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Taxes in Slovakia: Recent changes to legislation

05.12.2024

In recent months, Slovakia has implemented several changes to legislation concerning corporate income tax and value added tax. A new financial transaction tax has also been established. The Ecovis experts explain the main key points of changes in taxes in Slovakia.

Corporate income tax (CIT)

The minimum amount of tax payable (tax license) for legal entities will apply for the first time for the tax period starting on 1 January 2024. The tax license depends on the entity’s taxable income:

Taxable income	Tax license
Does not exceed EUR 50,000	EUR 340
Exceeds EUR 50,000 and does not exceed EUR 250,000	EUR 960
Exceeds EUR 250,000 and does not exceed EUR 500,000	EUR 1,920
Exceeds EUR 500,000	EUR 3,840

In addition, the Slovak Income Tax Act was amended to introduce changes to the rates of CIT. The rate depends on the taxable income of the entity:

• 10% for entities with taxable income not exceeding EUR 100,000
• 21% for entities with taxable income between EUR 100,000 and EUR 5 million
• 24% for entities with taxable income exceeding EUR 5 million

The new tax rates will apply to the tax period starting on 1 January 2025.

Valued added tax (VAT)

The most significant change to the Slovak VAT Act is the change in the VAT rate. Currently, until 31 December 2024, there are two general VAT rates (except for specific cases related to state supported rental accommodation) of 10% and 20%. From 1 January 2025, these be replaced by three VAT rates of 5%, 19% and 23%. The standard VAT rate will be 23%.

Other changes include (among others):

• adjustment of the registration obligation for domestic and foreign entities
• introduction of specific rules for small business
• introduction of the reverse-charge mechanism for the import of goods in Slovakia under certain conditions (the effective date differs for domestic and foreign persons).

Would you like to know more about the individual tax measures? Please feel free to contact us.

Lubomir Alezar, Partner, ECOVIS LA Partners Tax, s.r.o., Bratislava, Slovakia

Financial transaction tax (FTT)

A significant change to legislation which may increase entrepreneurs’ costs is the introduction of a financial transaction tax. The FTT Act is effective as of 1 January 2025 with the first taxable period in April 2025. The FTT will apply to legal entities and natural persons carrying out business activity, i.e. not to all individuals.

In general, the FTT will apply to the following, with certain exemptions:

1. Debit payment transactions

• Bank account transactions will be taxed at a rate of 0.4% of the amount paid with a limit of EUR 40 per transaction
• Cash withdrawals will be subject to a tax of 0,8 % of the amount withdrawn (without limit)
• A flat rate tax of EUR 2 per year will apply to each payment card used by the entity at least once in a calendar year

2. Recharged costs associated with the execution of financial transactions in connection with the taxable person’s activities in Slovakia will be taxed at a rate of 0.4% of the amount recharged without a limit. The minimum amount of the tax is EUR 0.01.

The taxpayers in this case are:

• Local banks or Slovak branches of foreign banks in the case of local bank accounts
• The taxable person him/herself
  • if he/she uses a foreign bank that does not have a branch in Slovakia
  • if he/she is recharged with the costs of carrying out financial transactions in connection with the taxpayer’s activities in Slovakia
  • if he/she carries out financial transactions on an account other than a bank account

The tax base is the amount of the payment or the amount of the recharged costs. The tax period is a calendar month and the tax must be paid and the relevant tax notice filed by the end of the following month.

For further information please contact:

Lubomir Alezar, Partner, ECOVIS LA Partners Tax, s.r.o., Bratislava, Slovakia
Email: Lubomir.Alezar@ecovis.sk

Invest in Kosovo: Brief economic overview

04.12.2024

Kosovo is one of the youngest countries in Europe with a lot of potential. With an annual GDP growth rate of around 4%, a skilled workforce and a business-friendly climate, Kosovo is interesting for companies and investors. The economy is primarily driven by services. They account for more than half of GDP, followed by industry and agriculture. The Ecovis experts report on the opportunities the country offers foreign investors and companies.

Why invest in Kosovo?

1. Young and educated workforce: Over 50% of Kosovo’s population is under 30. The youthful workforce is highly educated, with strong expertise in fields such as information technology, engineering, finance, and business services. It is also relatively cost-effective.
2. Tax incentives: With a corporate tax rate of just 10%, Kosovo offers one of the lowest rates among its neighbouring countries. This strategic advantage allows businesses to dramatically reduce tax burdens while benefiting from direct access to a dynamic, growing market. For companies aiming to maximise profitability and operational efficiency, Kosovo’s tax regime presents an unmatched opportunity in the region.
3. Strategic location: Strategically located in the heart of the Balkans, Kosovo serves as a gateway to both regional and broader European markets. The country boasts excellent road connections to neighbouring countries, facilitating seamless trade and movement across borders. As a member of the Central European Free Trade Agreement (CEFTA), Kosovo enjoys preferential access to regional markets, creating a favourable environment for businesses looking to expand. Additionally, Kosovo is progressing steadily on its path towards European Union integration, further enhancing its potential as a future EU-linked market hub. This combination of connectivity and trade advantages makes Kosovo an ideal base for businesses aiming to scale within Europe.
4. Ease of doing business: Kosovo has positioned itself as a regional leader in the ease of doing business. Through comprehensive reforms in key areas such as business registration, property rights, and tax administration, Kosovo has streamlined processes that are crucial for attracting foreign investors. These improvements have significantly reduced bureaucratic hurdles, making market entry smoother, faster, and more cost-effective for international businesses. With these advancements, Kosovo stands out as an increasingly attractive destination for investment in Southeast Europe.
5. Low labour costs: Kosovo offers exceptionally competitive wages, making it one of the most cost-effective options in the region. This advantage is particularly valuable for businesses in labour-intensive sectors, allowing them to access a skilled and highly motivated workforce.

We specialise in auditing, accounting, tax and financial consulting and support companies and investors in establishing themselves in the dynamic market.

Nehale Hajredini, Audit Assistant, ECOVIS UA Kosova SH.P.K., Auditing, Accounting, Tax Services and Financial Consulting, Pristina, Kosovo

High growth industries in Kosovo

1. IT and technology: Kosovo’s tech industry is expanding rapidly, fuelled by a young, tech-savvy population. With a growing number of IT startups and software development firms, Kosovo is becoming a hotspot for outsourcing and technology-related investments. The country is already home to a thriving startup ecosystem and has the potential to be a regional leader in tech innovation.
2. Business services (audit, accounting, and financial consulting): As businesses grow, so does the demand for professional services such as audit, accounting, tax advice, and financial consulting.
3. Renewable energy: Kosovo has immense potential in the renewable energy sector, particularly in wind and solar power. The government is keen to reduce its dependence on coal and is increasing investment in cleaner energy sources. This makes it an exciting sector for investors interested in green technologies.
4. Agriculture: Agriculture continues to play an important role in Kosovo’s economy, with opportunities in organic farming, food processing, and exports. As demand for organic and sustainable products grows globally, Kosovo’s fertile land and low-cost production provide great potential for agriculture-related investments.
5. Construction and real estate: Kosovo’s real estate sector is experiencing growth, especially in urban areas such as Pristina. With increasing demand for both residential and commercial spaces, this sector offers solid returns for investors.

Conclusion

Given its strong economic fundamentals, favourable business environment, and strategic location, Kosovo stands out as a destination with high investment potential.

For further information please contact:

Nehale Hajredini, Audit Assistant, ECOVIS UA Kosova SH.P.K., Auditing, Accounting, Tax Services and Financial Consulting, Pristina, Kosovo
Email: nehale.hajredini@ecovis-uakosova.com

How to manage tax risk in China

02.12.2024

Companies, as well as private individuals, must manage their taxes in order to be able to identify and contain potential risks. The penalties for mistakes are harsh and fearsome. The Ecovis experts explain how tax risks can be managed in China.

The world of tax and audits in China not only involves the tax office. There is also a broad collaboration that includes the Ministry of Public Security, China Customs, the People’s Bank of China, the Supreme People’s Procuratorate and the State Administration of Foreign Exchange.

Risk prevention and control

Within a company, alongside the financial officer and legal representative, the shareholder(s), as well as those who write invoices and prepare the tax, are responsible for risk-prevention and control. To identify tax issues in a company, it is first necessary to understand how the tax audit procedure works.

In the context of big data, tax audit procedures follow a structured process. First, an electronic system automatically collects and analyses data, identifying potential tax risks. When issues are flagged by this system, the tax authority informs the taxpayer about these specific concerns. Following this notification, a tax audit or inspection is conducted to examine the taxpayer’s records in detail. Based on the findings, the taxpayer is required to file any outstanding taxes and pay late payment interest, if applicable. Finally, if the taxpayer disagrees with the audit result, they may seek administrative reconsideration of the decision.

Companies should ensure that all information on taxes and audits is consistent and logically linked. We can provide support with tax check-ups.

Pingwen Hu, Senior Partner and Certified Public Accountant, ECOVIS Ruide Certified Public Accountants Co., Ltd, Shanghai, China

How to identify potential tax problems

Based on our extensive experience, companies should:

• Evaluate their own operations: Assess whether there are any unusual business activities, and review the company’s growth and overall position within the industry (e.g., excessive profits or prolonged losses).
• Examine VAT invoices: Identify any discrepancies in input and output data, spot abnormal invoices, or note any inconsistencies between the goods received and invoiced amounts.
• Facilitate interdepartmental information sharing: Review information from various government departments and analyse bank statements alongside business data to ensure alignment and accuracy.

For further information please contact:

Pingwen Hu, Senior Partner and Certified Public Accountant, ECOVIS Ruide Certified Public Accountants Co., Ltd, Shanghai, China
Email: pingwen.hu@ecovis.cn