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Slovakia - Income Tax

Slovakia - Income Tax

Taxation of international executives

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Tax returns and compliance

When are tax returns due? That is, what is the tax return due date?

The statutory deadline for filing a tax return is 3 months following the end of the tax period, i.e. 31 March of the following year. This deadline can be extended by up to 3 months by any taxpayer, and by up to 6 months by resident taxpayers declaring taxable income from sources abroad.

What is the tax year-end?

31 December.

What are the compliance requirements for tax returns in Slovakia?

Generally, Slovak tax residents are liable to pay tax in Slovakia on their worldwide income, that is employment income, income from self-employment, rental income, investment income, capital gains, as well as any other taxable income. Individuals who are Slovak tax non-residents are subject to tax only on income from Slovak sources, e.g. employment income for activities performed in Slovakia, director’s fees from a Slovak resident company, rental income derived from a property situated in Slovakia, etc.

Tax returns are not required if total taxable income does not exceed certain minimal threshold (EUR2,207.10 in 2020) or if income was subject to final tax withheld at source (e.g. tax on interest withheld by banks). The tax return is not needed if an individual has solely employment income from Slovak sources and the annual settlement of taxes and prepayments is performed by the employer.

The taxpayer calculates the tax liability in the tax return. The tax payment is due by the tax return filing deadline. There is no joint filing in Slovakia.

In most cases, the tax liability is prepaid by making advance tax payments on a monthly basis.

Tax rates

What are the current personal income tax rates in the Slovakia?

Personal income tax rate is 19 percent on part of annual tax base not exceeding EUR37,163.36, and 25 percent on part of annual tax base exceeding this level. However, interest and similar income from capital assets is subject to 19 percent tax rate only, irrespective of taxpayer’s tax base.

Starting from 2017 (transitional provisions apply), dividends and similar types of income are subject to 7 percent tax rate, or 35 percent tax rate if paid by entity from a non-Treaty country/jurisdiction.

Specific 15 percent tax rate applies to self-employment income up to EUR100,000.

Residence rules

For the purposes of taxation, how is an individual defined as a resident of the Slovakia?

An individual will be considered a Slovak tax resident if at least one of the following conditions is met:

  • a permanent residence in Slovakia (incl. residency permits of foreigners deemed as permanent),
  • a “residence” in Slovakia (understood as a residence available in Slovakia used not just for occasional purposes, while considering all personal and economic ties to Slovakia the intention to reside permanently in this home is evident),
  • a presence in Slovakia for at least 183 days in the relevant calendar year.

A cross-border worker who commutes to Slovakia on a regular basis only to perform dependent work is not considered a Slovak tax resident.

If individuals qualify as tax residents simultaneously in Slovakia as well as in another country/jurisdiction, with which Slovakia concluded a Double Tax Treaty (DTT), their Slovak tax liability would be limited in accordance with the provisions of the DTT.

Is there, a de minimus number of days rule when it comes to residency start and end dates? For example, taxpayers can’t come back to the host country/jurisdiction for more than 10 days after their assignments end and they repatriate

Not applicable.

What if the assignee enters the country/jurisdiction before assignment begins?

Any days of presence in Slovakia count towards the 183-day residence test.

Termination of residence

Are there any tax compliance requirements when leaving Slovakia?

If the individual who registered with the tax authorities and obtained a tax ID certificate terminates the activities in Slovakia, they must formally deregister.

The tax return for the year when the individual leaves Slovakia is due by the regular deadline, i.e. 31 March of the following year, or applicable extended deadline.

What if the assignee comes back for a trip after residency has terminated?

Any days of presence in Slovakia count towards the 183-day residence test.

Communication between immigration and taxation authorities

Do the immigration authorities in Slovakia provide information to the local taxation authorities regarding when a person enters or leaves Slovakia?

Such communication is in theory possible.

Filing requirements

Will an assignee have a filing requirement in the host country/jurisdiction after they leave the country/jurisdiction and repatriate?

As explained above, a tax return for the final year of assignment is due in the following year. Additionally, if e.g. a bonus for the assignment activities is paid in the year after assignment, another tax return may be required for this post-assignment year.

Economic employer approach

Do the taxation authorities in Slovakia adopt the economic employer approach to interpreting the Income from Employment article (Article 15) of the OECD treaty?

Yes.

De minimus number of days

Are there a de minimus number of days before the local taxation authorities will apply the economic employer?

No.

Types of taxable compensation

What categories are subject to income tax in general situations?

The taxable base is calculated as the aggregate of bases determined for the different categories of income: income from dependent services, income from business activities and rental income, and other income, while a separate base is calculated for certain types of income from capital assets such as interest and also for dividend income. Income includes any benefits regardless of whether it is money or a fringe benefit.

Typical examples of benefits-in-kind that will be considered fully taxable are:

  • company car used also for private purposes; the value of this benefit is calculated as 1 percent of the acquisition price of the car including VAT per month, decreased by 12.5 percent for each calendar year following the year in which the car was put into use
  • petrol expenses for private use of the company car
  • contributions to pension plans or other insurances (other than mandatory)
  • home leave, housing, relocation expenses, etc.

Intra-group statutory directors

Will a non-resident of Slovakia who, as part of their employment within a group company, is also appointed as a statutory director (i.e. member of the Board of Directors in a group company situated in the Slovakia trigger a personal tax liability in the Slovakia, even though no separate director's fee/remuneration is paid for their duties as a board member?

Slovak tax liability may be triggered if there is an allocation of employment costs incurred by the mother company to group company situated in Slovakia.

a) Will the taxation be triggered irrespective of whether or not the board member is physically present at the board meetings in the Slovakia?

The individual (assuming a Slovak tax non-resident) would not be taxed in Slovakia if there is no physical presence in Slovakia.

b) Will the answer be different if the cost directly or indirectly is charged to/allocated to the company situated in the Slovakia (i.e. as a general management fee where the duties rendered as a board member is included)?

If there is a cost allocation to Slovakia, the individual (assuming a Slovak tax non-resident) would be taxed in Slovakia for the work physically performed in the territory of Slovakia (i.e. if there is no physical presence, no Slovak taxation should occur).

The entity should, however, be vigilant in regards to their place of management if the physical presence of the individual in Slovakia is in place.

c)  In the case that a tax liability is triggered, how will the taxable income be determined?

The income of statutory directors / board members is treated as employment income. The taxable income would be determined similarly to normal employees in Slovakia. 

Tax-exempt income

Are there any areas of income that are exempt from taxation in Slovakia? If so, please provide a general definition of these areas.

Contributions to profit sharing or pension plans

Employer’s mandatory payments to the social security system (including state pension system) are exempt from tax.

Medical expense reimbursements and accident and health insurance premiums

Employer’s mandatory payments to the health care and accident insurance system are exempt from tax.

Meals and lodging

Meal allowance up to the statutory limit is exempt from tax. Any travel reimbursements up to the statutory limits are not subject to tax. Contribution to employee’s recreation up to specific limits can also be exempt from tax.

Certain fringe benefits

Only very specific types of fringe benefits qualify for exemption.

Moving expenses

Moving expenses in general do not qualify for exemption.

Temporarily-away-from-home travel expenses

Temporarily-away-from-home travel expenses in general do not qualify for exemption.

Others

13th and 14th salary can be tax exempt subject to very specific conditions and amounts. 

Expatriate concessions

Are there any concessions made for assignees in Slovakia?

No.

Salary earned from working abroad

Is salary earned from working abroad taxed in Slovakia? If so, how?

Slovak tax residents are liable to tax on their worldwide income. Double taxation of employment income earned from working abroad can however in most cases be avoided, even if no DTT is concluded with the particular country/jurisdiction.

Taxation of investment income and capital gains

Are investment income and capital gains taxed in Slovakia? If so, how?

Investment income and capital gains in general are taxed in Slovakia at 19 percent if withholding tax applies or if income belongs to category of certain types of income from capital assets such as interest, otherwise at progressive rates in other cases. The income which was not subject to final withholding tax should be included in the aggregate tax base on the tax return.

Gains from selling of securities, options and shares in the company capital are exempt from tax up to EUR500 (if acquired after 1 January 2011) or EUR925.95 (if acquired before 1 January 2011) or in the whole amount (for certain securities acquired prior to 1 January 2004).

As of 2016, gains from sale of securities that are traded on regulated market (stock exchange) are tax-exempt if the period between acquisition and sale of the securities exceeds 1 year and provided the securities did not form part of taxpayer’s business assets.

Tax exemption also applies to gains from sale of securities, options and derivatives from long-term investment saving schemes meeting specific conditions, in particular duration of at least 15 years.

Dividends, interest, and rental income

As of 2017, dividends are subject to tax in Slovakia (transitional provisions apply).

Interest income from Slovak bank deposits is taxed by the banks at 19 percent, representing final tax. Such taxed income does not need to be included in the tax return.

Rental income derived in respect of a property situated in Slovakia is taxed at the respective progressive rate. First EUR500 of income is exempt from tax. Actual expenses can be deducted (expenses should be reduced proportionally if income was reduced by the exempt amount).

Gains from stock option exercises

Residency status Taxable at:
  Grant Vest Exercise
Resident N N* Y
Non-resident N N* Y

* The employee stock options granted after 1 January 2010 are in general taxable at exercise. Stock options granted prior to 1 January 2010 are however taxable at vest.

Foreign exchange gains and losses

Foreign exchange gains or losses are not subject to tax if a person does not conduct business. If a person derives capital gains from investment expressed in foreign currency, the acquisition costs are converted to Euro using historical exchange rate, thereby any effect of exchange rate movement between acquisition and disposal is reflected in the tax base.

Capital losses

Losses from sale of securities can be offset against gains from sale of other securities in the same tax period only.

Gifts

Gifts are in general not subject to tax, unless obtained in connection with employment or self-employed activity, in which case they are taxed at the respective progressive rate.

General deductions from income

What are the general deductions from income allowed in Slovakia?

Taxpayers are entitled to personal allowances reflecting their personal circumstances; however, these can be used to decrease only income from employment or self-employed activities:

  1. personal allowance of up to EUR4,414.20
    1. This amount is gradually reduced with increasing income. If the tax base exceeds EUR37,163.36, no allowance can be claimed.
  2. spouse allowance of up to EUR4,035.84
    1. This amount is gradually reduced with increasing income. If the tax base exceeds EUR37,163.36 or if spouse’s own income exceeds EUR4,035.84, no allowance can be claimed. Several conditions must be met.
  3. Allowance for contributions to qualifying 3rd pension pillar plans of up to EUR80.
  4. Allowance for provably incurred costs relating to spa treatment up to EUR50 per year

Taxpayers mandatorily contributing to the Slovak or their home country/jurisdiction social security and health care insurance may deduct these contributions from their taxable income.

Calculation of estimates/pre-payments/withholding

How are estimates/pre-payments/withholdings of tax handled in Slovakia?

Individuals on Slovak payroll are subject to tax prepayment withholding on taxable income each time income is paid out. This obligation is met by the employer without involving the individual. The withheld amounts are reconciled at the year-end and if any overpayment occurred, this can be recovered.

Individuals not on Slovak payroll are required to make monthly tax prepayments calculated on income actually received. The payments are due by the end of the month following the month, in which the income was received. The paid amounts are reconciled at the year-end and if any overpayment occurred, this can be recovered. This obligation does not apply to tax non-residents not exceeding 183 days of activities in Slovakia, as well as if a person is assigned to a Slovak company which assumes the tax payment obligation on behalf of the assigned employee.

Relief for foreign taxes

Is there any relief for foreign taxes in Slovakia?

Foreign tax credit can be applied for avoiding double taxation of income with countries/jurisdictions with which Slovakia concluded Double Tax Treaties.

General tax credits

What are the general tax credits that may be claimed in Slovakia? Please list below.

Tax credit for dependent child is currently EUR22.72 per month per one child above 6 years. For children younger than 6 years, the amount is doubled (i.e. EUR45.44). However, there are several conditions when the tax bonus could be applied.

Tax credit in respect of mortgage interest is also available for young taxpayers. However, this is subject to very strict conditions and amounts.

Tax bonuses can be claimed only by Slovak tax residents or non-residents deriving at least 90 percent of their worldwide income from Slovak sources.

Sample tax calculation

This calculation assumes a married taxpayer resident in Slovakia with two children (aged above 6 years) whose 3-year assignment begins 1 January 2018 and ends 31 December 2020. The taxpayer’s base salary is EUR00,000 and the calculation covers 3 years.

 

2018
EUR

2019
EUR

2020
EUR

Salary

100,000

100,000

100,000

Bonus

20,000

20,000

20,000

Cost-of-living allowance

10,000

10,000

10,000

Housing allowance

12,000

12,000

12,000

Company car

6,000

5,250

4,500

Moving expense reimbursement

20,000

0

20,000

Home leave

0

5,000

0

Education allowance

3,000

3,000

3,000

Interest income from non-local sources

6,000

6,000

6,000

Other assumptions

  • All employment income is attributable to local sources.
  • The company car is used for business and private purposes, originally costs EUR50,000 incl. VAT and was put in use in 2018.
  • Calculation disregards employee’s social security contributions which could otherwise be deducted from the taxable income.
  • Calculation for 2019 and 2020 disregards any future changes of the applicable law.

Calculation of taxable income

Year ended

2018
EUR

2019
EUR

2020
EUR

Days in Slovakia

365

365

365

Earned income subject to income tax

     

Salary

100,000

100,000

100,000

Bonus

20,000

20,000

20,000

Cost-of-living allowance

10,000

10,000

10,000

Net housing allowance

12,000

12,000

12,000

Company car

6,000

5,250

4,500

Moving expense reimbursement

20,000

0

20,000

Home leave

0

5,000

0

Education allowance

3,000

3,000

3,000

Total earned income

171,000

155,250

169,500

Other income

6,000

6,000

6,000

Total income

177,000

161,250

175,500

Standard deduction

0

0

0

Personal exemptions

0

0

0

Total taxable income

177,000

161,250

175,500


Calculation of tax liability

 

2018
EUR

2019
EUR

2020
EUR

Taxable income as above

177,000.00

161,250.00

175,500.00

Slovak tax

42,133.91

38,137.11

41,645.19

Less:

     

Tax bonus for children

(517.44)

(532.08)

(545.28)

Total Slovak taxes

41,616.47

37,605.03

41,099.91


*please note that mandatory employee’s social security decreases the employee’s tax base. As there is no information on social security, the total taxable income is assumed being the tax base.

Disclaimer:

All information contained in this document is summarized by KPMG Slovensko Advisory, k.s., a Slovak limited liability partnership and the Slovak member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. The information contained in this publication is based on:

  • Act No. 595/2003 Coll. on Income Tax as amended,
  • Act No. 461/2003 Coll. on Social Security as amended,
  • Act No. 283/2002 Coll. on Travel Allowances as amended,
  • Act No. 404/2011 Coll. on Residence of Aliens as amended.

© 2021 KPMG Slovensko Advisory k.s., a Slovak limited partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

KPMG International Cooperative (“KPMG International”) is a Swiss entity.  Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.

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