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secure and maintain the income of the taxpayer are deductible for tax purposes. As an alternative to actual costs, a flat deduction of 40% of income can be claimed provided the individual is not registered for VAT purposes (for a limited number of professions the flat deduction is 60%).

Rental income

Income from the rental of real estate or movable property is subject to Slovak tax. Depreciation may be claimed against the income from letting a building, generally over a period of 20 years (the property is then deemed to be used for the business purposes which has an effect on the possibility to exempt its sale – please refer below). Deductions can also be claimed for interest and finance charges, repairs and maintenance and real estate taxes. As an alternative, a deduction of 40% of income can be claimed provided the individual is not registered for VAT purposes.

Income from capital

Income from capital includes securities income, profit shares from partnerships and interest income. Each item of taxable income is subject to specific tax rules and generally the Slovak entity making the payment will withhold tax at source, which will constitute either the final tax liability for the recipient or a prepayment. Dividends paid out of profits earned after 1 January 2004 are not subject to tax.

An individual who is a Slovak tax resident must include all taxable foreign sourced interest income in his/her taxable income (as well as dividend income, if taxable). Subject to the provisions of applicable double taxation treaties, foreign tax paid on dividends and interest received can be offset against the Slovak tax liability on the same income up to the amount of the Slovak tax liability. Tax paid on dividends which are not subject to tax in Slovakia cannot be offset against any other tax liability in Slovakia.

Tax-exempt Income

Certain types of income are exempt from tax, e.g.:

income (capital gains) from the sale of immovable assets after five years from acquisition (two years if the individual had registered a permanent residence in the property during two years preceding the sale), or, if the asset was used for business purposes, after five years from the date when the taxpayer ceased to use the asset for business purposes income (capital gains) from the sale of movable assets or, if the asset was used for business purposes, after five years from the date when the taxpayer ceased to use the asset for business purposes.

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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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