Property Taxes in Slovakia

Patricia Holikova,  Monday, 25 August 2014

Slovak Countryside

Buying property in the Slovak Republic is nowadays possible for everyone, foreigners including. Foreign nationals are permitted to purchase property in the country directly and in their own names, while the process is generally very straightforward. Some exceptions, however, apply, including agricultural land, forests and other property which is under special interest to the Slovak state according to the laws. Nevertheless, it is even possible to buy those categories of land by foreigner given that the person owns a legal entity (i.e. company) with registered settle in Slovakia. Otherwise, it is not necessary to establish a legal entity in order to buy property in Slovakia. The whole process of buying a real estate in Slovakia has also become considerably simple thanks to the local tax system.

Rentals and Profits from Sellings: Flat Income Tax of 19%

Slovakia tax system is flat 19% of value added and income tax (the standard VAT rate is momentarily raised to 20% since January 1, 2010, due to reasons related to the economic crisis). This flat portion is applicable for foreigners as well. After January 1, 2005, there is no longer any tax on transfer of ownership title and the inheritance tax is no longer applicable as well. Also, there is no purchase tax in Slovakia. Capital gains from sales of the assets are incorporated into taxable income, but there is no separate capital gains tax. Still, an obligation to pay tax on the profits of a real estate sale exists and any income from the sale of real estate is taxed at a flat rate of 19%.

Since Slovakia belongs to one the EU economies with the fastest economic growth, the country naturally attracts high amount of industries and businesses. These factors influence the real estate market in the country which has currently promising letting submarket. Until 2007, if the landlord leased the property as a non-resident of given property, the tenant paid 19% of the rental fee as a tax to the state already before the rent reached the landlord. Such automatic deduction no longer applies and since 2007 no such requirement exists (except non-EU citizens for whom this advance-payment tax still applies).

Any incomes coming from property rentals are then burdened by 19% income tax with possibility of personal allowance around 2500 EUR per year. There is also possibility to further reduce the tax bill by deducting the expenses related with the property. Such deductible items include loan interest, depreciation, real estate taxes, and repairs and maintenance costs. Alternatively, the taxpayers with rental income can claim for general expense of up to 40% of the property income and can avoid itemizing deductions.

Finally, it is crucial to mention that the person (or legal entity) renting the property should be registered with the Tax Office otherwise the person may face a fine of 6,600 EUR. Further reference to the law concerning rental of property in Slovakia can be found in Section 6 (3) of the Income Tax Act of the Slovak Republic.

The Slovak government already announced they are planning to introduce progressivity of the tax system and such measures should affect primarily corporate income tax. Nonetheless, details related to the increased tax rate and the taxable income thresholds are still being discussed. The most recent information (as of November 2013) says the income tax rate should be increased to 21% and may be applicable for taxable income which exceeds 30 million EUR.

Property Tax

Real estate tax is levied on companies and individuals who own land, buildings, flats or apartments, and non-residential premises. The tax consists of three kinds: land tax, building tax and apartment tax. The tax corresponds to the type of property and its location. This means there is difference in the annual property tax payment for flat, family house, apartment, and villa. Generally, the amount is dependable on the area of land occupied by the real estate (measured in square metres), number of floors, its nature and purpose.

Amount of the property tax also depends on the specific tax rates as set by local municipal authority. These local property taxes are in fact the main local taxes that a municipality can levy. Usually, the property tax is payable by the registered owner of the property. In case the taxpayer cannot be determined, the tax burden falls on the user of the land, either individual or legal entity by whom the property is used. The real estate tax is ruled by the Act on Local Taxes which includes the basic annual rates. These are, however, normally changed on yearly basis by the municipalities via General Binding Regulations. The total amount of real estate tax almost never exceeds 50 EUR per year. It is recommended always to consult an attorney and stay informed about any other possible legal duties and fees according to valid legislation.

Village in the Slovak countryside
Property for sale in Slovakia by private sellers and estate agents.  
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Slovak landscape Since 2004, when Slovakia entered the European Union, its market with real estate begun to flourish and attracts foreigners as well. Currently, there are practically no obstacles to buy a property in Slovakia and local banks offer mortgage to the foreign nationals under standard conditions. Whole process is not complicated and bureaucracy involved is often below the levels of many Western European countries. 
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