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Chapter 5

Taxation of Individuals

General

An individual’s tax liability is derived from the taxable income. Slovak tax residents are liable to personal income tax on their worldwide income, subject to provisions under applicable double taxation treaties. Slovak tax non-residents are taxed only on income from Slovak sources, including Slovak sourced salaries, rent and interest. Dividends are in general not taxable, unless they are distributed out of profits earned prior to 1 January 2004.

The tax year is the calendar year and the income tax rate is a flat rate of 19%.

Residency

Tax residents

In accordance with the Slovak Income Tax Act, an individual will generally be considered a Slovak resident for tax purposes if:

the individual is granted permanent residence status in Slovakia, or the individual stays for at least 183 days in a calendar year in the territory of Slovakia, whether consecutive or otherwise.

Tax non-residents

If individuals do not have a permanent residence or usual presence in Slovakia, they are not considered to be Slovak residents and thus they are only liable to pay taxes on their Slovak source income (i.e. income from activities performed in or related to Slovakia).

Additionally, individuals working for a Permanent Establishment (PE) whose salary costs are borne by the PE are subject to personal income tax even if they are not in the

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©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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