Taxation in Slovakia
Slovakia’s taxation framework is a complex system that plays a vital role in the country’s economic strategy, effectively balancing the need for revenue with promoting growth and investment. This framework includes various taxes, each regulated by intricate rules and rates. For businesses, investors, and individuals, having a thorough understanding of this environment is crucial for effective financial management and adherence to regulations.
Taxation system
Slovakia’s taxation system aims to harmonize with national fiscal strategies and international requirements, providing a systematic but flexible framework for taxation. It likely includes a mix of flat rates, progressive scales, and specific exemptions, representing the nation’s economic goals and social aims. Grasping the complexities of these tax mechanisms is essential for maximizing financial results, ensuring adherence to regulations, and taking advantage of opportunities within the legal structure.
Capital gains tax
In Slovakia, capital gains are typically subject to a flat tax rate of 19%, although elevated rates could be imposed on certain income types or if income surpasses defined limits. This tax is levied on earnings from the sale of securities, real estate, and various assets. The tax framework differentiates between income generated from business activities and other types of personal income, each with distinct regulations and potential deductions. The gains are determined by the difference between the proceeds from the sale and the costs of acquisition.
Corporate taxation
In Slovakia, the standard corporate income tax (CIT) rate is 21%. A lower rate of 15% is applicable to corporate taxpayers, entrepreneurs, and self-employed individuals with taxable revenue not exceeding EUR 49,790 in a tax period. The country adheres to OECD guidelines regarding corporate taxation. Tax residents are taxed on their global income, while non-residents are taxed solely on income generated from Slovak sources. To avoid double taxation, companies can use either the exemption or credit method as outlined in applicable treaties.
Personal income taxation
In Slovakia, personal income tax is set at a rate of 19% for annual taxable income up to EUR 47,537.98, and for income that exceeds this amount, the rate is 25%. There are specific rates for dividends and capital gains, with dividend income from profits earned after January 1, 2024, being taxed at 10%, and other capital income taxed at 19%. Different rules apply to self-employment income, which can be taxed at a 15% rate for amounts below EUR 60,000. Slovak tax residents are liable for tax on their global income, whereas non-residents are only taxed on income generated within Slovakia.
Dividend taxation
In Slovakia, the taxation of dividends varies based on the origin and timing of the profits. Dividends sourced from profits earned prior to 2004 and from January 1, 2017, to December 31, 2023, incur a tax rate of 7%. In contrast, dividends derived from profits generated after January 1, 2024, are subject to a 10% tax rate. For dividends coming from a non-cooperating country, a tax rate of 35% is applied. There are specific regulations regarding the withholding tax on dividends issued by Slovak companies to both residents and non-residents.
Property tax
In Slovakia, real estate tax is made up of three categories: land tax, building tax, and apartment tax. The standard rate for land tax is set at 0.25% of the land’s value, whereas the tax for buildings and apartments is €0.033 for each square meter. Local governments have the power to adjust these rates according to the specific conditions of their area. Property owners are required to pay this real estate tax annually, and it is governed by the Act on Local Taxes.
Inheritance taxation
Slovakia does not levy an inheritance tax on property transfers following a person’s death. Due to recent tax reforms, inheritance tax has been eliminated, which means that beneficiaries, irrespective of their connection to the deceased, are not required to pay taxes on inherited assets.
International taxation
Slovakia’s international tax framework imposes taxes on residents based on their global income and on non-residents for income sourced in Slovakia. To mitigate or avoid double taxation, Slovakia has established Double Tax Treaties (DTTs) with numerous nations. For instance, dividend income from countries that cooperate is taxed at rates ranging from 7% to 10%, whereas dividends from non-cooperative jurisdictions face a 35% tax rate. Interest and royalties are typically taxed at 19%, while other forms of income can be taxed at either 19% or 25%, depending on the total amount. These treaties frequently lower the rates of withholding tax.
Cryptocurrency taxation
In Slovakia, the taxation of cryptocurrency varies based on whether the taxpayer is an individual or a business. Individuals who hold crypto for more than 12 months benefit from a lower tax rate of 7% on their profits. Those with short-term holdings of less than 12 months face taxation as personal income, subject to progressive rates ranging from 19% to 25%. For businesses, profits from cryptocurrency are incorporated into corporate income and taxed at rates from 15% to 21%, depending on the business’s total yearly revenue. Cryptocurrency is classified as a short-term financial asset, with its value assessed at the moment of the transaction. It is required for both individuals and businesses to report any income derived from cryptocurrency.
VAT system
In Slovakia, the standard VAT rate is 20% for the sale of goods and services. A lower rate of 10% is applicable to specific items, such as pharmaceutical products, books, and some food products. Goods that are exported and intra-community supplies have a zero rate. VAT is relevant for taxable persons, which include both legal entities and individuals engaged in economic activities. Additionally, businesses are required to register for VAT if their turnover exceeds EUR 49,790 in the past year.
Our taxation solutions
In a rapidly changing tax landscape, expert assistance is essential. Our firm provides a range of specialized tax solutions specifically designed to address the varied needs of individuals, businesses, and investors in Slovakia. We aim to help clients navigate the intricacies of the tax code, reduce liabilities, and maintain complete regulatory compliance.
- Personal tax advisory: Tailored advice to minimize tax exposure while ensuring legal compliance.
- Corporate tax strategy: Comprehensive planning to maximize tax efficiency and leverage incentives.
- Capital gains optimization: Expert guidance to manage and reduce taxes on capital gains.
- International tax planning: Advanced strategies for optimizing cross-border tax outcomes.
- Cryptocurrency advisory: Compliant tax strategies for both individual and corporate crypto activities.
- Inheritance and estate planning: Strategic planning for efficient wealth transfer and reduced inheritance taxes.
- VAT compliance: Full-service support for VAT registration, reporting, and optimization.
Book a consultation
In the intricate realm of taxation, expert guidance can have a considerable impact. Reach out to us today to arrange a consultation with our group of tax specialists. We will collaborate with you to create a personalized tax strategy that meets your goals and guarantees complete adherence to Slovakia’s regulatory framework.
Disclaimer
Tax laws and regulations are continually evolving and can differ depending on personal circumstances. The information presented here is intended for general guidance and may not capture the latest changes. It is strongly advised to seek the assistance of a qualified tax professional for personalized and current advice tailored to your situation.