VAT

 

VAT in Slovakia is predominantly uniform - 19 %, only a very special category of products like medicaments, pharmaceutical products, medical and diagnostics aids is subject to VAT of 10%.

 

Income tax

 

Major applicable legislation

Act no. 595/2003 of Law Code on Income tax

 

Income tax is paid monthly in the form of a tax advance – 19% from the tax base which is the gross wage minus all the contributions to compulsory insurance funds and non-taxable sum (exempt from taxation)[1]. (See also sections on social insurance, health insurance and working conditions)

 

The tax base can be reduced by a child allowance (dependent child, e.g. attending school) and a spouse allowance (if he or she is without own income or the income is lower than the set limit and lives in the same household), however, only by a foreigner with permanent residence in the Slovak Republic.

 

After the taxation period (that is one calendar year) the annual clearing of taxes is made by filing the tax return (declaration of taxes), and only then the final level of non-taxable amount is calculated dependent on the whole-year wage. Only afterwards the tax overpayment or tax in arrears can be determined.

 

Notice: The following incomes are exempt from taxation: (for exact wording see the Act on Income tax)

§          scholarships, except for a PhD. scholarship, provided from the state budget, or by higher education institutions or similar benefits provided from abroad, financial support of foundations, non-for-profit organisations, etc. except for remuneration for carrying out employment or business activities

§          financial resources from grants provided on the basis of international treaties, by which is the Slovak Republic bound

§          benefits from insurance of natural persons except for benefits from insurance after reaching certain age or additional old-age savings.

§          travel allowances and per diems up to the amount set by law

 

Tax residence

As regards the tax return (declaration of taxes), it is of great importance to determine the tax residence of the person or entity in order to clarify the tax liability to the state of occupation and/or residence, since e.g. researchers may carry out research activities of various duration in several states. According to the Act on Income tax a taxpayer – a physical entity can be either of an unrestricted tax liability or a restricted tax liability in the SR:

 

Taxpayer with an unrestricted tax liability:

This is a physical entity (natural person) with permanent residence in the Slovak Republic or who often stays in the Slovak Republic (although without permanent residence but he or she stays on the territory of the Slovak Republic at least 183 days in a respective calendar year; the first day of each period of residence is counted towards this period). Such a taxpayer pays tax from the income received in the Slovak Republic as well as from his or her income from abroad.

 

Taxpayer with a restricted tax liability:

This is a physical entity (natural person) who is not a taxpayer with an unrestricted tax liability. Such a taxpayer pays only tax from income received in the Slovak Republic for his/her period of employment in Slovakia.

 

Tax residence may be further specified in intergovernmental Double-taxation treaties (where such a treaty exists). (According to the Act on Income tax such treaties have primacy over the Act itself) The aim of these treaties is to avoid double-taxation of the same taxpayer of the same income, not only in the country of his or her income source but also in the country of his or her tax residence. The decisive point for determining tax residence are: residence, personal home, centre of vital interest - closer personal or economic relations, habitual abode, being a national of one of the states (usually Article 4).

 

Provisions in Double-taxation treaties

The Slovak Republic has concluded agreements on double-taxation prevention with the following countries:

 

Australia – Austria – Belarus - Belgium – Bosnia and Herzegovina – Brazil – Bulgaria – Canada  - Croatia  - Cyprus – the Czech Republic – China - Denmark – Egypt* – Estonia – Finland – France – Germany - Greece – Holland – Hungary – India – Indonesia – Ireland – Island – Israel – Italy - Japan – Korea – Latvia -  Lithuania – Luxembourg – Macedonia – Malta – Moldavia – Mongolia – Montenegro - Nigeria – Norway – Poland – Portugal - Republic of South Africa - Romania – Russian Federation - Serbia – Singapore - Slovenia – Spain - Sri Lanka – Sweden – Switzerland - Tunis – Turkey – Turkmenistan – Ukraine – USA – Uzbekistan – UK

 

* The treaties have been signed but have not yet come into force.

 

Double-taxation treaties set, which the contracting states are and to what extent a particular type of income is liable to tax. After determining the country of tax duty by setting down the tax residence, the other contractual state must carry out provisions in order to avoid double-taxation.

Treaties might contain special provisions for students (including PhD. students), teachers, researchers (usually Articles 20 and 21). As an example:

“A professor, teacher or researcher who temporarily resides in one contracting state for the period not exceeding two years for the purpose of teaching or engaging in research at a university, college, school, or other establishment of teaching (or research), not aiming at personal profit and who is or instantly before this stay was a resident of the second contracting state shall be exempt from paying taxes from remunerations for such teaching or research in the former state, (on condition these financial sources do not come from the former state)”.

“Allowances/remittances of a student or a trainee, who is or instantly before his/her arrival at the first contracting state was a resident of the second contracting state and who is present in the former state solely for the purpose of further education or training, that he/she receives to cover maintenance, study or training shall be exempt from taxation in this state on condition that these financial sources do not come from this state.”

 

Double-taxation treaties also state the method of elimination of double-taxation (usually article 23).

 

In case of states, where no double-taxation treaty exists, income from abroad, that have been taxed in the country of occupation other than SR are exempted from taxation in the SR. (An authentic certificate of taxation of income must be submitted.)

 

The list of double-taxation prevention treaties as well as specifically methods for elimination of double taxation for particular states can be found on the website of the Ministry of Finance of the SR: www.finance.gov.sk/en/ >> Taxes, Customs and Accounting >> Direct taxes >> Income tax.

 

Tax return (declaration of taxes)

In the SR tax return shall be filed on the appropriate form each year by March 31st for the previous calendar year (taxation period) to the Tax office respective to the place of stay. If a taxpayer has had income liable to tax from abroad, the period for submitting the declaration of taxes may be prolonged by maximum of 6 months, upon written request addressed to the Tax office and its approval.

However, it is always recommended to consult the tax issues also with the appropriate tax authority of researcher’s state of permanent residence prior to commencing work in the SR.