Taxation


 

The government budget is a financial plan that summarizes anticipated income and expenses. When anticipated income equals anticipated expenses, the budget is said to be balanced. When income is greater than expenses, the difference is said to be a surplus. When budget expenses are greater than income, the difference is described as a deficit.

Incomes and expenses of the government

Incomes

 

Expenses

 

Why do governments collect taxes?

 

The tax system = all the taxes in the country together

Tax is a regular payment to the state, that is levied by the government on workers' income and business profits, or added to the cost of some goods, services and transactions

 

Taxes in general can be:

Tax incidence refers to those, who have to pay taxes. When it comes to direct taxes, we know exactly who pays them. However, indirect taxes are paid only by those who are registered as indirect tax payers. They add this tax to their prices, so in reality customers pay the taxes.

 

Direct taxes


 

Direct taxes are collected by the government directly from incomes and wealth of individuals and businesses.

The tax period is one fiscal year which is identical to the calendar year.

 

Income and corporate tax

Tax residents have their seat or HQ in the SR, or they are in the country for more than 183 days.

Non tax residents are in Slovakia for less than 183 days, they mainly earn abroad and they don't have their seat in Slovakia. They pay taxes only from income earned in SR.

As regards legal entities, legal seat or location of management is decisive..

The company tax rate is 23% for all corporations and legal entities without exception. The income tax rate for individuals is 19%. Increased rate of 25 % is on incomes above certain income.

Tax is due and payable in a single payment, in quarterly instalments or in monthly instalments, depending on how much you have earned.

Tax returns for the applicable period should be filed by 31 March of the following year. A three-month extension of the deadline may be requested, but only if income was earned outside Slovakia. Taxpayers can donate 1.5 -2% of their paid taxes to non-profit organizations. Based on a written request

 

Tax allowances:

Real estate tax

We distinguish:

 

Tax on plots of land is paid by:

This tax is calculated by the value of given land multiplied by a coefficient. However, the coefficient can be different according to geographical location or according to the type of land.

 

Tax on buildings is paid by:

This tax is calculated as built up area in square meters multiplied by a coefficient. However, the coefficient can be different according to geographical location and type of the building.

 

Tax on apartments is paid by:

This is calculated tax liability is determined by the total area of the ground floor set in square meters multiplied by a coefficient.

 

Motor vehicle tax

Motor vehicle tax is governed by the Act on Local Taxes and is levied by a higher territorial unit.

Subject to motor vehicle tax are legal entities and individuals registered as possessors of a motor vehicle, registered under the evidence registration number with the local Vehicle Transportation Office of the Police Department and used for or in connection with business activities. The motor vehicle tax is paid on an annual basis.

The taxable amount is the engine cylinder capacity in cm³ for passenger cars, and the total weight and the number of axles for utility vehicles and buses. The range of the tax rates varies from Higher Territorial Unit to Higher Territorial Unit. The Act on Local Taxes stipulates further the exemptions from motor vehicle tax obligations, cars in diplomacy or government service, ambulances, firefighting engines.

 

Some other local taxes: fees on community waste disposal, tax on keeping a dog, tax on operation of vending machines, tax on machines that do not offer cash prizes, tax for the entrance to the historic center, tax for use of public space. 4

 

Indirect taxes


 

Indirect taxes are levied on the production or sale of goods and services, sold and provided in our territory, goods imported from EU member states, and imported from non-member states of EU . They are included in the price paid by the final purchaser.

Value added tax

This is a multiple - stage tax, it is calculated at multiple phases during production. Určité dane na vstupe už zaplatili, a tak od dani na výstupe ich odpočítajú aby to neplatili 2X, a teda platia už len rozdiel medzi daňou na vstupe a na výstupe.

 

VAT applies to:

This tax is paid by people who have reached a particular turnover for the past 12 consecutive calendar months. These people must apply for the VAT registration by the 20th day of the month following the month in which the turnover was reached. There are people that have to pay this tax regardless of their turnover: those, who have cross-border economic activities, or are voluntarily registered.

The tax rate for VAT is 20%. There is a reduced rate of 10% for medicines, books and other printed material. Exemptions are postal services, money equivalents - tax is not paid for them.

 

Excise Taxes

Excise taxes refer collectively to:

  1. excise tax on wine;
  2. excise tax on beer;
  3. excise tax on tobacco;
  4. excise tax on spirits;
  5. excise tax on mineral oils; and
  6. excise tax on electricity, coal, and natural gas

The subject of tax on wine is any producer in the SR, person who supplies from another Member State or imports from a third country into the SR. The tax liability is determined by amount of wine set in hectolitres * (some % from the base rate which is 1080 € * a coefficient different for each type of wine)

The subject of tax on beer is any producer in the SR, person who supplies from another Member State or imports from a third country into the SR. The tax liability is determined by amount of beer in hl * (some percentage from base rate * a coefficient).

Tax on tobacco and tobacco products - there is a base rate, which is 59 € per 1 000 cigarettes, plus 23 % from fixed price per pack of cigarettes

The subject of tax on spirits is any producer in the SR, person who supplies from another Member State or imports from a third country into the SR. The tax liability is calculated: a concrete percentage of alcohol content from the base rate 1 080 €.

Multinational companies often register their head offices in tax heaven – small countries, where income taxes for foreign companies are low (Lichtenstein, Monaco, the Cayman Islands, the Bahamas)

Using legal methods to minimize your tax burden is called tax avoidance. It often involves using loopholes (ways of getting around the law, because of an error in the law itself). Using illegal methods such as not declaring your income or reporting it incorrectly is called tax evasion and can lead to big penalties.