Slovakia Tax & Business Guide - Deloitte

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Basic facts
Population 5.4m Inflation 4.5% (2006)*
Main languages Slovak (official), Hungarian GDP per head US$10,090*
Currency Slovak koruna (SKK) GDP growth 7.5% (2006)*
Economic communities European Economic Area, EU, OECD, WTO
GDP sources 3.7% agriculture, 31.1% industry, 65.2% services
*Economist Intelligence Unit estimates.
Political environment

SlovakiaÌs political system is a parliamentary democracy.

The centre-left Smer-SD (Direction-Social Democracy) leads the government, in coalition with the Slovak National Party and the populist PeopleÌs Party-Movement for a Democratic Slovakia. Robert Fico was elected prime minister in 2006. A direct presidential election will be held in 2009.
Foreign trade and investment
Exports US$41.7bn (2006)* Imports US$44.6bn (2006)*
*Economist Intelligence Unit estimates.

Major exports: Machinery and transport equipment, manufactured goods and chemicals.

Leading export markets: EU countries, especially Germany, the Czech Republic, Italy and Austria.

Investment incentives include tax holidays and worker-retraining grants.
Business and financing
Business forms Limited liability companies, joint stock companies

The most common forms for conducting business in Slovakia are the limited liability company (s.r.o.) and the joint stock company (a.s.).

Bratislava, the capital, is the financial centre.
Labour environment
Unemployment rate 10.4% (2006)* Minimum wage SKK 7,600 (monthly)
*Economist Intelligence Unit estimate.

The minimum monthly wage is SKK 7,600.

Trade unions are not prone to concerted action.

Healthcare and pension fund contributions amount to 35.2% of payroll for employers and 13.4% for employees.
Taxation
Corporate tax
Main rate 19%

Resident companies are taxed on worldwide income; non-resident companies are taxed only on Slovakian-source income. A company is deemed to be resident in Slovakia if its legal seat or place of effective management is in Slovakia. Corporate tax is charged at a flat rate of 19%. Dividends paid from profits are not subject to tax in the hands of corporate or individual shareholders. Partnerships are transparent for tax purposes, and the partners are taxed on their share of partnership income.
Individual tax
Flat rate of 19%

Resident individuals are taxed on their worldwide income; non-residents pay tax only on Slovakian-source income. Individuals who have their permanent residence or habitual abode in Slovakia are considered to be resident for tax purposes. Presence for 183 days in a tax year implies habitual abode. Individual income tax is charged at a flat rate of 19%. Income from capital, including interest, is included in total income. Dividends received are not taxed.
Capital gains
Company gains on business assets are taxed as income

Capital gains of companies and individuals generally are included in taxable income. Certain gains of individuals are exempt, including gains on the sale of a dwelling that was used as the individualÌs permanent address for at least two years and gains on other immovable property that was owned for at least five years before the sale.
Indirect tax
VAT standard rate 19% VAT reduced rate 10%

Value-added tax (VAT) applies to most transactions at the standard rate of 19%. A reduced rate of 10% applies to selected goods (for example, medications and medical equipment) listed in a special annex. Exports are zero-rated. Exemptions include certain services, for example financial, insurance, educational and broadcasting services. Non-residents from other EU countries who are registered for VAT abroad may be able to recover input tax paid in Slovakia. Slovakia also refunds VAT to non-residents established outside the EU. However, this applies only for residents from several selected countries.

Registration is compulsory for businesses with a turnover exceeding SKK 1.5m in a 12-month period. Voluntary registration is possible.
Tax administration and compliance
Tax year Corporations: accounting year; Individuals: calendar year

Companies make monthly or quarterly advance payments of corporate income tax, calculated on the basis of tax paid in the previous year. Companies must file a self-assessment tax return within three months of the end of the year, but this limit may be extended by an additional three months upon request. Final tax is payable based on information in the return.

Employment income of individuals is taxed by withholding, and monthly or quarterly advance payments may be required in respect of other income. Where required, individuals must file a self-assessment tax return by March 31st following the tax year-end, but this period may be extended by up to three months.
Additional tax information
Withholding taxes Dividends 0%, Interest on loans and bonds 19%, Royalties 19%. Rates may be reduced by tax treaty or EU directives.
Tax treaties Slovakia has concluded more than 55 tax treaties.
Dividends Dividends are excluded from taxation.
Revenue protection There is transfer-pricing legislation, but no thin-capitalisation rules.
Groups There is no provision for group taxation.
Incentives Investment incentives in the form of tax credits subject to government approval procedures, limited by state aid rules.
Other taxes Excise duties, Import duties, Tax on real estate, Road tax.