Amendment to Slovak Income Tax Act proposed by the Government

Slovakia
UniCredit Bank Czech Republic and Slovakia, a.s., pobočka zahraničnej banky
Summary: 
Amendment to Slovak Income Tax Act proposed by the Government
Fri, 14/10/2016

The Government of Slovak Republic proposed an approval to the Parliament for an amendment to the Income Tax Act. Please find below an overview of the main changes in the area of Dividend Taxation:

  • Dividends (including payments such as liquidation proceeds, settlement shares or shares in profit payable to a silent partner) received from or paid to taxpayers who are residents in non-treaty countries, will be subject to a tax rate of 35% (applicable to both individuals and legal entities).
  • Dividends paid to individuals who do not reside in a non-treaty country(1)  will be taxable at a rate of 7%, contrary to a 15% rate suggested by the Ministry of Finance
  • Dividends paid to legal entities that do not reside in a non-treaty country(1) are not subject to tax
  • The tax from dividends will be withheld when the source is in Slovakia or taxed through a tax return when paid to Slovak tax residents from abroad.
  • Dividends received by individuals who participate in Health Care Insurance System in Slovakia will no longer be subject to contributions for that System.

(1)Treaty countries are all countries with whom Slovakia has concluded a Double Tax Avoidance Treaty or a Treaty on Exchange of Information for Tax Purposes (including similar multilateral instruments). In principle, this includes all EU/EEA and OECD countries and a wide range of other countries.

These changes should be applicable to dividends distributed out of profits generated in a taxable period beginning on or after 1 January 2017.

Impact on investors: Amended legislation will reintroduce dividend taxation on profits generated in a taxable period beginning on or after 1 January 2017.