Key tax factors for efficient cross-border business and investment involving Slovakia.
With the following countries, territories and jurisdictions:
|Bosnia & Herzegovina
|Egypt(a)||Rep. of Korea||Romania||US|
Notes: (a) Treaty signed but not yet in force
Limited liability company (s.r.o.), joint-stock company (a.s.).
Limited liability company (s.r.o.): at least EUR 5,000,
Joint-stock company (a.s.): at least EUR 25,000.
A company is resident if it has been incorporated in Slovakia or if its place of effective management is in Slovakia.
Resident companies are taxed on their worldwide income. Non-resident companies are taxed on their Slovak source income only.
The corporate income tax return must be filed within 3 months from the end of the respective taxable period (usually the calendar year, but can be changed to a different financial year). However, based on the written notification submitted to the relevant tax authorities by the date prescribed for the filing of the tax return, the deadline for filing can be extended:
The standard corporate income tax rate is 21 percent.
No withholding tax on dividends paid to non-resident companies (except for distributions of profits generated before 2004).
35 percent on dividends paid to a taxpayer in a non-tax treaty country distributed out of profits derived in taxable periods starting on and after January 1, 2017. Distributions to non-white list countries from profits realized in taxable periods starting on and before December 31, 2016 (subject to exception mentioned above) continue to be exempt from WHT.
No withholding tax applies to dividends paid to EU parents, regardless of the year in which the profit was earned (due to the domestic law implementing the EU Parent-Subsidiary Directive), if the following conditions are fulfilled:
Generally 19 percent, but exemption for interest paid to EU-associated companies (due to the domestic law implementing the EU Interest and Royalties Directive):
The rate may also be reduced under DTTs. 35 percent on interest paid to taxpayer in non-tax treaty state.
Generally 19 percent, but exception for royalties paid to EU-associated companies (due to the domestic law implementing the EU Interest and Royalties Directive):
The rate may also be reduced under DTTs. 35 percent on royalties paid to taxpayer in non-tax treaty state.
Generally 19 percent on fees for technical advisory services provided by non-residents in the territory of the Slovak Republic. Benefit from DTT may be sought.
Withholding tax must be applied on specified categories of income originating from sources in the territory of the Slovak Republic.
Exemption, except for distributions of profits generated before 2004.
For dividends distributed by an EU resident subsidiary whose share capital is directly held as to 25 percent, the exemption applies regardless of the year in which the profit was earned (due to the domestic law implementing the EU Parent-Subsidiary Directive).
In accordance with the amendment of the EU Parent-Subsidiary Directive, in order to avoid the tax evasion related to hybrid instruments, the profit shares (e.g. dividends) are not subject to tax only to the extent that they are not a tax expense of the distributor of the profit share.
Dividends received from non-treaty states are subject to tax at the rate of 35 percent if distributed out of profits for taxable periods starting on and after January 1, 2017.
In principle, taxable as ordinary income: taxation of capital gains from Slovak sources, on the sale of moveable assets of a PE, shares and securities in a Slovak entity if sold by a non-resident to a Slovak entity or if the non-resident company owns real estate in Slovakia with an accounting value totaling more than 50 percent of the company's equity (may be reduced/exempted by application of DTT).
As of January 1, 2018, the Income Tax Act introduced the participation exemption rules for capital gains on the sale of shares and business shares, provided that the following conditions are met:
Only legal entities (not individuals) are entitled to the exemption and it also applies to shareholdings acquired up to December 31, 2017; however the holding period test on existing shareholdings starts on or after January 1, 2018 and therefore it will only be possible to apply the participation exemption for the first time in 2020.
As of January 1, 2014 tax losses can be carried forward in equal parts over 4 years. Provisional conditions to the Income Tax Act stipulate that any tax losses reported from 2010 to 2013 not utilized until January 1, 2014 can only be carried forward in four equal portions.
No, only minimal stamp duties when a company is being registered or changes to registration in the Commercial Register.
The real estate tax consists of three different types of taxes:
The tax return for real estate tax must be filed before January 31 of the year for which this tax return is filed.
As of January 1, 2018, the Income Tax Act introduced the “Exit tax”. If a tax resident or a tax non-resident with a PE established in Slovakia decides to transfer assets or business activities or its tax residence abroad, an obligation to tax the economic value of all capital gains normally generated in Slovakia will arise, despite the fact that profit had not been realized at the time of exit. Assets transferred outside the territory of Slovakia will be subject to tax even if no sale / change of the legal ownership arises, as long as Slovakia loses its right to tax this income due to the transfer of the property.
Exit tax is levied at a rate of 21 percent.
As of January 1, 2019, Control Foreign Company (CFC) rules apply in Slovakia.
The non-resident company is treated as a CFC if it is controlled by a Slovak resident or jointly with related parties, by direct or indirect share participation in the share capital or voting rights of at least 50 percent or at least 50 percent profit share, and the corporate income tax of the CFC paid abroad is lower than 50 percent of the Slovak tax. In such cases, the corporate income tax base of the CFC will be included in the corporate income tax base of its Slovak controlling company and taxed in accordance with Slovak tax legislation. Some of the foreign tax paid on the CFC’s income may be credited against the final tax liability.
OECD Transfer Pricing Guidelines apply. Very broad definition of 'related parties'. As of January 1, 2015 transfer pricing rules apply also between Slovak entities.
As of January 1, 2009, there is an obligation for foreign-related parties to keep specific transfer pricing documentation. Detailed requirements for such documentation were issued by the Ministry of Finance.
As of 2014 the taxpayer is obliged to submit local transfer pricing documentation to the tax authorities upon request (i.e. not only during the course of a tax audit), within 15 days of receiving the request.
As of January 1, 2015, domestic related parties are also required to maintain transfer pricing documentation.
Earning stripping rules: In the tax periods commencing on or after January 1, 2015, interest and other expenses related to loans received from a related party exceeding 25 percent of an amount in principle corresponding to EBITDA will be non-deductible for tax purposes. The rules apply to related parties - in line with the definition of related parties for transfer pricing purposes, i.e. to foreign and domestic related parties. These rules do not apply to certain financial institutions, e.g. banks, insurance companies, re-insurance companies.
Tax authorities may issue binding advance rulings on transfer pricing issues and for the determination of the taxable base of a PE only.
As of September 1, 2014, it is possible to request a binding opinion from the Financial Directorate, on the application of tax laws in specific areas.
Yes. A company may file an application for R&D incentives after the Ministry of Education publishes a call for submissions. A successful application results in tax relief, which is computed as a proportional part of the tax due.
As of January 1, 2018, the Income Tax Act introduced a separate tax regime, the patent box. Income for the use of or the right to use granted and registered patents, utility models and software created by the taxpayer (not purchased) will be partially exempt from tax. The exemption will also apply to 50 percent of profit generated by the sale of products manufactured using a registered patent or a technical design protected by a utility model.
Investment incentives can be granted if the particular conditions and all the administrative requirements are met.
The standard rate is 20 percent and the reduced rate is 10 percent. VAT grouping is possible.
In principle, 'substance over form' rule in the Tax Administration Act applies to any planning structure.
Source: Slovakian tax law and local tax administration guidelines, updated 2019.
KPMG in Slovakia