Slovakia amends Act on Income Tax

The government of Slovakia made amendments to its Act on Income Tax in October.

Below is a summary of the major changes; find out more detail at https://www.financnasprava.sk

Monetary and non-monetary benefits provided to health care providers, their employees or health care professionals

On 30 October 2014, The National Council of the Slovak Republic approved an amendment to the Act no. 595/2003 Coll. on Income Tax. The amendment relates to the method of monetary and non-monetary benefit taxation provided to health care providers, their employees or health care professionals. Non-monetary benefits include e.g. refreshment provided to the participants in a conference, accommodation, etc.

Withholding tax payers and the introduction of the notification duty

The taxation method of the above stated benefits by withholding tax, provided they are paid by the holder, shall be applied with no regard to the fact whether they are paid to a natural person or to a legal entity. In terms of monetary benefits, these shall be taxed by the holder who paid them. The holder is obliged to pay the withheld tax to the tax administrator by the 15th day of each calendar month for the preceding calendar month in which such benefits were provided.

As far as non-monetary benefits are considered, these shall be taxed by the recipient of the benefit, i.e. the health care provider, their employee or the health care professional who received such benefit from the holder. Under the amendment, health care providers are obliged to pay the tax from the received non-monetary benefit on a quarterly basis, i.e. by the end of the month following the respective calendar quarter.

Monetary as well as non-monetary benefits provided to health care providers – natural persons and legal entities – shall be subject to the 19% withholding tax. Pursuant to the amendment, the withholding tax shall not be applied provided that the total amount of benefit for the respective calendar quarter does not exceed 10 EUR.

Tax exemptions:

  • benefits from for the execution of clinical trial are not subject to withholding tax,
  • withholding tax shall not apply to the non-monetary benefits provided by the holder in form of constant education of health care providers, their employees or health care professionals under a special provision. Such benefits are exempt from personal income tax under the Section 9 (2) of the Act on Income tax,
  • participation in constant education means only education which is organised in accredited study programmes of constant education or in non-accredited educational activities; a non-accredited educational activity means a single educational activity,
  • meals, accommodation, and travel costs provided in relation to constant education are not considered to be participation in constant education; therefore such non-monetary benefits represent taxable income of a tax-payer,
  • among the benefits exempt from the tax are e.g. payment of a lecturer, rental of a conference room, equipment, etc. Benefits which are not exempt from the tax are travel costs, meals and accommodation provided by the holder to doctors and other health care professionals,
  • all benefits paid by the holder on behalf of health care providers, their employees or health care professionals participating in other educational or professional events which are not considered obligatory constant education represent taxable income of a recipient.

In conclusion, as of 2015, a new taxation method of monetary and non-monetary benefits provided to health care providers, their employees or health care professionals has been applied. The Ministry of Finance of the Slovak Republic expects increase in efficiency of the income taxation in this area.

The amendment has extended the definition of a benefit provider by including pharmaceutical companies which are, together with holders of a medicament registration, holders of a medicament wholesale licence, holders of a medicament production licence, producers of medical equipment, producers of dietary food, and the third party through which the benefits are provided, considered to be the Holder.

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