Corporate income taxes

Last reviewed 09 Mar 2023

Object of taxation

Income

Tax rate

15%

Corporate income tax rate for corporations with unlimited or limited liability to tax with taxable income (revenues) not exceeding the amount of EUR 49,790

21 %

Corporate income tax rate for corporations with unlimited or limited liability to tax with taxable income (revenues) exceeding the amount of EUR 49,790

Tax liability

Unlimited

Legal persons (a.s., j.s.a., s.r.o., v.o.s., k.s., cooperatives), branches and public sector institutions with their residence or management in Slovakia, on their world income

Limited

Foreign legal persons neither resident nor managed in Slovakia, on their Slovak income

Financial year

Calendar year; different financial year possible, but must be reported to the tax office in writing in advance

Accounting

Double-entry bookkeeping

Loss carryback

No loss carryback

Loss carryforwards

Losses incurred from 2014 to 2019 - equally over the consecutive 4 years

Losses incurred from 2020 - in general: during consecutive 5 years and up to 50% of the tax base amount; in case of micro-taxpayers: during subsequent 5 years and up to the tax base amount

Shell company purchase

N/A

Operating expenses

Expenses incurred to procure, secure or maintain business taxable income, and recorded in the tax- payer’s books and records; expenses with character of personal consumption spent also for private purposes are tax-deductible to a limited level, either in form of fixed expenses of 80 % or at documented level.

Transfer prices

Arm’s length basis

In general, the following methods are employed:

Traditional transactional methods

• comparable uncontrolled price (CUP) method
• resale method
• cost plus method

Transactional profit methods

• profit split method
• transactional net margin method

obligation to keep records of the method used

Interest on financing of acquisition of investment

Interest on financing of acquisition of investment are treated as tax deductible at the time of further sale of shares under the condition the sale of shares will not be exempted from tax; exception for brokers

Debt / equity

Interest from loans from related parties recognized as tax deductible only up to a limited amount of a maximum of 25 % of earnings before interest expenses, tax, depreciation and amortisation (adjusted EBITDA); exception for leasing companies ("thin capitalisation restrictions"). New rules limiting the amount of tax deductible interest expense will apply in Slovakia in case of loan contracts concluded as of 2024 (for more information, please see section "EU interest barrier" below).

Tax depreciation

Seven depreciation categories

Tax depreciation may and in some cases has to be suspended;
component depreciation is possible

Advantageous depreciation of assets in Group 0-4 for micro-taxpayers

Group 0 - 2 years, green cars (electric and plug-in hybrid vehicles);
Group 1 - 4 years, e.g. office equipment, cars, trucks, buses, telecom equipment;
Group 2 - 6 years, e.g. machines, furniture, special-purpose trucks, cranes;
Group 3 - 8 years, e.g. assets of technological nature (generators or transformers);
Group 4 - 12 years, e.g. small constructions, industrial machinery and – equipment, ventilation equipment, television and cable networks;
Group 5 - 20 years, production types of buildings – e.g. civil engineering, trade and services, industrial buildings;
Group 6 - 40 years, non- production types of buildings and constructions including hotels and administration buildings.

Provisions

Provisions for untaken vacation including employer’s share of social insurance contributions, and for emissions are tax-deductible

Motor vehicle expenses

Depreciation: 4 years

Acquisition cost as of: EUR 48,000 – restriction for tax depreciation

Non-deductible expenses

Income tax (including corporate income tax)

Distributions of profit

Expenses for personal use

Entertainment and promotional expenses including alcoholic drinks besides wine in certain cases (exception: promotional articles with an individual value of no more than EUR 17)

Expenses for unlawful activities

Donations except humanitary aid

Profit distributed to members of statutory bodies

Shortages and damages in excess of compensation received (theft, damage to the property: only those losses resulting from natural disasters and those caused by persons unknown and confirmed by a police report are recognized)

Interest barrier

New rules limiting the amount of tax deductible interest expense will apply in Slovakia in case of loan contracts concluded as of 2024 (for more information, please see section "EU interest barrier" below).

Interest and royalties to intra-group companies

For tax deductibility of inter-company interest and royalties expenses, general transfer pricing restrictions apply.

In case of inter-company interest expenses, also thin capitalisation restrictions apply (for more detail please see section "debt / equity" above).

Royalties are generally recognized as tax deductible only after payment.

Withholding tax

Generally 19 %; a DTA can provide for a lower rate of taxation. Relief is generally by reduction at source.

On payments to non-contracting states (e.g. off-shore countries) a withholding tax rate of 35 % applies.

Interest

At 19 %, or per applicable DTA; interest is are exempt from tax, if conditions of the EU Interest and Royalty Directive for group purposes are met (25 % minimum direct participation and 24 month minimum holding period, even if conditions are met additionally, after the day of income payment). This also applies where the interest is paid or finally received by a permanent establishment.

Royalties

At 19 %, or per applicable DTA; royalties are exempt from tax, if the conditions of the EU Interest and Royalty Directive for group purposes are met (25 % minimum direct participation and 24 month minimum holding period, even if conditions are met additionally, after the day of income payment). This also applies where the royalty is paid or finally received by a permanent establishment.

This also applies where the royalty is paid or finally received by a permanent establishment.

Dividends

Nil for distribution of profits generated for the years 2004 – 2016;

19 % on distributions of profits generated before 2004, unless per applicable DTA and or the EU Parent-Subsidiary Directive for group purposes (25 % minimum participation, no minimum holding period) apply;

35 % on distributions of profits generated for the year 2017 and later if paid-out to non-contracting states or when beneficial owner of the dividend income cannot be proved.

Rules for controlled foreign companies (CFC)

Rules to prevent the erosion of tax bases and profit shifting by reattributing the income of a low-taxed controlled subsidiary or permanent establishments to its parent company are applicable.

Hybrid mismatch rules

Legislation include actions for prevention of:

1. deduction of expenses without including them into taxable income
2. multiple deduction of expenses by more associated parties without multiple taxation of relating income

National parent-subsidiary exemption

N/A as distribution of profits generated for the year 2004 and later between Slovak companies is not subject to corporate income tax.

International investments

N/A

International parent- subsidiary exemption and portfolio investments

Please see section on "Withholding taxes - Dividends" above.

Goodwill amortization

Goodwill can be amortized in statutory financial statements.

For tax purposes, goodwill can be amortized and considered in the taxation base over 7 consecutive years.

Group taxation / pooling

Not possible

Tax group

N/A

Pooling

N/A