Global expatriate tax guide

Expatriate tax - Slovakia

This page provides an overview of the Slovak tax system and possible tax planning opportunities. Expatriates taking up employment in Slovakia will be subject to comprehensive rules and in some cases employment visa requirements. Grant Thornton’s expatriate tax team can help expatriates and their employers to navigate the Slovak tax and employment visa requirements.

In particular, Grant Thornton can assist expatriates and their employers by identifying Slovak tax planning opportunities, reviewing tax equalisation policies, and providing compliance services regarding the Slovak tax filing requirements.

Click on each of the areas below to expand for more information:

Facts and figures
Pre arrival procedures

The employees of non-EU nationals are usually required to apply for a Work Permit (WP) prior to taking up employment in Slovakia. Therefore, it is important that the expatriate’s employment contract and benefits package are structured in a tax-efficient manner before the contract is submitted to the Department of Work, Social Affairs, and Family in Slovakia.

A residence permit is also required in some cases for non-EU nationals. The application for a residence permit is a complex procedure that is performed through the Slovak Embassy in the home country of the expatriate.

Employment visas

Foreigners coming from EU and non-EU jurisdictions must comply with the applicable immigration requirements.

Citizens of the EU/EEA and Switzerland are only required to notify the Foreign Police about their stay in Slovakia within 10 workdays after their entry in Slovakia. For a stay exceeding 90 days, EU/EEA and Swiss citizens must register with the Foreigner Police within 30 days after the end of the 90 day period, which begins on the date of entry into the Slovak Republic. No visa or work permits are required for citizens of EU/EEA or Switzerland.

Foreign nationals residing in jurisdictions for which a visa is not required may enter the Slovak Republic without a visa and stay in Slovakia for up to 90 days during a 180-day period.

Tax year

The Slovak tax year runs from 1 January to 31 December.

Tax returns and compliance

Expatriates who are assigned to work in Slovakia are required to register with the relevant tax authority (Daňový úrad Bratislava) for income tax purposes within 30 days. However, if the employer in Slovakia has registered for tax on dependent activity, then expatriates are not obliged to register individually.

Expatriates are obliged to calculate their tax advances monthly, based on the income they have received (gross salary including benefits in kind) and to pay these tax advances each month to the relevant tax authority (Daňový úrad Bratislava).

After a tax period has ended, expatriates must declare their taxable income via a Personal Income Tax Return (PIT) or via Annual Tax Reconciliation (ATR). The PIT and ATR should be filed by 31 March following the end of the tax period and the tax is due within the same time period. It is possible to obtain a three-month extension on the submission of the PIT by submitting written notification to the tax authority (Daňový úrad Bratislava). This can be further extended by another three months if expatriates receive income sourced abroad and they notify the tax authority about the extension.

Expatriates may be able to reduce their tax base by deducting the contributions they made for mandatory insurance to the ‘Social and Health Insurance Institutions’ and any tax allowances stated in Slovak tax laws.

In general, expatriates can apply for the following tax allowances (amounts are valid for the tax period 2019):

Personal allowance: For an annual tax base under €20,507.00 a taxpayer can claim a €3,937.35 per year allowance. For a tax base of over €20,507.00 to €36,256.38 a taxpayer can claim the progressive personal allowance. For a tax base that exceeds €36,256.38 a taxpayer cannot claim a personal allowance.

Tax allowance for a spouse: a taxpayer can also claim a spouse allowance up to €3,937.35, provided that the spouse does not have income in excess of the tax allowance amount (ie €3,937.35 in 2019).

The annual amount of tax allowances depends on the level of the individual´s and spouse´s income. he tax allowances can be claimed by expatriates only in situations where they receive at least 90% of their worldwide income from Slovak sources.

Tax credit for interest paid on mortgage loans: As of 2018, a taxpayer may claim a tax credit in the amount of 50% of paid interest in a given tax period, up to €400.00 per year, if specific conditions are met.

Tax bonus for dependent children: This tax bonus is approximately €22.17 a month (the high of the tax bonus is changed as 1 July of each calendar year). Special criteria that must be met are a minimum taxable income = €3,120, children must live in the household of the expatriate and the worldwide income of expatriate must be sourced at least 90% from Slovakia.

Employment Bonuses: Effective from 1 May 2018, Slovak employers can provide bonus 13th and 14th (monthly) salaries for the summer and Christmas holidays (that is, in June and December of a respective calendar year). Under certain circumstances, the bonus salaries are subject to beneficial tax and social security treatment.

The 13th salary paid in the current year:

  • Tax and health insurance contributions exemption up to the amount of €500
  • No exemption from payment of social insurance contributions (this will be applied in the next year).

Conditions for applying the above exemption are as follows:

  • the 13th salary must be included in salary for May and paid out during June at the latest,
  • the 13the salary must be paid out at least in the amount of €500 and at the same time, the employment of the employee must last at least 48 months in a row as of April 30.

The 14th salary paid in the current year:

  • Tax, health, and as well as social insurance contributions exemption up to the amount of €500.

Conditions for applying the above exemption are as follows:

  • the 14th salary must be included in salary for November and paid out during December at the latest
  • the 14the salary must be paid out at least in the amount of the average monthly earnings of the employee and at the same time the employment of the employee must last at least 48 months in a row as of October 31
  • and at the same time, the 13th salary had to be paid out to the employee in June in the amount of at least €500.
Income tax rates

There are two tax rates for individuals (progressive taxation) in Slovakia. Slovak individuals including expatriates with gross income up to €36,256.38 are taxed at a rate of 19% The exceeding part of the tax base is taxed at a rate of 25%.

Sample income tax calculation

Sample income tax calculation for the year 2019

  Eur
Annual gross income after social insurance contribution: 60,000
Plus: benefits in-kind:  
– housing 12,000
– company car for private use*: 3,700
– private pension insurance  
paid by employer 6,000
Less:  
– mandatory social and health insurance 10,801
Tax base: 70,899
Personal allowance 0
Tax liability @19% (from the amount of €36,256.38) 6,889
Tax liability @25% (from the amount of €36,256.38) 8,661
Total tax liability 15,549

*Calculated as 1% of the purchase price of the car (including value-added tax) for each month of private use in the first year of usage; in next years 1% is calculated from a reduced purchase price incl. VAT by 12.5% per year.

Basis of taxation
Charge to tax

Slovak residents are subject to tax on their worldwide income. Non-residents are subject to tax on their Slovak-source income only.

Residence and domicile

Tax residence

Tax residence in Slovakia is determined by an individual’s actual presence in Slovakia during a tax year. The individual will be treated as a Slovak tax resident if any of the following conditions are met:

  • the individual has a permanent residency in the territory of Slovakia
  • the individual has accommodations available in the Slovakia that are not just for occasional use based on all the relevant facts and circumstances, including any personal and economic ties the individual may have to Slovakia
  • the individual is physically present in Slovakia for at least 183 days in a calendar year, either continuously or periodically (each day or part of a day shall count towards the total duration).

The 183-day test does not apply to the following individuals:

  • individuals staying in the country to study
  • individuals present in the country for medical treatment
  • individuals who earn Slovak-source income for dependent activities and enter the Slovak republic daily or at agreed-upon time periods for the sole purpose of performing such activities

Individuals assigned by a foreign employer to the Slovak republic who continue to be employed and paid by the foreign employer but who perform work under the instruction of a Slovak resident individual or legal entity are deemed to be employed by the Slovak resident individual or legal entity and are subject to monthly withholding of personal income tax from their employment income.

Domicile

The concept of tax residence is considered in conjunction with the concept of domicile under the relevant double tax treaty. The test for domicile is rather complex as it is based on Slovak national tax law and the applicable tax treaty. Slovakia has signed more than 60 double tax treaties based on the OECD Model Tax Convention.

Income from employment

A Slovak tax charge arises on employment income derived from duties performed in Slovakia.

Assessable employment income includes all wages, salaries, overtime pay, bonuses, gratuities, perquisites, benefits, employees` stock options, etc.

Source of employment

Where duties are performed in Slovakia, any remuneration received as compensation for carrying-out these duties is treated as Slovak-sourced income and subject to Slovak income tax regardless of the expatriate’s tax residence status (subject to the relevant double tax treaty).

Benefits (in kind)

In general, where the benefit is enjoyed in Slovakia, a Slovak income tax charge will arise. Therefore, housing, provision for a car, and relocation allowances will be subject to Slovak income tax in addition to the individual’s salary.

Expatriate concessions

There are no specific concessions available to expatriates in Slovakia.

Relief for foreign taxes

Where income has been subject to double taxation (in Slovakia and a foreign jurisdiction) relief can be granted by the Slovak tax authority when relief is provided in a relevant double tax treaty.

Deductions from taxable income

Certain expenses can be provided by an employer free of income tax when they qualify as expenses that are wholly, exclusively, and necessarily incurred duing the course of performance of the employment duties.

A Personal tax allowance is available only to certain employees achieving a certain determined tax base (ie €36,256.38 per year in 2019).

Obligatory payments to social and health insurance schemes (either in Slovakia or abroad) are deductible from the expatriate’s income.

Other taxes
Capital gains tax

An expatriate’s exposure to capital gains tax will be determined by their Slovak tax residence and domicile status. In general, tax will be assessed on net gains realised in Slovakia (e.g. from disposal of real property or a car), after deducting the cost of acquisition of the asset from the sale proceeds.

Dividend income

Dividends distributed from profits for accounting periods starting 1 January 2017 or later are taxed at a 7% rate. Dividends distributed to Slovak residents by a company with its registered seat in a non-treaty state are subject to a 35% tax rate.

Inheritance, estate and gift taxes

There are no inheritance, gift, or real estate transfer taxes in Slovakia.

Investment income

An expatriate’s Slovak tax residency and domicile status will determine whether investment income such as interest will subject to Slovak tax. Dividends (paid or received) are not subject to tax in Slovakia.

Local taxes

There are no other local taxes on income or property with the exception of real estate tax (see below).

Real estate tax

There are local taxes charged to individuals who own real estate located in Slovakia. The tax is assessed on the area of real estate and the rates differ significantly depending on the type of real estate and its physical location within municipalities.

Social security taxes

Expatriates of EU member states should apply for the A1 form to ensure they continue to pay social security contributions in their home countries. In some cases, expatriates of non-EU states who are treated as employees of the Slovak employer must register with the Slovak social insurance system and health insurance system. An expatriate that is treated as an employee must contribute 9.4% of gross salary to the social insurance system and 4% to the health insurance system.

The employer will also be required to contribute 35.2% of the employee’s gross salary to the social and health insurance system.

However, there is a cap on the calculation of monthly contributions to the social security systems, which is updated semi-annually. For 2019, the cap has been increased to €6,678 per month and for 2020 the cap will be €7,091 per month. Nevertheless, one type of employer contribution (injury insurance at 0.8 %) is uncapped. Since 2017, there is no cap for the healthcare contribution that must be made by the employee and the employer.

Stock options

A grant of stock options (the benefit is the difference between the market value of the stock and the exercise price of the option) is taxable at the moment of realisation of the option.

Wealth tax

There is no wealth tax in Slovakia.

Other specific taxes

No other specific taxes would apply to expatriates in addition to those described above.

Tax planning opportunities

There are many tax planning opportunities that the Grant Thornton Slovakia team can help employees and employers explore. One example of how effective structuring of employee contracts can have significant tax advantages is that the contract can be written to ensure that an expatriate working abroad in Slovakia who also performs employment duties outside of Slovakia is not taxed in Slovakia on any employment income received in respect of the foreign duties (provided the income is not remitted to Slovakia).


Additionally, travel expenses according to the Slovak law can be paid tax free.

 

For further information on expatriate tax services in Slovakia please contact:

Jana Kyselova
E jana.kyselova@sk.gt.com