Allow us to inform you through this year’s Tax News on the tax news for 2017. This includes, for example social security and health insurance premium relief for working pensioners, new item deductible from taxable income, disclosure of archived accounting documents, exit taxation and other tax interesting points.
Minimum wages and overtime pay
The new year brings the regular increase in minimum wages. The new minimum wages applicable as of 1 January 2018 amount to EUR 480/month for employees. This also implies an increase in the minimum hourly wages from the original EUR 2.50/hour to EUR 2.759/hour.
As of 1 May 2018, there is an amendment to increase the overtime pay and pay for work done during national holidays. For the first time, this change will also affect one-off job contracts. The current law obliges the employer to pay extra for overtime work, work during national holidays and during night shifts as extra percentage of wages. This extra pay will now have to be calculated using at least the minimum hourly rate of EUR 2.759 in the following manner:
- For every hour worked overtime during Saturday or Sunday, the employer will be obliged to pay to the employee an extra amount on top of the regular wages of at least 100% of EUR 2.759;
- For every hour worked during a night shift (between 10pm and 6am), the employer will be obliged to pay to the employee an extra amount on top of the regular wages of at least 50% of EUR 2.759 = EUR 1.3795;
- For every hour worked under hardship, the employer will be obliged to pay to the employee an extra amount on top of the regular wages of at least 20% of EUR 2.759 = EUR 0.5518;
- For every hour worked during a national holiday, the employer will be obliged to pay to the employee an extra amount on top of the regular wages of at least 100% of EUR 2.759.
Illegal employment
As of 1 January 2018, the National Parliament approved amendment No. 82/2005 Coll. on illegal work and illegal employment. The law introduces changes that will benefit employers. If an employer omits to register an employee for social security purposes before the employee starts the work, the employer is liable to a penalty of at least EUR 2,000. If the employer omits to register 2 and more employees, the penalty amounts to at least EUR 5,000. It does not matter whether the employer corrects this by making a retroactive registration afterwards.
As of the new year, more reasonable conditions will apply. If an employer registers an employee within 7 days after starting work, the penalty will no longer apply. However, if a labor office starts an audit of the employer during the 7-days period, the penalty will still apply.
The obligation to register employees for health insurance purposes remains in effect without any changes.
Job offer
The amendment introduces a new obligation for the employers that remains to be seen in practice. As of 1 May 2018, upon publication of a job offer, an employer will be obliged to publish the offered wages (the so-called basic wages). If an employer subsequently enters into a work contract with the employee, the employer cannot agree on basic wages in the contract that would be lower than what had been published in the job offer.
Social security and health insurance premium relief for working pensioners
For a number of years, a relief for social security and health insurance premiums has been in place for working students, which they can apply based on a signed declaration. When receiving income of up to EUR 200/month, the amount of social and health insurance premiums is negligible.
As of 1 July 2018, the relief will also newly apply to pensioners, including those in early retirement. The relief will not be as substantial as for students, but will surely make all working pensioners happy nonetheless. The relief can be claimed with one employer only for the amount of up to EUR 200. The principle remains the same as for students. The amount of social security and health insurance premiums for the working pensioners will be as follows: 4% for the employee, 18.75% for the employer.
It is not recommendable for early pensioners to exceed the income amount of EUR 200 as it would trigger mandatory pension insurance, which would lead to the loss of entitlement to pension, the payment of which would be duly suspended by the social security office.
Tax relief
As of 2018, a new item deductible from taxable income has been put in place for taxpayers that will apply to payments for medical stays in spas. The list of qualifying spas has been published by the Ministry. The maximum amount of the deductible amount is EUR 50/year. This fixed amount can also be claimed in respect of wife and children that also took part in the medical procedures. However, the service must be purchased directly from the qualifying spa and not from an intermediary.
As of 2018, tax bonus for interest paid from residential loans is in effect. Tax bonus shall be granted to young people of up to 35 years of age who draw a loan to finance property. The tax bonus will amount to 50% of the interest paid in the given year up to the maximum amount of EUR 400/year.
Non-taxable part of taxable income for taxpayer
The first increase in the non-taxable part of taxable income for taxpayers since 2014 is going to apply as of 2018. In the last four years, the amount has been EUR 3,803.33. As of 2018, the amount shall increase to EUR 3,830.02 EUR/year and EUR 319,17 EUR/month. The amount of the credit is calculated from the current minimum income (19.2 times the minimum income). EUR 19.2 * EUR 199.48 = EUR 3,830.02. The new amount of the credit will first apply to salaries and wages for January 2018 and when filing 2018 tax returns.
Exit taxation
Exit tax shall apply in cases when a taxpayer (subsidiary of a foreign multinational) decides to terminate business activities in Slovakia and migrate to another state in terms of its tax residency. Such a taxpayer will be obliged to tax all capital gains that relate to the Slovak business activities, regardless of the fact whether the gains had been realized or not as of the exit date. Such capital gains will be subject to the 21% tax rate.
A mitigating clause relates to tax collection point as the tax shall be paid within the period of up to 5 years. However, such payment schedule will only be possible in case that the property is transferred to a state where subsequent collection of tax can be reasonably assured.
Changes in the VAT securitization rules
As of 1 January 2018, there will be new criteria for establishing tax risks for the purpose of VAT securitization for VAT registration applicants that are:
- natural person or legal entity, with the VAT debt of EUR 1,000 and more, if such tax debt had not been paid as of the day of filing the VAT registration application;
- natural person or legal entity to which VAT registration was cancelled due to repeated breach of conditions stipulated in Article 81 Section 4 Subsection b, Point 2 of the VAT Act.
The procedure to refund the VAT security is governed by the VAT Act and applies when the following occurs:
- VAT registration process is suspended and the cash security or its part had already been deposited;
- VAT registration is cancelled within 12 months of the VAT security deposit date in cases where the security had not yet been fully used up.
Disclosure of archived accounting documents
As of 2018, the period for archiving accounting documents has been harmonized with the period for archiving financial statements. As financials statements are drawn up from accounting documents, the new rule is reasonable but not very practical for entrepreneurs. The obligation to archive accounting documents will extend from the current 5 years to 10 years and will also apply to documents for which the original 5-year period had not yet elapsed.
A rule that accounting documents can be archived in a written or digital form, based on the entrepreneur’s own decision, remains in effect.