A governmental package of proposed amendments on tax law has been submitted to the parliament and the changes are suggested to become effective from 1st January 2017. These changes needs to be approved by the parliament and signed by the President for becoming law. The main amendments are given below:
Corporate Income Tax
- Dividends paid to companies based in jurisdictions, which do not have a tax treaty in force with the Slovak Republic will be subject to 35% withholding tax.
- Dividends paid to domestic companies from foreign sources will have to pay 35% conditioning that the distributing entity is based in a jurisdiction that does not have a tax treaty in force with the Slovak Republic.
- The main corporate income tax rate will be reduced to 21% from 22%.
- Regulations regarding tax payment or the minimum amount of tax will be cancelled from 2018.
Individual Income Tax
- Dividend paid to resident or non-resident individuals will be subject to 7% withholding tax unless a more favorable treatment for under an applicable tax treaty is provided. Dividends paid to employees who do not own shares in the company will be subject to the tax treatment applicable to wages and salaries.
- Tax deductible expenses (lump-sum expenses which can be claimed by a sole entrepreneur) will be increased from 40% to 60% of the income and its maximum amount may not over EUR 20,000.
Transfer pricing
- Fees paid in relation with APA applications will be changed. For applying a unilateral APA, EUR 10,000 is to be set and for applying bilateral and multilateral APAs, the fees will be EUR 30,000.
- Penalties for increasing the tax because of the gap of an arm’s length principle between associated entities will be stricter.
VAT
The introduction of an interest payment in favour of a taxable person in the case a VAT refund is postponed for more than 6 months. The taxable person should collect the interest payment for each day of delay after the end of the 6-month period. Note that, the interest rate must be twice that of the basic interest rate of the European Central Bank and not lower than 1.5%.
Excise duties
Rates for the excise duty regarding tobacco and tobacco products will progressively increase. It will be initiated from 1st February 2017 and later from 1st February 2019.
Special levy on selected financial institutions (Bank levy)
The bank levy (0.2%) will not change during the period from 2017 to 2020. But starting from 2021, the rate will be 0%.
Special duty on business activities in regulated sector
- The definition of the taxable base in respect of special duty will be amended. In this way, duty applies only on income from regulated activities and it must be paid, even after 2016.
- The monthly rate will temporarily increase to 0.726% from 0.363% during 2017 to 2018. Then the rate will gradually decrease so that in the period from 2019 to 2020, the monthly rate will be 0.545% and from 2021, the rate will be again 0.363%.