National Council of the Slovak Republic, at its meeting held on 2 December 2020, approved a relatively extensive amendment to the Income Tax Act. Compared to the proposed wording, which was approved in the first reading, the final wording brings several changes.
The second reading introduced several changes in comparison with the wording that was covered in our Article, for example:
CFC for individuals – the parliamentary amendment made several adjustments to the new provision, which introduces the rules of controlled foreign companies also for individuals. The most significant change is the increase in the tax rate from the original 7 % to 25 %, and at the same time it postpones the effective date to 1 January 2022.
The calculation of the attributable income was specified by excluding received profit shares that have already been taxed through another controlled company from the accounting result. It also provides, that the CFC rules applicable to legal entities override the rules applicable to individuals.
Abolition of the exemption of the 13th and 14th salary – another parliamentary amendment cancels the exemption from tax for the so-called 13th and 14th salary. The exemption can be applied for the last time to income provided for Christmas holidays, which the employer pays not later than on 31 December 2020.
Tax bonus – Amendment to the Income Tax Act introduces gradual increase of the tax bonus for dependent child living with the taxpayer in the same household and has reached the age of 6 until he reaches the age of 15. As of 1 July 2021 the amount of the tax bonus is increased to 1.7-fold of the base amount and as of 1 January 2022 to its 1.85-fold.
Shortening of the right to the tax bonus, which was proposed after the committee meetings, was not approved by the Parliament and the right to the tax bonus remains unchanged until the child reaches the age of 25 (providing other conditions are met).
15% rate - new conditions – from 1 January 2020, the Income Tax Act allows taxpayers with revenues not exceeding EUR 100,000 to apply a reduced income tax rate of 15 %. According to the amendment to Income Tax Act 15 % rate is applicable for taxpayers with revenues not exceeding EUR 49,790. Only the taxable revenues will be included into the revenues threshold.
Other changes – the approved amendment cancels more specific provisions – for example the non-taxable part of the tax base for spa care, the possibility of faster depreciation of buildings in which spa care is provided and buildings used mainly for accommodation of own employees.
The amendment to the law has yet to be signed by the President of the Slovak Republic. We will continue to monitor the development of the legislative process.
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