As of 1 January 2025, a series of changes under the so-called consolidation package will come into force in Slovakia. This bill, which is currently awaiting only the President's signature, introduces changes in the areas of income tax and value-added tax (VAT). The main goal of these changes is to stabilise public finances and reduce the deficit of the state budget.
However, the amendment is facing criticism not only from the parliamentary opposition, but also from experts, as it was adopted through an expedited comment procedure. From the first publication of the wording of the law to its approval by the National Council of the Slovak Republic, only 11 working days have passed.
In this article, we look at the main points of the proposal and their potential risks for businesses and individuals.
- Dividends paid to natural persons will be once again taxed at a lower rate of 7% (instead of the current 10%).
- Income tax for small businesses (legal persons) with a turnover of up to EUR 100,000 is reduced to 10%.
- Income tax for small businesses (natural persons) with a turnover of up to EUR 100,000 is reduced to 15%.
- A new increased income tax rate of 24% is introduced for legal persons with a turnover of more than EUR 5 million.
- The tax bonus for children is being reduced
- The possibility to remit 2% of the tax paid to pensioner parents is introduced.
- The Slovak Republic has adopted measures to promote electro-mobility (reduction of taxation of employee's non-cash income from 1% to 0.5% of the vehicle price when using a company electric/hybrid vehicle also for private purposes, which is depreciated in depreciation group 0).
- Increase in the standard VAT rate to 23% and introduction of reduced rates of 19% and 5% for selected goods and services.
- Introduction of the Financial Transaction Tax.
- An increase in the maximum assessment base for social security contributions is introduced, which will increase the tax burden on the price of labour in Slovakia.
Changes to income tax
From 1 January 2025, corporations and individuals will be subject to significant changes in taxation:
- New 24% tax rate for legal persons: For legal persons with an annual turnover (taxable income) above EUR 5 million, a new income tax rate of 24% is introduced for accounting periods starting from 1 January 2025.
- Reduced tax rate for small businesses of legal persons and natural persons entrepreneurs (income according to Section 6 of the Income Tax Act): Companies and entrepreneurs with a turnover of up to EUR 100,000 will have their income tax rate reduced to 10% for legal persons and 15% for natural persons.
- Reduction of withholding tax on dividends paid to a natural person: Dividends paid to natural persons will be once again taxed at a reduced rate of 7% instead of the current 10%.
- Reduction of the tax bonus for children: The amendment also introduces changes to the tax bonus for children, with the new system basing the amount of the bonus on the parent's income. The tax bonus will now only be available for children up to the age of 18. The new child tax bonus will be EUR 100 per child under 15 and EUR 50 per child aged 15-18. However, the amount of the tax bonus will be reduced depending on the income of the parent. If the employee's total income in 2025 is higher than EUR 25,740, the parent will only be entitled to only a part of the child tax bonus. Employees whose monthly gross salary exceeds approximately EUR 2,480 in 2025 (including all bonuses) will only be entitled to a reduced tax bonus. Employees whose monthly gross salary exceeds approximately EUR 3,630 will lose the right to any tax bonus. If the tax bonus for children has been claimed monthly in a parent's salary and it is found in the annual settlement (tax return) that the employee's income in 2025 was more than EUR 25,740, the employee will be required to repay the proportional part of the tax bonus for children to which they were not entitled.
- A reduction in the taxation of an employee's non-cash income from 1% to 0.5% of the cost of the vehicle has been adopted when the company's electric/hybrid vehicle is also used for private purposes, which is depreciated in depreciation group 0.
- 2% of the tax paid to pensioner parents: This new ruling will allow natural persons - children to remit 2% of the tax paid to their parents who are recipients of old-age, disability or military service pensions.
- An increase in the maximum assessment base for social insurance from EUR 9,128 to EUR 15,730 is introduced, which will make the cost of labour more expensive for employers of talent as well as reduce the net pay for employees who have a gross income of more than EUR 9,129.
Changes to VAT
- Increase in the standard VAT rate: One of the most significant changes is the increase in the standard VAT rate from 20% to 23%, which will be reflected in the prices of goods and services.
- Introduction of a new reduced VAT rate of 19%: A reduced VAT rate of 19% is introduced for selected products, beverages, electricity and non-alcoholic beverages served in restaurants.
- Reduced VAT rate of 5%: A reduced VAT rate of 5% will be introduced on selected services and products, such as accommodation services, books, e-books, medicines, restaurant meals and others.
- The exact list of goods and services with reduced VAT rates can be found here.
- The reduced VAT rate of 19% applies to goods in Section 1 of Annex 7 of the VAT Act and services in Section 1 of Annex 7a of the VAT Act.
- The reduced VAT rate of 5% is applied to other goods and services as specified in Annexes 7 and 7a of the VAT Act.
- The reduced VAT rate of 10% has been repealed.
Financial Transaction Tax
- A new Financial Transaction Tax will be implemented. For more information, see our article.
The 2025 consolidation package brings major tax changes that will affect both the business environment and ordinary citizens. Increases in VAT, a new income tax for large companies, a new Financial Transaction Tax and other measures may increase costs for businesses and consumers. Criticism from experts highlights the risk of a weakening competitiveness, the outflow of talent and foreign investors from Slovakia, downsizing and a countrywide increase in prices.
Grant Thornton offers expert tax advice to help you prepare for new tax rules brought into force, optimise your business and minimise the impact of changes. We focus on ensuring your business operates efficiently and in accordance with current legislation. We will help you adjust accounting systems, plan financial transactions and take advantage of available tax reliefs to ensure you meet all legal requirements while optimising your tax liabilities.
Our goal is to ensure that you can focus on growing your business while we take care of complex solutions in the area of tax consulting.
