Income tax is payable by both natural and legal persons.
Natural persons with permanent residence in the Slovak Republic or staying in the Slovak Republic for more than 183 days per year are subject to unlimited tax liability. Unlimited tax liability means that all of the income and profits of a person are taxable. Natural persons without permanent or usual residence in the Slovak Republic must pay taxes from their determined income earned in the Slovak Republic.
Legal persons with a registered office or permanent establishment in the Slovak Republic are subject to unlimited tax liability.
Existing double taxation treaties avoid double taxation and regulate the distribution of tax income among the Member States depending on the source of income. A resident of a state which has concluded a double taxation treaty with the Slovak Republic may use his/her tax rights in accordance with his/her national law. To date, the Slovak Republic has concluded double taxation treaties with more than 60 countries (currently, there are 64 valid treaties). Most double taxation treaties determine taxable rights in the country of permanent residence of a self-employed person (samostatne zárobkovo činná osoba (SZČO)), unless such self-employed person leaves his/her permanent establishment. A permanent establishment is defined as a specific and permanent workplace. In such cases, only the income from the activities of a permanent establishment is subject to tax.
Artistic activity income tax (income of authors and performing artists) is defined separately in many double taxation treaties, even where a permanent establishment exists; under certain circumstances, the right of taxation of such income is in the Slovak Republic.
Dependent activity income (employment subject to a labour contract or agreement) earned in the Slovak Republic is subject to tax in the Slovak Republic.
In general, the tax rate for the taxable income of persons with limited tax liability in the Slovak Republic is the same as for persons with unlimited tax liability. Depending on the manner of double taxation avoidance, as specified in the applicable double taxation treaty, the income taxed in the Slovak Republic is exempt from tax in the country of tax domicile (method of tax exclusion), or the tax paid in the Slovak Republic is set-off against the tax liability of the country of tax domicile which taxes the global income and deducts the taxes paid in the Slovak Republic from the total tax liability.
Under double taxation treaties in force, income tax and the income of authors (such as, directors, screen play authors, dialogue authors, composers, art directors, choreographers, etc.) and performing artists (such as, actors, musicians, dancers, stuntmen, performers, etc.) is divided into active and passive income. Active income is the income from performing a work of art, and passive income is the income from surrendering a licence to distribute a work of art. Double taxation treaties usually stipulate the duty to deduct tax from passive income only (licence).
The tax rate for natural persons is 19 % of the tax base up to a specified limit; for a tax base above the specified limit, the tax rate is 25 %.
The non-resident tax rate is:
For income that is subject to the provisions of the Copyright Act (authors, performing artists), an author/artist may contractually agree to not have his/her tax deducted, which means that he/she will file a tax return in which such income will be included. This regulation applies to income earned in the Slovak Republic by taxpayers with unlimited tax liability, as well as taxpayers with limited tax liability.
The tax rate for legal persons is 21 % of the tax base.
In general, the supply of goods and provision of services is subject to VAT in the Slovak Republic (with only a few exceptions). The standard value added tax rate is 20 %, and the reduced rate, which applies to food, antibiotics, pharmaceuticals, books, brochures, leaflets, musical instruments, medical devices for physically handicapped, etc., is 10 %.
After meeting certain criteria, a foreign person from another Member State may request a refund of the Slovak tax paid on the purchase of goods and services in, or import of goods to the Slovak Republic.
The tax refund request is filed by a foreign person from another Member State electronically via the electronic portal of his/her Member State (i.e., the Member State in which the foreign person has his/her registered office, place of business, establishment, residence or habitual residence). Subsequently, the relevant body of the Member State of the foreign person sends his/her request electronically to the Bratislava Tax Authority (Daňový úrad Bratislava) which will then decide on such tax refund request.
The tax refund request may be filed for a period of no more than one calendar year, and the requested tax amount may not be less than €50. The tax refund request may also be filed for a period shorter than one calendar year, but not shorter than three calendar months, and the requested tax amount may not be less than €400. The tax refund may relate to a period shorter than three calendar months if such period represents the remainder of the relevant calendar year, but the requested amount may not be less than €50. An applicant may only file one tax refund request for one and the same tax refund period. The tax refund request must be filed by September 30 of the calendar year following the period for which the tax refund claim is related.
The tax refund request must include:
(a) the first and last name, or business name of the applicant (foreign person), and the address of his/her registered office, place of business, establishment, residence or habitual residence;
(b) the applicant’s electronic address;
(c) a description of the applicant’s business activities for which he/she acquired the goods and services, by specifying the corresponding numerical code according to a special regulation, in this case Council Regulation (EEC) No 3037/90 of 9 October 1990 on the statistical classification of economic activities in the European Community (OJ special edition: Chapter 2 Volume 4) as amended;
(d) the period to which the request applies;
(e) the applicant’s declaration on meeting the criteria;
(f) the applicant’s tax identification number or tax registration number assigned in another Member State;
(g) the applicant’s bank account details, including the International Bank Account Number (IBAN) and Bank Identifier Code (BIC).
In addition, the VAT refund request must also include details of each and every invoice for the provided goods or services, and each and every import document from which the applicant requests a tax refund; if the tax base in an invoice or import document amounts to €1,000 or more, or €250 or more for a fuel purchase invoice, the applicant is obliged to also submit a copy of such invoice or import document by electronic means along with the tax refund request.
Pursuant to the currently valid legislation, an employer is obliged to pay public health insurance and social security contributions for its employees. The employer deducts the percentage for the insurance and security for its employee, as stipulated by law, from the employee’s gross salary, and pays the contributions from such employee’s gross salary to the relevant health insurer and the Social Insurance Agency (Sociálna poisťovňa) itself as the employer.
|Insurance||Contribution rate Employer||Contribution rate Employee|
|Solidarity reserve fund||4.75%||-|
|Total social security||25.20%||9.40%|
Student Temporary Work Agreements (Dohody o brigádnickej práci študentov), where from a gross monthly income of €200 the employer only pays the guarantee and accident insurance, are exempt from the payment of contributions.
If the employer has a registered office in the Slovak Republic, it is obliged to register its employees with a health insurer and the Social Insurance Agency within 8 days following the commencement of their employment. After the end of a calendar month, the employer is obliged to pay the compulsory health insurance and social security contributions from the employee’s salary. If the employer does not have a registered office in the Slovak Republic, but in another EEA (European Economic Area) country, it may enter into an agreement with the employee to transfer the obligation to pay contributions to the employee.
Unlike employees, self-employed persons (including trade license holders, authors and performing artists) are obliged to pay health insurance and social security contributions by themselves. The contributions depend on the amount of their annual active income, but the law also stipulates a minimum amount. The percentage is 35.2% and 14% of the monthly basis of the assessment for the health insurance and social security, respectively. If the insurance is subject to a formal requirement (e.g., a trade licence (živnostenské oprávnenie)), the health insurance commences on the date of acquiring such trade licence, while social security commences after the first year of business, and ends on the last day of the month in which the trade licence was terminated.
The social security of natural persons working in 2 or more countries simultaneously is regulated by Regulation (EC) No 883/2004 on the coordination of social security systems which harmonises the payment of social security within the European Union.
Social security and health insurance contributions for work in EU countries must only be paid in one country, (the above-mentioned regulation determines the country in which the contributions are paid). Contributions paid abroad may be deducted from the Slovak income from the dependent activity to which they relate.
Pursuant to the regulation, the following fundamental principles apply when determining the jurisdiction:
(a) If the dependent activity is performed
– the contributions are paid in the country of residence if at least 25% of the work is performed in the country of residence;
– the contributions are paid in the country of the employer if less than 25% of the work is performed in the country of residence;
(b) If the dependent activity is performed within the framework of a secondment abroad which does not exceed 24 months, the social security must be paid in the seconding country.
The determination of the jurisdiction is confirmed by the A1 (former E101) form issued by the Social Insurance Agency.
A trade licence must be obtained in order to do business or perform a commercial trade (živnosť) in the Slovak Republic. The licence may be obtained in person or electronically.
The announcement of a trade in person is performed at the commercial trade section (odbor živnostenského podnikania) of the relevant District Authority (okresný úrad) (its duties are performed by a point of single contact (jednotné kontaktné miesto). In relation to obtaining a trade licence for a natural or legal person, the District Authority has jurisdiction over the future registered office of the trade or company. If a natural person is obtaining a trade licence, he/she needs to appear in person; if a company is applying for a trade licence, its statutory body announces it on its behalf. In addition, a power of attorney may be granted to an attorney, notary public, or companies who provide such service to establish a commercial trade
When announcing a trade in person, the relevant form must be filled out: the Natural Person’s Trade Announcement Form (Formulár ohlásenia živnosti pre fyzickú osobu) for a natural person and the Legal Person’s Trade Announcement Form (Formulár ohlásenia živnosti pre právnickú osobu) for a legal person. The completed form must be handed over at the single point of contact and the relevant fee must be paid. The fee is €5 for each free trade (voľná živnosť) licence and €15 for each contingent trade (viazaná živnosť) licence.
After the application is processed, the authority will send the Trade Licence Certificate (osvedčenie o živnostenskom oprávnení) by mail.
In the Natural Person’s Trade Announcement Form, a natural person must provide his/her identification data, health insurer, business activities with the option to specify the date of commencement and termination of trading if he/she does not intend to conduct the business on a permanent basis. If the person is applying for craft or contingent trade licences, the name of the responsible representative must also be provided in the Trade Announcement Form; information for the purpose of proving the applicant’s clean criminal record must also be provided (the single point of contact will request an extract from the Criminal Register on that basis). A natural person may also apply for registration for income tax in the Trade Announcement Form.
In the Legal Person’s Trade Announcement Form, the legal person must provide its identification data, information about its statutory body and its members, and all of its business activities with the option to specify the date of commencement and termination of trading. If a legal person also intends to perform a craft or contingent trade, it must appoint a responsible representative, provide his/her information, and ensure that such responsible representative provides his/her consent to such appointment. In the special part of the Trade Announcement Form, information about the members of the statutory body and the responsible representative which is necessary for the request for an extract from the Criminal Register to prove the legal person’s clean criminal record must also be provided. You may also apply for registration for income tax in the last section of the Trade Announcement Form. The statutory body (e.g., the Executive Officer of a limited liability company) must sign the form where applicable.
To date, the electronic filing of a trade licence application may only be performed by a Slovak citizen with his/her electronic identity card with a chip (the eID card), fitted with a security personal code and certificates for a qualified electronic signature.
A Natural Person’s Trade Announcement Form must be accompanied by the following attachments:
A Legal Person’s Trade Announcement Form must be accompanied by the following attachments:
Natural persons may start doing business immediately after filing their petition; legal persons may not start doing business until the date of their entry in the Commercial Register (obchodný register). The document entitling a person to perform a trade is the Trade Licence Certificate, which is issued by the District Authority within three business days.
Establishing a Limited Liability Company (LLC)
Foundation documents: An LLC is established by its founders who draft the foundation documents. Depending on the number of founders of the new LLC, either a Deed of Foundation or a Memorandum of Association is drafted. The Deed of Foundation for an LLC is used where only one founder exists. If an LLC is established by at least two founders, they must draft and sign a Memorandum of Association. The authenticity of the signatures of all LLC founders must be officially certified.
Proof of the absence of debts towards the Tax Authority and the Social Insurance Agency: As of September 1, 2018, the proof of absence of debts towards the Tax Authority and the Social Insurance Agency is established by the court of registration (the Regional Court (Krajský súd) in the LLC’s future place of business).
Payment of the registered capital: The minimum amount of registered capital is €5,000 and the minimum contribution of each member is €750. If only one member is founding an LLC, the registered capital must be fully paid before the petition for the registration of the LLC in the Commercial Register is filed. If a company is established by several persons, at least 30% of each monetary contribution must be paid and the total value of the paid monetary contributions and the value of the delivered non-monetary contributions must amount to at least €2,500. The value of the non-monetary contributions must be determined in an expert’s opinion which must be attached to the petition for the registration of the company in the Commercial Register. The administrator of the contributions, i.e. one of the LLC founders, manages the paid portions of the members’ contributions before the company is established. Prior to entering the LLC in the Commercial Register, the administrator is obliged to issue a declaration on the payment of the contribution or a portion thereof by the individual members, which must be attached to the petition for registration in the Commercial Register.
Registration of a company in the Commercial Register – the petition for the registration of a company in the Commercial Register must be filed within 90 days of the company’s establishment or the delivery of the document proving that the company has a trade or other business licence. The petition for registration in the Commercial Register is filed with the court of registration seated in the regional city with jurisdiction over the registered office of the newly established LLC. The petition for registration in the Commercial Register may already be filed when filing a petition for a trade licence at the single point of contact (commercial trade section of a District Authority) by filling out the Petition for Registration of a Limited Liability Company in the Commercial Register Form (Formulár návrhu na zápis spoločnosti s ručením obmedzeným do obchodného registra) in which information from the foundation documents must be specified (petitioners’ identification data, information about the newly established LLC, its business activities, information about its Executive Officers, about the members and their contributions, about the members of the Supervisory Board (if established), and about the registered capital, and a list of attachments to the petition). In 2018, the fee for submitting a petition for the registration of an LLC in the Commercial Register in person is €300.
Establishment of an LLC: if the petition and its attachments meet all of the criteria, the court of registration will enter the LLC in the Commercial Register within two business days of the delivery of the petition and payment of the fee. The petitioners (the Executive Officers of the LLC) will obtain a certificate confirming the registration and an extract from the Commercial Register by mail. An LLC is officially established on the date of its entry in the Commercial Register and may then start doing business.