Important developments in personal income tax in Slovakia

On 28 June the Slovak Parliament approved three different amendments to Slovak Income Tax Act, with the aim of reducing the tax burden on individuals. Two of them should bring the following important changes as of 1 January 2024.

Important changes from 2024

• More precise treatment and new definitions related to virtual currency (crypto), including "stablecoin" or "staking", as well as new exemptions in case of use or sale of virtual currency not held for business, were introduced. The new exemption for individuals in case of exchanging virtual currency for goods or services will be applied if the cumulative total income less expenses for the respective tax year does not exceed EUR 2 400. In the case of an excess, only the difference over EUR 2 400 will be included in the tax base.
• Income from the sale of virtual currency after one year from its acquisition is included in the special tax base according to §51e of the Income Tax Act applied also to dividends, i.e. it will be taxed at a 7% tax rate. Moreover, no statutory health insurance will be applied. However, this reduced taxation will not be applicable to virtual currency included in business assets, neither in cases when the virtual currency is sold within one year of its acquisition.
• Exemption of income from sale of securities not listed on a stock exchange/regulated market after three years from its acquisition (with certain exceptions, e.g., bills of exchange, cheques, etc.) is added to the current exemption of income from sale of securities listed on a stock exchange after one year from its acquisition. Income from the sale of securities which were included in the taxpayer's business assets will not be exempt from taxation.
• An exemption from income tax is introduced for benefits in-kind in the form of employee shares (valued at their nominal value) or in the form of a business share in an LLC (valued at the value of the contribution as determined under the Income Tax Act) if:

1. the company has not paid profit share (dividends) so far; and
2. these employee shares have not been/are not listed on a regulated market until the end of the tax year in which the benefit was acquired by the employee.

• A new exemption is introduced for income from the sale of shares in a limited liability company after three years from its acquisition, except for the transfer of a share acquired as an employee benefit in kind or shares that were the taxpayer's business assets. This will be likely applied only to shares acquired from 2024.

As the legislative change was rather extensive and has some unclear areas, we recommend contacting our team for further advise.

Abolition of the CFC rules for individuals

Another important change is that the controlled foreign companies rules ("CFC") applicable for individuals are removed, after a short period of its effectiveness. This was the area with an insufficient regulation and many unresolved issues. The approved amendment removes these rules for individuals from the legislation entirely, effective 1 August 2023. If there was a payment of this tax before its abolition, the payment should be treated as a tax overpayment. The amendment has already been signed by the President and published in the Collection of Laws. For legal entities, the CFC rules remain in force.

We will continue to track developments on these changes and provide updates.