The Slovak Government and Parliament made several changes to the tax system with effect from 1 January 2017, some of them affecting also the local insurance companies, as well as their foreign shareholders. The recently adopted amendments concern - among others - corporate and personal income tax, value added tax, special levy in regulated industries, as well as social security and health insurance contributions, reads a Kinstellar report published by the Lexology portal.

Among the changes mentioned by the report, there are:

Special levy on businesses in regulated industries, including the insurance business

The rate of the special levy on businesses in regulated industries (energy, telecoms, public health insurance, etc.) doubles as of 1 January, to 0.726%. This rate should be lowered to 0.545% in 2019 and to 0.363% in 2021.

As a result regulated entities with a trading income exceeding EUR 3,000,000 will pay a levy calculated as a percent of their trading income, further multiplied by the levy rate. The levy is not paid unless it exceeds EUR 1,000 in the relevant month. The new calculation mode is applicable since January 1st, 2017.

"Under the previous law, a regulated entity had to pay the levy only if its turnover from regulated activities was at least 50% of its total turnover. In addition, the levy was paid on trading income above EUR 3,000,000 and was calculated by reference to all trading income rather than a coefficient," underlines the Kinstellar report.

Corporate tax

The corporate tax rate will decrease by 1 pp, from 22% to 21%, starting with the fiscal year 2017. The previously announced abolishment of so-called 'tax licences' (i.e. the minimum tax payable even if a company declares zero profit or loss) was postponed to 1 January 2018.

Dividends

Taxation of dividends also changes significantly as of 1 January 2017, but not for profits generated before that date. Thus, dividends paid out of profits generated in prior fiscal years will continue to be subject to the old regime, even if paid to shareholders after 1 January.

The new regime abolishes the 14% health insurance contribution on dividends received by individuals. Instead, the following tax rates will apply:

• No tax: dividends paid/received by legal entities resident in Slovakia or in a treaty state;
• 35% tax: dividends paid to legal entities or individuals resident in a non-treaty state or dividends received by Slovak residents from a legal entity in a non-treaty state;
• 7%: dividends paid to individuals resident in Slovakia or in a treaty state or dividends received by individuals resident in Slovakia from a treaty state.

'Treaty states' are listed on the Ministry of Finance website, namely states that have signed a double taxation treaty or similar with the Slovak Republic.

Minimum wage

As of 1 January the monthly minimum wage is increased from EUR 405 to EUR 435, i.e. EUR 2.5 per hour.

For more details and the full version of the report, access www.lexology.com.