Income Tax Act Amendments in force from 1 January 2014

Slovakia
UniCredit Bank Czech Republic and Slovakia, a.s., pobočka zahraničnej banky
Summary: 
Amendments to the Income Tax Act came into force as of 1 January 2014 after being approved by the Parliament of the Slovak Republic
Wed, 29/01/2014

An overview of the tax rates in Slovakia valid from 1 January 2014 is presented below.

 

I. Dividend Income (no change)

-          Exemption from taxation since 2004 for both residents and non-residents remains valid

-          Dividends reported for the tax periods until 31 December 2003 and paid out to local residents after 1 January 2013 are subject to 15% WHT

 

II. Interest Income

A. Non-residents

Treaty countries (no change) - the definition will now include also countries with which Slovakia does not have Double Taxation Treaty but which are signatories to other agreements covering the exchange of information to which Slovakia is also a party (e.g. treaties between EU and such countries)

-          Exemption from withholding tax on interest from government bonds and T-Bills since 1 January 2011 remains valid

-          Exemption from withholding tax on interest from non-government bonds since 1 July 2013 remains valid

-          19% withholding tax rate remains on interest from deposits and it may be reduced by applicable Double Tax Treaty

Non-Treaty countries - the definition of Non-Treaty Country Tax Payer for the purposes of application of the new withholding tax has been narrowed down, the list of Non-Treaty countries should be published by the Ministry of Finance in due course.

-          Exemption from withholding tax on interest from government bonds and T-Bills since 1 January 2011  remains valid

-          Exemption from withholding tax on interest from non-government bonds since 1 July 2013 remains valid

-          35% withholding tax rate has been introduced on taxable income in case the source of such income is determined to be in Slovakia (e.g. interest on deposits, royalties, payments for services), effective from 1 March 2014

B. Residents

Companies

-          No withholding tax rate applied to interest income from government bonds and T-Bills, such income needs to be included in the annual tax return of the local residents

-          Exemption from 19% withholding tax on interest income from non-government bonds, unless the income is paid to the National Property Fund, the National Bank of Slovakia and local non-profit organisations, in which case 19% WHT will be applied

Private individuals

-          Exemption from withholding tax on interest from government bonds and T-Bills, such income needs to be included in the annual tax return of the local residents 

-          19% withholding tax has been introduced  on interest income from non-government bonds as of 1 January 2014

 

III. Income Tax (Slovak residents only)

-          Two personal income tax rates, depending on the amount of the income of the tax payer - 19% for tax base up to 176.8 times of the subsistence minimum (approximately EUR 35,000) and 25% for the exceeding part

-          Corporate income tax rate decreased from 23% to 22%, applicable from the fiscal year 2014

 

IV. Capital Gain Tax

A. Non-residents

-          Capital gain by EU residents from the sale of shares issued by Slovak tax payers is not taxable - this change effectively affects only taxpayers from Germany as all other EU residents are exempt from such tax under existing DTTs

-          Non-EU residents are subject to capital gain tax - tax guarantee at the rate of 19% - from the sale of shares (issued by Slovak tax payers) to Slovak tax residents (buyers).  The tax guarantee at the rate of 19% is arranged by the Slovak tax residents (buyers) within the settlement of the sale price (reduction of 19%). In case of such a transaction, where the seller will be from a Non-Treaty country (as defined by the Ministry of Finance), the tax guarantee rate will be 35%. Exemption applies only in case of Slovak government bonds and T-Bills.

-          The treatment of capital gain tax is defined in the Income Tax Act (Article 16, section 1, subsection e5 and subsections g, h, i). Due to the complexity and vagueness of the above mentioned regulation, we strongly advise clients to contact their tax advisors for further details and clarifications.

B. Residents

Capital gain of local residents, both companies and individuals, is added to the regular income and is subject to standard income taxation

 

Impact on investors: Withholding tax of 35% on taxable income not exempt from withholding tax and paid to foreign investors from Non-Treaty countries has been introduced, effective from 1 March 2014. Dividends and interest income on debt securities paid to foreign residents remain exempt from taxation.