United States-Slovak Republic Tax Treaty
Slovak Republic International Tax Compliance Rules
Quick Summary. The Slovak Republic is located in Central Europe. Slovakia joined the European Union (EU) in 2004 and the Eurozone in 2009. Slovakia is one of the most open economies in the EU.
Slovakia traces its roots to the 9th century state of Great Moravia. Subsequently, the Slovaks became part of the Hungarian Kingdom, where they remained for the next 1,000 years. After the formation of the dual Austro-Hungarian monarchy in 1867, backlash to language and education policies favoring the use of Hungarian (Magyarization) encouraged the strengthening of Slovak nationalism and a cultivation of cultural ties with the closely related Czechs, who fell administratively under the Austrian half of the empire. After the dissolution of the Austro-Hungarian Empire at the close of World War I, the Slovaks joined the Czechs to form Czechoslovakia. The new state was envisioned as a nation with Czech and Slovak branches. During the interwar period, Slovak nationalist leaders pushed for autonomy within Czechoslovakia, and in 1939 Slovakia became an independent state created by and allied with Nazi Germany. Following World War II, Czechoslovakia was reconstituted and came under communist rule within Soviet-dominated Eastern Europe. In 1968, an invasion by Warsaw Pact troops ended the efforts of Czechoslovakia’s leaders to liberalize communist rule and create “socialism with a human face,” ushering in a period of repression known as “normalization.” The peaceful “Velvet Revolution” swept the Communist Party from power at the end of 1989 and inaugurated a return to democratic rule and a market economy. On 1 January 1993, Czechoslovakia underwent a nonviolent “velvet divorce” into its two national components, Slovakia and the Czech Republic.
Property rights are guaranteed by the Slovak Constitution and the European Convention of Human Rights. The country has a written Commercial Code including contract law in the civil and commercial sectors.
Foreign and domestic private entities have the right to establish and own business enterprises and engage in all forms of remunerative activity in Slovakia (Commercial Code, 98/1991 Coll.).
Businesses can contract directly with foreign entities. Private enterprises are free to establish, acquire, and dispose of business interests, but must pay all Slovak obligations of liquidated companies before transferring any remaining funds out of Slovakia. Non-residents from EU and OECD member countries can acquire real estate for business premises.
Slovakia is a civil law country. The Slovak judicial system is comprised of general courts, the Supreme Court, and the Constitutional Court. General courts decide civil and criminal matters and also review the legality of decisions by administrative bodies. The 54 district courts are the courts of first instance. The eight regional courts hear appeals. The Supreme Court of the Slovak Republic is the court of final review in selected cases.
The Constitutional Court of the Slovak Republic is an independent judicial body that determines the conformity of legal norms, adjudicates conflicts of authority between government agencies, and hears complaints – including individuals’ and legal entities’ complaints regarding constitutional rights violations, e.g. human rights violations – and interprets the Constitution or constitutional statutes.
The Action Plan to Combat Tax Fraud 2017 – 2018 includes 21 measures aiming at fighting tax evasion. The plan covers company mergers, registering sales from cash registers, excessive deductions, and indexing the reliability of taxpayers. As part of the plan, the Act on Tax Administration (563/2009 Coll.) was amended to include a “tax reliability index” starting in 2018 that will classify taxpayers as reliable, less reliable, or unreliable. The ranking aims to encourage and reward transparent tax behavior. The law also transposes an EU directive on access of tax authorities to information used to combat money laundering, and should improve efforts to fight tax fraud and increase transparency.
Cryptocurrencies are not accepted as an official currency in Slovakia or in the EU; nevertheless, recognizing the impact of such technologies (blockchain, security chain), the Finance Ministry issued a guidance on cryptocurrencies stating that all income has to be taxed based on valid corporate income tax legislation. In line with the OECD and Global Forum principles, and amidst an EU-wide discussion on taxing digital businesses, the Slovak Finance Ministry is currently considering ways to tax digital companies for the proportion of their business activities on the territory where the activity occurs, or where profits and revenues are registered.
U.S.-Slovak Republic Tax Treaty
Slovak Tax Treaty. Convention Between the United States of America and the Slovak Republic for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income, signed in Bratislava on October 8, 1993
Currency. Euro (EUR)
Common Legal Entities.
Tax Treaties. Slovakia is party to 68 income tax treaties and is a signatory to the OECD MLI.
The 1992 U.S.-Slovakia Bilateral Investment Treaty specifies the basic framework for investment protection and dispute resolution. Slovakia signed a Bilateral Taxation Treaty with the United States in 1993.
The United States and Slovakia agreed to the Foreign Account Tax Compliance Act (FATCA) in July 2015, and Slovakia subsequently approved the Act on Automatic Exchange of Information on Financial Accounts (359/2015) in order to fully comply with FATCA. Slovak financial institutions are now required to report tax information of American account holders to the Slovak Government, which then forwards that information to the U.S. Internal Revenue Service (IRS).
Corporate Income Tax Rate. 21%
Individual Tax Rate. 19%-25%
Corporate Capital Gains Tax Rate. 21%
Individual Capital Gains Tax Rate. Generally included in aggregate income.
Business Receipts Tax.
Transfer Pricing. Generally follow OECD guidelines. Country-by-country (CbC) reporting applies.
CFC Rules. Slovakia has implemented “model B” rules under the EU Anti-Tax Avoidance Directive.
Hybrid Treatment. N/a
Inheritance/estate tax. No.
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