Inheritance tax and inheritance law in Slovak Republic

September 09, 2010

INHERITANCE TAX

Inheritance taxes were abolished as of 01 January 2004.

Transfer of real estate properties is also possible by means of donation. Donation taxes were also eliminated as of 01 January 2004. Because of this elimination, donations and gifts are no longer recognized as tax-deductible expenditures.

INHERITANCE LAW


Inheritance in Slovakia

The laws governing the ownership and inheritance of immovable property include bilateral and multilateral international treaties and agreements, constitutional laws, the Private International Code, the Civil Code, and the Civil Procedure Code.
Inheritance proceedings in Slovakia take on average six months, but the time-period depends on several factors, such as obtaining the information from Cadastre of Immovables (public register of immovables), the cooperation of heirs, domicile of heirs, and the need for experts' opinions, etc.
There is no inheritance tax.

The right to own and hold property in Slovakia belongs to any natural (or legal) person, regardless of his/her nationality, citizenship or religion. However, this general rule does not apply in cases when the laws of the country in question do not award the same rights to Slovak nationals.

The only exception to the ability of foreign natural persons to acquire and own immovable property in Slovakia is expressed in Foreign Exchange Act (Devízový zákon), according to which, land forming the agriculture land fund of Slovak Republic (outside urban areas), and land forming part of the forest land fund can be acquired only by a foreigner who either holds Slovak citizenship, or is a citizen of an EU member state who holds a residency permit, and has disposed of the land for at least three years.

Applicable law, and competency of courts

The inheritance of movable and immovable property after the death of a foreigner is governed by the material laws of the testator's domicile at the moment of his/her decease. However where the laws of deceased's country of citizenship appoint the Slovak law to be decisive, the inheritance proceedings are governed by the Slovak Civil Code (in its material part), and by the Civil Procedure Code (its procedural part).

The inheritance proceedings regarding property located in Slovakia are carried out by the Slovak courts, in cases when:
a) the testator had permanent or temporary residence in Slovakia, and his/her heirs require the inheritance proceedings to be held in front of the Slovak courts; or
b) when the subject of inheritance proceedings is immovable property in Slovakia.

There is an exclusive competence of the Slovak courts in cases sub b). The court will, however, apply the material inheritance laws of the country of the testator's citizenship, unless the laws of testator's country of domicile prescribe otherwise.

The inheritance proceedings of a testator not domiciled in Slovakia are governed by the rules of the Slovak International Private Code. In respect of immovable property, the inheritance proceedings would be carried out by the competent court in the district where the immovables are located, regardless the citizenship or nationality of the owner.

The same court would deal with movables or other assets located in such immovable property as well, even if the testator had died abroad. If the movable (as opposed to immovable) assets are located in another country, then the court in the district where the immovables are located would put the inheritance proceedings on hold, until the movable assets had been dealt with, by inheritance proceedings abroad. Afterwards the inheritance proceedings regarding the immovable property located in Slovak Republic would take place, and the court (or notary public) would usually acknowledge the decision of the foreign court and would not examine the matters and facts stated in such decision.

Intestacy

If a person dies intestate, his inheritance is dealt with accordingly to the law. If the inheritance proceedings are carried out under the Slovak law, the heirs are divided into four groups. Persons in each group are entitled to inherit only if there is no heir in the preceding group.

  • In the first group, all heirs inherit an equal portion of inheritance assets, such persons including the children of the deceased and his/her spouse. If there are no eligible children of the deceased, then their children (the deceased's grandchildren) become entitled to inherit, and if there are no grandchildren, then their children complete the first group of statutory heirs.
  • Where there are no heirs in the first group, except the spouse of the deceased, the spouse inherits in the second group of heirs. The second group includes the deceased's spouse, the deceased's parents, and those who lived together with the deceased for at least one year prior to his/her death and provided for him/her. All persons in the second group are entitled to an equal portion of inheritance; however the spouse is entitled to inherit at least half of the inheritance assets.
  • In the third group, the enumeration of entitled heirs includes the deceased's siblings (and if there are no siblings, then their children) and those who lived together with the deceased for at least one year prior to his/her death and provided for him/her. Each of the heirs in third group is entitled to an equal portion of the inheritance assets.
  • The fourth group includes the grandparents of the deceased, and if there is no such person, then their children (aunts or uncles of deceased).

The reserved portion

Under Slovak law, some heirs are always entitled to a part of the inheritance assets, unless the testator has disinherited them. A portion of inheritance assets (the reserved portion) is reserved to the testator's descendants (i.e., his/her children, grandchildren, grand grandchildren etc.):

  • Descendants who are minors must receive at least as much as their inheritance share by law.
  • Adult descendants must receive at least as much as one half of their inheritance share by law.

If the will stipulates a lesser ratio to persons entitled to a reserved portion, that part of the will shall be considered null and void, unless the aforementioned descendants have been disinherited.

Inheritance assets outside the reserved portion can be freely willed.

Procedural law

Under Slovak law, the competent court of first instance shall begin inheritance proceedings after it becomes known to the court that the person has died. No motion is needed to commence such proceedings.

Although the court has jurisdiction over inheritance proceedings, its competence in inheritance proceedings is delegated to the office of the notary public in the court district. The notary public then performs all the necessary steps in inheritance proceedings, and the final settlement of the inheritance is formally approved by the court.

A Slovak court is competent if the testator had his/her residence in the Slovak Republic, provided at least one of the heirs residing in the Slovak Republic requests the inheritance proceedings to be held in a Slovak court. A Slovak court also has competence in every instance where the inheritance assets include immovables located in the Slovak Republic. The competence of a particular court is therefore determined by: (i) the last residence of deceased; (ii) the last stay of the deceased; (iii) location of the property, in that order.

If no Slovak court is competent, the court will perform preliminary findings only, and an affirmation of such findings will be issued to the heirs, at their request.

A Slovak court is competent to deal with the inheritance of non-resident foreigner's property as well. No difference is made as to the citizenship, nationality or religion of the testator's heirs or surviving spouse.

Personal and proprietary relationships between the spouses are governed by the laws of the spouses' country of citizenship. If the spouses are citizens of different countries, Slovak law will then apply.

If Slovak law is applicable, any property acquired during the marriage, unless agreed otherwise between the spouses, falls into the common ownership of spouses. This issue needs to be settled before inheritance proceedings can be commenced.

The will

A will dealing with movable and/or immovable property in Slovakia is valid, according to Slovak Private International Law, if it conforms to the requirements of laws of the deceased person's domicile. However it will be admitted to probate if it conforms to the formal requirements of Slovak law, i.e. if it is handwritten and signed by the testator, or executed in other written form in front of witnesses and signed by them, or executed in the form of a notarial record.

The settlement of inheritance assets through a will is perceived rather negatively in Slovakia. Consequently, inheritance proceedings according to wills are not very common, and account for only 10 - 15 % of all cases, compared to inheritance proceedings by the law (Civil Code).

It is however advisable for a foreigner to settle his inheritance affairs, especially as regarding immovable property, by executing a will, regardless of whether the will is executed according to Slovak law, or according to laws of the testator's domicile. Executing a will is likely to speed up inheritance proceedings.

When executing a will according to Slovak law, the testator must take the statutory requirements for the reserved portion into account. The will, as the personal statement of the testator, must (according to Slovak law) be executed by the testator him/herself. No proxy can act on the testator's behalf in this matter, and the testator must be present at its execution.

It is advisable to draw up the will in the form of a notarial record, because such a will is stored electronically at the central registrar of wills. If such a will is somehow destroyed, its scanned copy is admissible in inheritance proceedings. There is no such possibility when a will is drawn up by the testator himself. When such a will is destroyed, it cannot be replaced and the inheritance proceedings are then carried out according to law (Civil Code), even if the heirs jointly argue the existence of the will.

In case of intestacy, the ratio of inheritance assets accrued to each heir is determined by law. The amount of assets can be diminished by the gifts granted to one of the heirs during his/her lifetime, thus restricting the ratio of other possible heir. The court is, on the basis of case by case examination, allowed to set off such gifts, towards the amount the inheritance assets accruing to endowed heir. This would apply e.g. when the value of the gift exceeds significantly the remaining assets, giving one of the heirs a disproportionate advantage in the inheritance proceedings.

Legal ownership

Slovak law looks primarily to the formal legal title of ownership of the immovables, such as ownership title or deed. The ownership of the immovable property is registered for every owner in the Cadastre of Immovables, which is the central registrar of every registered land or property.

The law deems a registration at the Cadastre to be valid, unless proven otherwise. Lawsuits disputing the ownership of immovables are relatively common in respect of restitution of land or property seized by the government in the past. However, such lawsuits are very rare in inheritance proceedings.

Immovable property is a common subject for securing of loans from banks and other institutions and in such case any encumbrance (e.g. mortgage) is also registered in Cadastre of Immovables. Such an encumbrance is generally passed on to the heirs together with the property. The court (or notary public) holding the inheritance proceedings will primarily look at the title deeds acquired from the Cadastre of Immovables when deciding on inheritance.

If the entitled heir should be child under age of 18 (including a not yet born child) then the court will appoint a trustee for the inheritance proceedings and afterwards the administrator of the inheritance assets until the child reaches the legal age (18 years in Slovakia). Usually the person is the child's parent, who acts as a legal guardian, but it can be any person, related or not. The administrator is then liable for any damage in case of breach of fiduciary duty, and needs the court's approval to dispose of the administered assets in a way exceeding common administration, e.g. sale or letting of the property.

There are very few restrictions on the ownership of immovable property in the Slovak Republic. Foreigners cannot own land which is part of the agriculture land fund outside the boundaries of urban area, with some exemptions for foreigners having the citizenship of Slovak Republic and citizens of EU member state under conditions set out by the Foreign Exchange Act.

The relationships relating to immovable property are governed by the law of the location of the property - rei sitae. In case the Slovak national dies abroad, generally the applicable law for settlement of his/her inheritance will be the one of the person's citizenship at the time of decease, according to the Private International Act.

EU legal framework

The European Commission has recently focused on the integration of EU inheritance law. Some progress has been made since 2005, when the Commission issued a Green Paper on Succession and Wills. The proposed regulation is expected to be presented shortly (the last date provided by Commission was Spring 2009). The regulation is intended to cover the jurisdiction, choice of law and recognition of foreign judgments.

The Commission has also proposed the introduction of a standard European Certificate of Inheritance, which would be issued by courts in EU countries, as well as the creation of a central registrar of wills.

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