The information in this part are determined for the tax non-residents of the SR (the entrepreneurs having no residence or habitual abode on the territory of the SR) who have derived any incomes from sources on our territory during the fiscal year.
We provide the information in this article in the following structure:
Filing of tax returns
A SR non-resident (a citizen having no residence or habitual abode on the territory of the SR) is obligated to file the tax return in the event his total taxable incomes from sources on the territory of the SR for the fiscal year 2013 exceed the amount of EUR 1,867.97 or in case of incurring a tax loss.
Incomes from sources on the territory of the SR
The incomes derived by a SR non-resident from sources on the territory of the SR mean, according to the Income Tax Act, the following incomes:
- from any activities performed through a permanent establishment situated on the territory of the SR,
- from any dependent activities (employment) performed on the territory of the SR,
- any incomes from services provided on the territory of the SR,
- from any activities of a foreign artiste, sportsman or acrobat performing on the territory of the SR,
- from payment by SR residents SR and by SR non-residents´ permanent establishments, including:
- any remunerations for granting the right for use or for use of an object of industrial property right (the so-called industrial royalties),
- any remunerations for granting the right to use or for use of the copyright or any right similar to the copyright (the so-called cultural royalties),
- any interests and other gains,
- any rental fees or incomes derived from any other exploitation of movable assets situated on the territory of the SR,
- any incomes from transfer of movable assets situated on the territory of the SR,
- any remunerations for member of statutory bodies and other bodies of legal entities, for performance of their duties,
- any prizes in lotteries and other similar games, any prizes from promotion actions and from drawing lots, any prizes from public contests and sports contests,
- any alimony, pension benefits, annuities, and similar payments;
- from sale or lease of any immovable property situated on the territory of the SR
Type of tax return form
If a SR non-resident (entrepreneur) derived in 2013 any incomes from sources on the territory of the SR from lease, gains from capital assets or any other incomes or combination of such incomes and wages from employment, he shall use the income tax form “FO type B”.
Deadline for filing the tax return
The tax return for the year 2013 should be filed within three calendar months following the end of the fiscal year (i.e. by 31 March.2014). The tax should be paid within the same period.
SR tax non-resident
A SR tax non-resident (a tax payer with limited tax obligation) according to the Income Tax Act means the tax payer, if:
- he has no residence or habitual abode on the territory of the SR for more than 183 days in a year continuously or during several periods (such period shall include each partial day of residence), or
- has habitual abode here solely for the purposes of study or medical treatment, or
- passes the borders of the SR on daily basis or in agreed time periods solely for the purposes of performance of any dependent activity (employment), the source of which is on the territory of the SR.
Caution: The above shall apply, unless an international agreement binding for the SR stipulates otherwise.
Taxation of incomes of a SR non-resident, derived from sources on the territory of the SR
Taxation of incomes of a tax payer who is a tax resident of the other contracting state (i.e. the state having concluded an international double taxation agreement with the SR), and that were derived from sources on the territory of the SR, shall be governed by the provisions of such agreement and at the same time by the Income Tax Act. The condition for application of the agreement is the proof of tax residence of such tax payer (a SR non-resident) on or before the date of payment, remittance or crediting of the income for his benefit. If the income from sources on the territory of the SR has been derived by a resident of any state that has not concluded an international agreement with the SR, his incomes are taxed solely according to the provisions of the Income Tax Act.
Business of a SR non-resident on the territory of the SR through a permanent establishment situated on that territory
The incomes of SR non-residents from the activities performed through a permanent establishment situated on the territory of the SR mean the incomes derived from the source on the territory of the SR.
Permanent establishment - definition
According to the Income Tax Act, permanent establishment means, for the purposes of this Act, a fixed place of business or a facility for performance of activities, through which the SR non-resident performs, wholly or partially, his activity on the territory of the SR. Such place or facility must be stabile from the aspect of geography and time (classical permanent establishment).
Geographic stability of the fixed place is specified by the following list of examples: It is particularly the place from which the tax payer´s activity is managed, a branch, an office, a workshop, a workplace, a place of sale, a technical equipment or a place of exploration and mining of natural sources, and in this respect it should be stressed that the above provision provides for the list of examples of such permanent places.
Time stability of a fixed place is specified as follows: A place or facility for performance of activities is considered permanent, if it is used for performance of activities on fixed or repeated basis. In case of a single activity, the place or the facility where the activity is performed is considered fixed, if the period of performance of the activities exceeds six months (a single activity is performed for six months and one day), continuously or in several periods during twelve consecutive months.
A building site, a place of construction project and installation project (a building permanent establishment) means permanent establishment only if performance of the activities performed therein exceeds six months.
Permanent establishment means also any dependent person who acts on behalf of a SR non-resident, and who negotiates, on permanent or repeated basis, or concludes on its behalf any contracts under an authorization (an agency permanent establishment). The person acts on behalf of a SR non-resident, is he acts according to the non-resident´s instructions, and the SR non-resident controls the results of his activities and bears the business risk for them.
Caution: If, on the territory of the SR, the activities are performed by a resident of any state which has not concluded a double taxation agreement with the SR, existence of the permanent establishment is reviewed solely according to the definition stipulated in the Income Tax Act (i.e. according to the features mentioned above).
However, if on the territory of the SR, the activities are performed by a resident of any state which has concluded a double taxation agreement with the SR, existence of the permanent establishment should be reviewed not only according to the Income Tax Act, but also according to Article 5 of the relevant agreement, which regulate existence of a permanent establishment for the purposes of that agreement. The double taxation agreements stipulate the so-called „negative list of activities“ performed for the business, which exclude existence of a permanent establishment (these are the activities which belong to the scope of auxiliary or supporting activities).
The income derived in a permanent establishment covers also the incomes of shareholders in a company with unlimited liability and shareholders with unlimited liability in a limited partnership, who are SR non-residents, and which are derived by them from the shares in such companies/partnerships, as well as from any loans and credits provided to such companies/partnerships.
The income derived in a permanent establishment covers also incomes of the members of the European economic associations having registered seats on the territory of the Slovak Republic, who are SR non-residents, and which are derived from the membership in such association, as well as from the loans and credits provided to such association.
Calculation of the tax base or tax loss attributable to a permanent establishment
Calculation of the tax base or tax loss of a permanent establishment situated on the territory of the SR is performed according to the Income Tax Act and the Article named „Business Profits“ of the relevant double taxation agreement (provided the SR has concluded such agreement with the given state).
The tax base of a permanent establishment covers that part of the non-resident´s incomes (profits) that is derived from the business activities through the given permanent establishment (i.e. the incomes that are allocated to that permanent establishment). If the SR non-resident derives any incomes for example from lease of immovable properties, and such incomes are provably related to the property of the permanent establishment situated on the territory of the SR, then such incomes are included in the tax base of the permanent establishment.
In accordance with the Income Tax Act, the tax base of a permanent establishment may not be lower that the purported tax base that would be derived if the permanent establishment would act as an independent person and would perform the same or similar activities separately from its founder. The taxable incomes of a permanent establishment cover all incomes derived by the activity of the permanent establishment, and the tax expenses of the permanent establishment of a SR non-resident may include also any costs provably incurred by the founder of the permanent establishment for the purposes of that permanent establishment, e.g. for foundation and management thereof, any administrative fees, etc.
If the tax base cannot be determined as the balance between the incomes and expenses, the SR non-resident may apply e.g. the method of the profit/loss to costs ratio in respect of comparable activities of comparable tax payers or the method of the profit/loss to gross income ratio in respect of comparable activities of comparable tax payers, etc. The SR non-resident may request the tax administrator to approve the specific method for determination of the tax base of the permanent establishment, and if it is approved by the tax administrator, it must be applied minimum during one fiscal year, and it cannot be changed during the fiscal year.
The SR non-resident shall fulfill his tax obligation from the incomes derived by the permanent establishment on the territory of the SR by filing the tax return in the SR according to the Income Tax Act.
Example:
A German company (enterprise) sells manufacturing equipment on the territory of the SR. Such equipment is subject to a 2-year guarantee. The company established a repair workshop on the territory of the SR, performing guarantee and post-guarantee repair of the sold manufacturing equipment on the territory of the SR.
The employees of the repair workshop buy spare parts also from Slovak manufacturers, and such Slovak manufacturers supply such spare parts to the management of the enterprise in the Federal Republic of Germany. Has the German company established a permanent establishment on the territory of the SR?
According to Article 7 of the Agreement between the Czechoslovak Socialistic Republic and the Federal Republic of Germany for avoidance of double taxation and fiscal evasion with respect to taxes on incomes and capital No. 18/1984 Coll., any profit of the German business may be taxed in the Federal Republic of Germany only, provided the enterprise performs no activity in the SR through a permanent establishment which is situated there, but only in the extent that may be allocated to that permanent establishment. The general conditions for existence of a permanent establishment according to provisions of § 16(2) of the Act No. 595/2003 Coll. on income tax, as amended, and Article 5(1) of the Agreement, is the existence and the location of the fixed place (facility), which is stabile from the geographic and time aspects, and performance of the activities through that place (facility).
In the above case, the place where the German enterprise has established the repair workshop may be considered as fixed place. Further, it should be reviewed whether the German enterprise also performs the activity through that place and whether such activity is not limited to the auxiliary or supporting activities defined in Article 5(3) of the Agreement.
Generally, a permanent establishment may exist if the enterprise maintains a fixed place of business in order to supply spare parts to customers for the equipment supplied by the enterprise to them, and which are moreover repaired or maintained, provided it is in addition to the pure supply set forth in Article 5(3)(a) of the Agreement.
As such activity represents the basic and important part of the services provided to the customers of the German enterprise after sale of the equipment, such activities have not only the auxiliary or supporting character.
From the foregoing it follows that the given activity of the German enterprise performed through the workshop founded on the territory of the SR means existence of a permanent establishment on the territory of the SR.
Registration of permanent establishment
If an individual who is not registered as income tax payer has any permanent establishment on the territory of the SR, the individual is obligated to apply for registration with the tax administrator by the end of a calendar month following the month when the permanent establishment was founded. If the individual is already registered, it is required to report such information to the tax administrator within the same period. A notice on foundation of a permanent establishment is made by the individual on the form named Request for Registration of Individual, Section VI – Permanent establishment on the territory of the SR according to the Income Tax Act.
Incomes from services provided on the territory of the SR
They cover incomes from any services provided by a SR non-resident on our territory, including any consulting services (e.g. business, technical or any other consulting services), managing and agency activities, and similar activities, even if they are not provided through a permanent establishment. These cover solely the cases of a single provided service, provided that the period of performance of the activities has not achieved the adequate level of stability, based on which the SR non-resident as the service provider of such service would have a permanent establishment on the territory of the SR.
If a SR non-resident performs any services for a Slovak customer outside the territory of the SR, the income from such services is not taxable on the territory of the SR.
Caution: If, on our territory, any services are provided by a resident of any contracting state, then the taxation of his incomes are subject to the relevant agreement. The incomes of a SR non-resident from the services provided on the territory of the SR are taxed solely in the event that resident has a permanent establishment here, and the income is table both according to the Income Tax Act and under the relevant agreement. In such case, the SR non-resident shall include the incomes from the services provided by the permanent establishment (established on our territory) into the tax base of that permanent establishment and shall fulfill his tax obligation by filing a tax return following the end of the fiscal year.
If, on our territory, any services are provided by a resident of any non-contracting state (having not concluded an international agreement with the SR), and there is no permanent establishment on the territory of the SR, then the income is taxed by a withholding tax paid by the payer of the income (tax payer) in the rate of 19 %.
Example:
A Czech company (a CR resident) charges to a Slovak company (a SR resident) the following services: a commission for mediation of an order for building and installation works in Slovakia, an advertising campaign in mass media in Slovakia, the costs for training of the Slovak employees. The Czech company has no permanent establishment in Slovakia.
Is the Slovak company obligated to withhold the tax from payment for the services and to pay the withholding tax on the territory of the SR ?
If the given services were provided by a tax payer with limited tax obligation (a CR tax resident) on the territory of the SR, it is necessary to review whether they were provided through a Czech resident´s permanent establishment situated on the territory of the SR or whether they were provided through a permanent establishment situated in the SR. According to Article 7 of the Agreement between the Slovak Republic and the Czech Republic for avoidance of double taxation and prevention of fiscal evasion with respect to taxes on income and capital (published in the Collection of Acts under No. 238/2003), any profits of a Czech enterprise are taxed on the territory of the SR solely if the enterprise performs its activity on the territory of the SR through a permanent establishment situated on that territory. The expression “permanent establishment” is defined in Article 5 of that Agreement.
From the foregoing it follows that if the Czech enterprise did not provide the services to the Slovak resident through a permanent establishment, the incomes are not taxed on the territory of the SR, and the payer of the income (a SR resident) shall pay them with no obligation to withhold the tax in the SR.
Incomes from activities of an artiste, sportsman or acrobat performing on the territory of the SR
These are the incomes derived by a SR non-resident as an artiste, sportsman or acrobat on our territory or it is an income of their assistant or an income from any other similar activity performed or improved by a SR non-resident in person on the territory of the SR. It is not essential whether such incomes are derived directly or via an agent. Such incomes are subject, on our territory, to the withholding tax in accordance with the Income Tax Act and in accordance with the relevant agreement (if any). The tax will be withheld from payment to the SR non-resident by the payer of the income (the taxpayer). The double taxation agreements contain this issue in Article “Artistes and Sportsmen“.
If, on the territory of the SR, a SR non-resident derives the given types of incomes and paid the tax from such incomes in the form of withholding tax, the given person may decide whether to consider the incomes settled (as the tax has already been withheld) or whether the withheld tax will be considered an advance tax according to the Income Tax Act. If he decides to consider the withheld tax as advance tax, then he may file a tax return on the territory of the SR. The filed tax return shall include the given income in the taxable incomes in the relevant tax base (partial tax base), and the advance payment will be deducted from the tax. If the amount of the withheld tax exceeds the computed tax in the given tax return, the SR non-resident is entitled to claim tax refund equal to the given excess.
Example:
In December 2013, a Slovak company ordered performance of a Czech artist who performed at a private party of that company in Slovakia. Shall the income (remuneration) paid to that artist be subject to the withholding tax in Slovakia?
The incomes from sources on the territory of the Slovak Republic of a tax payer with limited tax obligation represent, according to § 16(1)(d) of the Act No. 595/2003 Coll. on income tax, as amended (hereinafter referred to as the Income Tax Act), the incomes from activities of an artist, sportsmen, acrobat or their assistants, and from any other similar activities performed in person or improved on the territory of the Slovak Republic regardless whether the incomes are derived by such person directly or via an agent.
Such incomes are subject to taxation on the territory of the Slovak Republic in the form of withholding tax in accordance with § 43(2) of the Income Tax Act. According to § 43(4) of the Income Tax Act, the tax base for the withholding tax on incomes set forth in clause 2 and 3 is represented solely by the income.
According to Article 16(1) of the Agreement No. 238/2003 Coll. between the Slovak Republic and the Czech Republic for avoidance of double taxation and prevention of fiscal evasion with respect to taxes on income and capital, the incomes derived by a CR resident as an artiste performing in public, namely as a theatre, motion picture, radio or television artiste or a musician, or as a sportsman, such personal activities performed in the Slovak Republic may be taxed, notwithstanding the provisions of Articles 7 and 14, in the Slovak Republic.
From the foregoing it follows that if the preliminary return shows any incomes of a Czech artiste (resident of the Czech Republic) from personal activities performed in the Slovak Republic, the incomes will be taxed on the territory of the Slovak Republic by a withholding tax paid by the tax payer, in the rate of 19 %.
The incomes of artistes, which are taxed by a withholding tax, may be considered tax advance payment according to § 43(6) of the Income Tax Act. If the tax payer (artiste) decides that the withheld tax will be considered advance payment of tax, such advance may be deducted from the tax in the relevant tax return (§ 43(7) of the Income Tax Act).
Income of the character of the so-called industrial royalties
These are incomes of a SR non-resident, derived from any payments by a SR resident and by a SR non-resident´s permanent establishment for provision of the right to use or for use of an object of industrial property.
They cover for example any payments for provision of the right to use (or for use) of computer programs (software), designs or models, plans, manufacturing and technical know-how and any other economically usable know-how, and others.
Such incomes are taxed on the territory of the SR by a withholding tax according to the Income Tax Act. The tax rate may be modified by the relevant double taxation agreement, in respect of a resident of a contracting state. Such issue is regulated in the agreements in Article „Royalties“. In case of a resident having registered seat or home address in any EU member state, the resident may apply the provision of the Income Tax Act, and may consider such tax paid in our Republic as an advance for tax.
Example:
A Slovak company – VAT payer shall pay to an individual with residential home in
Ukraine a royalty for use of an ordered software. Is the royalty payer (the Slovak company) obligated to withhold and pay tax in the rate of 19% in Slovakia?
In the event it is an ordered software which means a specific software product that was created for a specific user or has been adapted for the specific user upon his request and is not determined for wide distribution for users and for an end user that is unknown in advance, payment for provision of the right to use or for use thereof has the character, for tax purposes, of the so-called industrial royalty and belongs to the incomes according to § 16(1)(e) clause one of the Income Tax Act.
In the agreement between the Government of the Slovak Republic and the Government of Ukraine for avoidance of double taxation and prevention of fiscal evasion with respect to taxes on income and capital, published in the Collection of Acts under No. 173/1997 (hereinafter referred to as the „Agreement“), the given income is subject to Article 12 („Royalties“) and is taxed in the state of source (the SR), however, if the recipient (an Ukraine resident) is a real owner of the royalties, the imposed tax shall not exceed 10 % of the gross amount. The said income is taxed on the territory of the SR through the Slovak payer of income (the tax payer) in accordance with the provisions of § 43 of the Income Tax Act. The condition for application of the international Agreement is a proof of residence of the real owner of the royalties (the Ukraine resident) to the payer of royalties (the SR resident) before the date of payment of the royalties.
Income of the character of the so-called cultural royalties
This is the income of a SR non-resident that was derived from payments by a SR resident and by a SR non-resident´s permanent establishment for provision of the right to use or for use of copyright or any right similar to the copyright.
This group of incomes covers the incomes from provision of the right to use copyright to any literary, music, artistic works including cinematographic films, films or tapes and any other means of image or sound reproduction used for radio or television broadcasting, architectonic works, applied art works, etc.
The incomes of this character are taxed on the territory of the SR by a withholding tax according to the Income Tax Act, however, if the recipient is a resident of a contracting state, the rate may be modified by the relevant agreement in Article „Royalties“. However, in many double taxation agreements, the right to tax the so-called cultural royalties is granted to the state of residence (nor to the state of source, i.e. in this case the SR). It means that in the SR, these types of income will not be taxed.
Example:
A company having registered seat in the Slovak Republic pays to an individual with residential home in the U.S.A. a fee (royalty) for the right to publish his book. Is the Slovak company obligated to pay the withholding tax from the amount paid as the royalty? The tax payer with residential home in the U.S.A. has no permanent establishment, office or any other person in the Slovak Republic, that would act on their behalf or that would represent them. Is the Slovak company is obligated to pay the withholding tax from the paid amount, and what is the tax rate?
Any payments for provision of the right to use or for use of copyright or any other right similar to the copyright, derived by the tax payer with limited tax obligation from payment by tax payers with unlimited tax obligation or by permanent establishments of tax payers with limited tax obligation, are taxed by the withholding tax on the territory of the Slovak Republic according to § 16(1)(e)(2) of the Income Tax Act.
According to Article 12 („Royalties“) of the Agreement between the Slovak Republic and the United States of America for avoidance of double taxation and prevention of fiscal evasion with respect to taxes on income and capital (published in the Collection of Acts under No. 74/1994, hereinafter referred to as the “Agreement”), the royalties set forth in clause 3(a) of that Agreement, derived from sources on the territory of the Slovak Republic in favour of such US tax resident, which is the real owner thereof, may be taxed in the U.S.A. only.
From the foregoing it follows that the royalties paid to the US resident are not taxed on the territory of the source of income (on the territory of the SR) under the Agreement which supersedes the Income Tax Act according to § 1(2) of the Income Tax Act. This shall apply under the condition that the US resident has no permanent establishment on the territory of the SR, as defined in Article 5 of the Agreement and in § 16(2) of the Income Tax Act. The condition for applying the international agreement is a proof of residence of the real owner of the royalties (the US resident) to the payer of royalties (the SR resident) before payment of the royalties.
Interests and other gains
These are incomes of a SR non-resident, derived from payments by a SR resident and by a SR non-resident´s permanent establishment in the form of interests and other gains from provided loans and credits and from deposits on passbooks, deposits of funds on current accounts and deposit accounts, gains from equity in a common fund, incomes from share certificates derived from repayment thereof (refund), gains from bonds.
If a SR non-resident receives for example any interest income from a loan provided by a SR resident, the payer of income (the SR resident) may withhold the tax from such income according to the Income Tax Act. However, the tax rate or the option to tax that income may be modified by the relevant double taxation agreement, if any. The interests in the double taxation agreements are stipulated in Article „Interest“.
The tax obligation of a SR non-resident in respect of the incomes where the tax is paid in the form of withholding is considered fulfilled by withholding the tax. The tax paid in the form of withholding tax may be considered as advance payment of tax by residents of the member states of the European Union.
Caution: The given incomes shall not cover any gains from governmental bonds and state treasury bonds, any gains from deposit certificates, cash vouchers, certificates of deposit, and any other securities similar to them, and from any derivatives according to a special regulation.
Example:
For example, if a resident of the Kingdom of Norway receives any interest income from a loan paid by the SR resident, the SR resident shall pay, under the double taxation agreement, that interest income with no withholding tax. The condition of applying the international agreement is a proof of residence (the resident of the Kingdom of Norway) to the payer of interests (the SR resident) before the date of payment of such interests.
Income from lease or any other exploitation of movable assets situated on the territory of the SR
Movable assets situated on the territory of the SR cover also any motor vehicles and other transport means used by a SR resident or by a tax non-resident´s permanent establishment in international transport. If a SR non-resident receives any incomes of such character, they are taxed on our territory by a withholding tax. However, in this case it is important to specify whether it is operative lease of movable assets or financial lease of movable assets.
The operative lease of movable assets is covered, in respect of the contracting states in a majority of cases, by Article „Royalties“ and are taxed on the territory of the SR by a withholding tax. The amount of the tax is then modified by the relevant double taxation agreement.
In case of a movable asset which is leased in the form of „pure“ financial lease, the income (installments) for the financial lease should be divided into the amount of the principal and the amount of the interest. According to the Income Tax Act, the amount of the principal is not considered as income from sources on the territory of the SR, and therefore, it is not taxed on that territory. The amount of interests represents the income from a source on the territory of the SR and is taxed on our territory by a withholding tax in accordance with the Income Tax Act. In respect of the contracting states where such income is covered by Article „Interest“, the tax rate may be modified or the right to tax the interest income may be granted to the state of residence only.
Example:
How is the income of the tax payer with limited tax obligation (a FRG resident) derived from operative lease of movable assets situated on the territory of the Slovak Republic taxed?
Generally, the incomes derived by a resident of the Federal Republic of Germany for operative lease of movable assets situated on the territory of the SR from the payer of the income, being a SR resident, are taxed according to § 16(1)(e)(4) of the Income Tax Act and Article 12(2) of the Agreement between the Czechoslovak Socialist Republic and Federal Republic of Germany for avoidance of double taxation with respect to taxes on income and capital (published in the Collection of Acts under No. 18/1984) on the territory of the SR (the state of source of income), provided that the maximum tax rate according to Article 12(2) of the Agreement may not exceed 5 % of the gross amount of royalties.
In accordance with § 13(2)(h) of the Income Tax Act, any payments for use or for the right to use any industrial, commercial or scientific equipment may be relived from tax. The condition for applying the tax relief stipulated in the provision of § 13(2)(h) of the Income Tax Act is the proof that the payer of incomes and the recipient of incomes are legal entities and tax payers of the member states of the European Union, and that the recipient of incomes is the real owner thereof. At the same time, it is required to observe the percentage of direct shareholding in the registered capital during the statutory period of minimum twenty four consecutive months before the date of payment of the income.
Unless the conditions for the tax relief of the relevant income are satisfied, the incomes derived by the FRG resident from operative lease of movable assets used by the SR resident on that territory are generally taxed on the territory of the SR according to the Income Tax Act and Article 12 of the Agreement.
The said incomes are taxed by a withholding tax according to § 43(2) of the Income Tax Act through the tax payer (the payer of the income). The tax must be withheld by the tax payer at payment, remittance or credit of payment to the tax payer in accordance with the provision of § 43(10) of the Income Tax Act.
The tax payer is obligated to remit the withheld tax to the tax administrator on or before the 15th day of every month for the preceding calendar month. At the same time, the tax payer is obligated to report this fact to the tax administrator (§ 43(11) of the Income Tax Act), and the recommended print form is available at the web site www.financnasprava.sk.
The German resident may decide whether to apply the option to fulfill the given tax obligation on the territory of the SR by filing a tax return, where the withheld tax will be deducted from the due tax (§ 43(7) or whether the tax obligation will be considered fulfilled by payment of the withheld tax.
Income from transfer of movable assets situated on the territory of the SR
It covers the income not only from sale of movable assets, but also the income from transfer of any securities issued by tax payers having registered seat on the territory of the SR, from transfer of any property rights registered on the territory of the SR, and from transfer of any shares or equity in a business company or membership share in a cooperative having registered seat on the territory of the SR, derived by a SR non-resident on that territory.
In respect of a resident of a contracting state, taxation of such incomes is governed by the Income Tax Act and also by the provisions of Article „Gains from Alienation of Property“of the relevant double taxation agreement.
In the event the given incomes are taxed in the SR both according to the Income Tax Act and according to the relevant agreement (in respect of a contracting state), they will be included by the SR non-resident, upon expiry of the fiscal period, in the tax return filed in the SR. In respect of the tax payers who are not tax residents of the members states of the European Union, the Slovak payer of income is obligated to withhold an advance from the paid income in order to secure the tax.
Example:
A tax resident of the Austrian Republic derived in 2013 an income from sale of a security from sources in Slovakia. Is that income taxed on the territory of the SR? Is the Austrian resident obligated, due to the given sale, to file a tax return on the territory of the SR?
According to § 16(1)(e)(5) of the Income Tax Act, the incomes from sources on the territory of the SR, derived by a tax payer with limited tax obligation, cover also any incomes from transfer of securities issued by a tax payer having registered seat on the territory of the SR.
According to Article 13 („Gains from Alienation of Property“), clause 4 of the Agreement between the Czechoslovak Socialist Republic and the Austrian Republic for avoidance of double taxation with respect to taxes on income and capital, published in the Collection of Acts under No. 48/1979, any gains from alienation (sale) of property, that are not set forth in clauses 1, 2, and 3 of that Article, may be taxed only in the contracting state where the alienator has residential home or registered seat (Austrian Republic).
According to the Agreement, in the given case, the incomes are not taxed in the SR (in the state of source), but in the Austrian Republic only (in the state of residence), and they are paid by the payer of income (the SR resident) in full amount without being obligated to withhold any tax or to pay any advance tax. The condition of applying the given Agreement is a proof of the recipient´s residence (the Austrian resident) before the date of payment of that income.
Incomes from sale or lease of immovable properties situated on the territory of the SR
If a SR non-resident derives any incomes from sale, lease or any other exploitation of immovable properties situated on our territory, such income is taxed on our territory in accordance with the Income Tax Act and in accordance with the double taxation agreement (in respect of a contracting state).
If, on our territory, a SR non-resident sells any immovable property which is situated here, the income is taxed according to the Income Tax Act and Article „Gains from Alienation of Property“in the relevant double taxation agreement (if any).
If, on our territory, a SR non-resident leases any immovable property which is situated here, the income is taxed according to the provisions of the Income Tax Act and Article „Incomes from Immovable Properties“ in the relevant double taxation agreement (if any).
In the event that in the fiscal period, a SR non-resident derives any incomes from sale or lease (or any other exploitation) of immovable properties, the tax obligation on the territory of the SR will be fulfilled by filing a tax return upon expiry of the fiscal period. In respect of tax payers that are not tax residents of the member states of the European Union, the Slovak payer of income is obligated to withhold an advance from the paid income in order to secure the tax. This shall apply under the condition that the given incomes are not relieved from tax in accordance with the Income Tax Act or under an international agreement.
Examples:
Example No. 1: An individual – a CR resident - sold in 2013 an immovable property which had been purchased from a Slovak resident in 2012, and which is situated on the territory of the SR. Is the individual obligated to file a tax return on the territory of the SR, and to pay the tax on that income in the SR?
According to Article 13 („Gains from Alienation of Property“), clause 1 of the double taxation agreement between the Slovak Republic and the Czech Republic (published in the Collection of Acts under No. 238/2003) and § 16(1)( f) of the Income Tax Act, any gains derived by a CR resident from alienation of any immovable property set forth in Article 6 of the given agreement, and situated in the Slovak Republic, are taxed in the Slovak Republic.
As the given income is not relieved from tax according to § 9(1)(a) of the Income Tax Act (the condition of holding the ownership title to that immovable property for minimum 5 year) it represents a taxable income that is settled by the tax payer (the CR resident) on the territory of the SR in person by filing a tax return within the period set forth in § 49 of the Income Tax Act. In respect of such income, the tax payer may apply any tax expenses set forth in § 8(5) of the Income Tax Act.
Example No. 2: A tax resident of Great Britain leased in 2013 his apartment in Slovakia. What are his tax obligations in the SR? Should such incomes be taxed on the territory of the SR? His income for the year 2013 is EUR 6,000.
In accordance with Article 6 („Income from Real Property“) of the Agreement (No. 89/1992 Coll.) between the Government of the Czech and Slovak Federal Republic and the Government of the United Kingdom of Great Britain and Northern Ireland for avoidance of double taxation with respect to taxes on income and capital), the income from immovable property may be taxed in the contracting state where such property is situated (Slovak Republic). The expression „may be taxed“ in no event means that the tax payer may elect the state where such income will be taxed, but it grants to the SR the right or the option to tax the income which is derived by the Great Britain resident. The application of such right by SR is governed by its national tax regulations.
In accordance with § 16(1)(f) of the Income Tax Act, the incomes of a tax payer with limited tax obligation from sources on the territory of the SR cover also any income from transfer, lease, and any other exploitation of an immovable property situated on the territory of the SR.
According to § 9(1)(g) of the Income Tax Act, the incomes from lease of immovable properties (§ 6(3) of the Act) are relieved from tax up to the amount of EUR 500. The tax payer´s tax base shall include only the incomes which exceed that amount. In respect of the derived incomes, the tax payer my apply the corresponding tax expenses.
As that income is taxed on the territory of the SR, the given tax payer (the GB resident) is obligated to fulfill the tax obligation on the territory of the SR in person by filing a tax return in accordance with § 32 of the Income Tax Act and within the period set forth in § 49 of the Act.
