Slovakia: Tax law amendments, proposals to be presented to Parliament

Slovakia: Tax law amendments, proposals to be presented

The government of Slovakia in September 2016 approved amendments to legislative proposals that would revise provisions of the income tax law of Slovakia. The amendments are expected to be approved by the Parliament by year-end, and then generally to be effective as of 1 January 2017 (changes to the taxation of dividends, described briefly below, would apply to dividends distributed out of profits generated in tax periods beginning on or after 1 January 2017, and a new regime of taxation of liquidation proceeds would apply if the liquidation started on or after 1 January 2017).

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Under the package of tax amendments approved by the government are the following items:

  • The corporate income tax rate would decrease from 22% to 21% as of 2017.
  • Dividends paid to individuals, including payments such as liquidation proceeds, settlement shares, or shares in profit payable to a silent partner, would be taxed at a rate of 7% (reduced from the rate of 15% as previously proposed by the Ministry of Finance).
  • If dividends are received from, or paid to, taxpayers who are resident in non-treaty countries, these dividends would be taxed at a rate of 35%.
  • When a domestic company distributes dividends, it would withhold the 7% tax at source. Likewise, when dividends are distributed to individuals or corporations that are resident in non-treaty countries, the 35% tax would be withheld by the domestic taxpayer distributing the dividends.
  • Dividends received by Slovak tax resident individuals from foreign sources (from any country), or received by tax resident corporate taxpayers (if taxable, i.e., those received from non-treaty countries) would be included in their tax return, to be taxed by at the rate of 7% or 35%.
  • Dividends received by employees who do not own shares in the company would be treated as income from dependent activities and taxed accordingly.
  • Dividends paid by a Slovak resident company to another Slovak resident company, or to a treaty-country resident company, as well as dividends received by a Slovak resident company from a company that is a Slovak resident or a treaty country resident, would not be subject to corporate tax or withholding tax.
  • Dividends received by individuals would no longer be subject to health care insurance contributions.

 

Read a September 2016 report [PDF 475 KB] prepared by the KPMG member firm in Slovakia

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