Income tax in Slovak Republic
Taxation Researcher | October 15, 2019
Resident citizens are taxed on their worldwide income. Resident foreigners are taxed on their Slovakian-sourced income. Married couples are taxed separately.
Income is classified according to the following categories: (1) employment income, (2) business, professional, and rental income, (3) income from capital, and (4) other income.
For 2019, income is taxed at a flat rate of 19% for income up to €36,256.38, and at a flat rate of 25% on income exceeding €36,256.38.
For 2018, income is taxed at a flat rate of 19% for income up to €35,022.31, and at a flat rate of 25% on income exceeding €35,022.31.
Residents are entitled to allowances and tax credits for 2019:
- Basic personal allowance of €3,937.35 if annual employment income does not exceed €20,507.
- Spouse allowance of €3,937.35 if the spouse’s annual income does not exceed €36,256.38.
- Child tax credit of €3,120
Rental income is taxed at 19%, after deductions. Generally, necessary expenses incurred to generate, ensure, and maintain rental income are deducted before arriving at the taxable income. Deductions can include depreciation costs, interest and finance charges, real estate taxes, repairs, maintenance and other types of rental expenses. Alternatively, the taxpayer can make a general expense claim of up to 40% of the rental income instead of itemizing deductions.
Rented buildings qualify for depreciation, and are usually depreciated over 20 years. Buildings can be depreciated either through the straight-line (property value - scrap value/estimated life) or accelerated method, under which depreciation is computed by multiplying the value of the property to a designated coefficient.
Capital gains realized from the sale of real estate are taxed at 19% to 25%.Gains from the sale of properties used in business are considered business or professional income. Gains from the occasional sale of properties not used in business are considered as other income.
Exempt from capital gains tax are the disposal of:
- Properties that has been the taxpayer´s permanent residence for at least the two-year period prior to the sale, unless the property was used for business in the last five years
- Properties held for more than five years, unless the property was used for business in the last five years
VALUE ADDED TAX (VAT)
The standard VAT rate is 20%. A reduced rate of 10% applies for medicines, books, and other printed matter.
Real estate leasing and sale of real estate property is VAT exempt.
Real Estate Tax
There are three kinds of real estate tax: (1) land tax, (2) building tax, and (3) apartment tax. There are general rates for these taxes but municipal authorities may increase or decrease the tax rates applicable in their municipalities.
Land tax is generally levied at 0.25% of the land value, as assessed by the municipality. Rates vary depending on the type of land and its location.
The general tax rate on buildings is €0.033 for every sq. m. occupied by the finished building. The general tax rate on apartments is €0.033 for every sq. m. of the flat´s floor area.
Income and capital gains earned by companies are taxed at a flat rate of 21%. Income-generating expenses are deductible when calculating taxable income.