee's gross monthly wage. The rates are 35.2% for employers (social security 25.2% and health insurance 10%) and 13.4% for employees (social security 9.4% and health insurance 4%). Social security contributions are capped by a maximum assessment base of EUR 6,678. There is no maximum assessment base for health insurance contributions. Health insurance allowance (annually to 4,560 EUR) can be applied by low-income employees on employee’s contributions.

The examples below show the cost of employers and employees in case of minimum wage level and the average wage in private sector.

Wage-related taxes in Slovakia Minimum wage Average wage in private sector
  in EUR   in EUR  
  520   1 057  
Total wage cost 703 135,20% 1429 135,20%
Vocational training contribution -   -  
Social contribution tax 183 35,20% 372 35,20%
Gross Salary 520 100,00% 1 057 100,00%
Personal income tax* 24 19,00% 112 19,00%
Employees' contributions** 66 12,63% 142 13,40%
Net Salary 430 68,37% 804 67,60%

* The gross salary is decreased by the total amount of a general allowance (328,12 EUR/monthly) and by social contribution tax

** Social and health insurance paid by employee (special health contribution for low-income employees)

Slovakia
Mazars TAX k.s.
Suché mýto 1, 811 03 Bratislava
Europeum Business Center,
Slovakia
Günter Oszwald
Partner