Slovakia: Important changes to Slovak Income Tax Act

Amendments to the Income Tax Act have brought changes that could improve the business environment in Slovakia and make founding a company more attractive.

Tax reduction for entrepreneurs and small businesses

A vital change is a reduction in the income tax rate to 15% for small businesses with a turnover of up to EUR 100,000 a year (both private entrepreneurs and companies). The rate can be applied for the first time in 2021 with the tax declaration for 2020.

At the same time, it should be noted that advance income tax payments would be paid at an unchanged rate of 21%.

Micro-taxpayer as a new category

A micro-taxpayer is an entity that does not exceed turnover requiring registration as a VAT payer, i.e. EUR 49,790.

Micro-taxpayers will enjoy benefits including improved tax optimization options such as greater possibilities to deduct tax losses, better optimization options for depreciation of tangible assets (except real estate and luxury cars) plus the possibility to include correcting book entries for claims in tax expenses.

However, these changes will be effective only from 2021 for the business year 2020.

Improved possibilities for exploiting tax losses

It will be possible to amortize tax losses from previous periods over a 5-year period. Losses will no longer have to be amortized equally.

Losses can be applied up to a maximum of 50% of the tax base in the respective year. However, if the loss for the previous year is less than 50% of the tax base, it can be fully amortized. The 50% threshold does not apply to micro-taxpayers, who will be able to apply tax losses on the amount up to the entire tax base.

All these changes provide interesting legal options for tax optimization and make Slovakia more attractive among other European countries for founding a company.

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