Slovakia: New Income Tax Act from January 1st, 2020

9. August 2019

Changes to the Slovak Income Tax Act

The Ministry of Finance of the Slovak Republic has proposed an amendment to the Income Tax Act to the Slovak government for deliberation and eventual implementation by 1 January 2020. The proposal aims, among other things, to support SMEs through income tax, to simplify the calculation of the income tax base, to remove barriers to the sustainable development of the automotive industry in Slovakia, and to transpose the EU Council Directive regarding hybrid mismatches with third countries (known as ‘ATAD 2’).

What’s new?

The draft amendment further proposes that the Income Tax Act:

  • introduce a definition of a micro-taxpayer (a natural person with a maximum income of €49,790) and related changes for more favourable taxation of this group of taxpayers (e.g. shorter depreciation of tangible assets, no limitation of tax depreciation due to rent of tangible assets, more attractive conditions for amortisation of tax losses).
  • adjust conditions for the deduction of tax loss, specifically cancellation of the uniformity of loss deduction and the extension of the period for its deduction to 5 years; compared to micro-taxpayers, who do not have a limit for amortised tax loss, other taxpayers can only apply a tax loss of up to 50% of the calculated tax base from which loss deductions can be made.
  • simplify and adjust the scope of those expenses which only become a part of the tax base after payment. For example, it is proposed to eliminate capping expenditures for obtaining standards and certificates. On the other hand, contractual penalties, delinquency charges, and default interest, which are not currently included in tax expenditure at all, are to be regarded as post-payment tax expenses.
  • introduce automatic registration of taxpayers by a tax administrator.
  • for R&D taxpayers, increase tax deductions (deduction of R&D expenditure from the tax base reduced by the tax loss deduction), i.e. a super deduction of up to 200%.
  • introduce a separate depreciation group 0 for electric vehicles with a depreciation period of 2 years.
    raise the threshold for the payment of corporate income tax advances from the current €2,500 to €5,000 and simplify the calculation of the last known tax liability.
  • introduce clearer rules for avoiding the use of hybrid mismatches because of different tax assessments of financial instruments and taxpayers, leading to a reduction in tax liabilities.
    expand tax exemption for defined types of non-monetary income.
  • introduce the ability for employers to issue and deliver, upon mutual agreement, certain types of documents to employees electronically.
  • upon mutual agreement between employers and employees, enable employees to electronically submit an application for an annual settlement of tax advances.
  • cancel the obligation of employees to sign an annual declaration to apply the non-taxable part of the tax base to the taxpayer and tax bonus.
  • increase the amount of the exempted non-monetary payment of employees for the provision of accommodation by their employers from €60 to €100.

An interdepartmental comment procedure is currently being assessed. It will be a few months before the Act is approved, so we will keep a close eye on these proposals and inform you about them in subsequent editions of our Newsletter from TPA Slovakia. If you have further questions regarding the above mentioned changes, please contact TPA tax expert Peter Ďanovský

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