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 three months following the end of the tax period, i.e. 31 March of the following year. This deadline can be extended by some taxpayers by up to three months based on a written announcement to the tax authorities. The deadline can be extended by up to three additional months under specific circumstances.

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 declare and 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 (EUR1,901.66 in 2015) or if final tax was withheld at source (e.g. tax on interest withheld by banks).

The tax payer 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 or quarterly basis.

Tax rates

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

Starting with 2013 tax year, the personal income tax rate is 19 percent on part of annual tax base not exceeding EUR 35,022.31, and 25 percent on part of annual tax base exceeding this level.

If income is subject to withholding tax, 19 percent rate applies irrespective of the amount of income.

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
  • 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, 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 for more than 10 days after their assignments end and they repatriate

Not applicable.

What if the assignee enters the country 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, he 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, unless extended.

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 after he leaves the country and repatriates?

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, income from capital assets, and other 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% for each calendar year following the year in which the car was put into use
  • petrol expenses for private use of the company car
  • housing
  • contributions to pension plans or other insurances (other than mandatory)
  • personal income tax paid by the employer
  • home leave
  • relocation expenses.

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 and share in profits distributed to employees 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.

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.

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.

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 at progressive rates in all 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).

Dividends, interest, and rental income

Dividends from profits earned after 1 January 2004 are not subject to tax in Slovakia.

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 rage, 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:

  • Personal allowance of up to EUR3,803.33
    1. This amount is gradually reduced with increasing income. If the tax base exceeds EUR35,022.31, no allowance can be claimed.
  • Spouse allowance of up to EUR3,803.33
    • This amount is gradually reduced with increasing income. If the tax base exceeds EUR50,235.62 or if spouse’s own income exceeds EUR3,803.33, no allowance can be claimed. The spouse allowance can be claimed only by Slovak tax residents or non-residents deriving at least 90 percent of their worldwide income from Slovak sources. Title to this reduction is subject to further specific conditions.
  • Allowance for voluntary additional contributions to 2nd pension pillar of up to EUR988.80
  • Allowance for contributions to qualifying 3rd pension pillar plans of up to EUR180.

Taxpayers mandatorily contributing to the Slovak or their home country 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 with which Slovakia concluded Double Tax Treaties or if so governed by the EC Savings Directive.

General tax credits

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

The only available tax credit is in respect of dependent children, referred to as a tax bonus. Its amount is currently EUR21.41 per qualifying child per month. Tax bonus 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 whose three-year assignment begins 1 January 2015 and ends 31 December 2017. The taxpayer’s base salary is EUR100,000 and the calculation covers three years.

  2015

EUR
2016

EUR
2017

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 2015.
  • Calculation disregards employee’s social security contributions which could otherwise be deducted from the taxable income.
  • Calculation for 2016 and 2017 disregards any future changes of the applicable law.

Calculation of taxable income

Year ended 2015

EUR
2016

EUR
2017

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

  2015

EUR
2016

EUR
2017

EUR
Taxable income as above 177,000.00 161,250.00 175,500.00
Slovak tax 42,148.66 38,211.16 41,773.66
Less:      
Tax bonus for children (513.84) (513.84) (513.84)
Total Slovak taxes 41,634.82 37,697.32 41,259.82

© 2016 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.

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