21% income tax for companies and 7% tax from dividends.

Slovak government approved new income tax regulation. Law is planned to be effective as of 1st January, 2017.

The Slovak government approved a new tax legislation. The plan is to reduce the income tax for a legal person from 22% to 21%. However, a new 35% tax will charge the profit share paid from and to non-treaty countries*. Also, the new legislation introduced a new 7% tax from paid dividends.

Currently, the dividends are not taxed in Slovakia. However, natural persons, with residency in Slovakia, receiving dividends are obliged to pay a percentage to the health insurance company. Under the proposed legislation, the payment to the health insurance company is cancelled and the dividend tax will apply to all entities, be they natural or legal persons, domestic or foreign persons.

The 7% dividend tax will apply when distributing profits for the tax period starting as of 1st January 2017. Thus, there will be no retroactive dividend taxation.

The government also introduced a new flat rate expenditure from the income tax for sole-proprietors. Currently, a sole-proprietor can apply a 40% flat rate expenditure from his yearly income, to a maximum of 5,040 EUR. The new flat rate expenditure for sole-proprietor persons will be 60% from their yearly income, to a maximum of 20,000 EUR. This could make the sole-proprietorship more attractive.

The new tax legislation is planned to be effective as of 1st January 2017, but will have to be approved by the Parliament and signed by the President. Since the government has a majority in the Parliament and there are no current President’s remarks regarding this legislation, we assume that this new tax legislation will be enacted in a wording very similar to the current one.

* The Finance Ministry governs a list of these countries.

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