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A Highly Competitive Tax Regime

The progressive business-friendly tax regime has been in effect since January 2004. The new government has so far made only minor amendments by reducing the comprehensive flat rate of 19% to 10% for VAT on pharmaceuticals and medical products and tax allowances have been gradually decreased to zero for those with an annual income above EUR 19.920 (SKK 600,000).

Further changes in 2009 have been the introduction of VAT grouping and new documentary requirements for transfer pricing purposes, especially between foreign parent and domestic subsidiaries. The re-introduction of thin capitalization rules on related party financing (such rules were abolished under the previous government) while considered by the current government were then abandoned so there still remains no formal thin cap restrictions in Slovakia.

Gross Salary

Social Security

Total monthly

contribution

labor cost

Slovakia

744.50

35.2%

1,006

Hungary

792

28.5% (33.5%)

1,031

Poland

729

17.48 – 21.68%

853 – 887

Average monthly gross salary in 2008 (EUR)

TABLE 8

Czech Republic

891.50

25%

1,195

Source: SARIO (Slovak Investment and Trade Development Agency)

Low Labour Cost

Although productivity rates are similar, labour in Slovakia is 15.8% cheaper than in the Czech Republic, Hungary and Poland (its immediate neighbours) and six times lower than much of Western Europe.

25

©2010 KPMG Slovensko spol. s r.o. , a Slovak limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

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