• Income Tax Act No. 595/2003 Coll. (Sections 2/n-r, 17/5, 17/6, 17/7, 18, 18a)
• Double Tax Treaties
• Financial Reporters No. 14/1997, 20/1999, 3/2002 where OECD Transfer Pricing Guidelines from 1995 and 1997 were published in Slovak language
• Financial Reporters No. 1/2009, 8/2014, 5/2015, 7/2016, 12/2018 where administrative guidance of the Slovak Ministry of Finance on content of the transfer pricing documentation were published

As an OECD Member State and an EU Member State, Slovakia adheres to the OECD Transfer Pricing Guidelines and to the EU Code of Conduct on transfer pricing documentation for associated enterprises. Slovakia also acceded to the EU Arbitration Convention, which establishes a procedure to resolve disputes where double taxation occurs between enterprises of different Member States as a result of an upward adjustment of profits of an enterprise of one Member State.

Applicability

The arm’s length principle is based on a comparison of the terms which were agreed in any business or financial transactions between related parties and the terms which would have been agreed between unrelated parties in similar business or financial transactions, in comparable circumstances.

The review of comparability of the terms is made by confronting in particular the businesses conducted by the parties, including, but not limited to their production, assembly works, research and development, purchase and sale, the scope of their business risks, the characteristics of the compared property or the service, the terms agreed between the parties to the transaction, the economic environment in the marketplace, and the business strategy. The terms shall be considered comparable if there is no difference at all or if only minor adjustments would compensate such a difference.

If there is a difference between the prices agreed in transactions of related parties, and the prices applied between unrelated parties in comparable business transactions, as long as such difference results in a reduction of the tax base or increase of tax loss, the related party shall increase its income tax base by that difference. As from January 1, 2023, the materiality threshold was introduced for controlled transaction (or group of controlled transactions that may be aggregated), for which such tax base adjustment is required. As qualified controlled transaction is considered a legal relationship or other similar relationship in which one or more related parties achieve taxable income or tax-deductible expense exceeding EUR 10,000. In the case of loan transaction, the qualified transaction is with a principal amount above EUR 50,000.

General terms

As from January 1, 2023, it is also extended that by economic tie shall be understood along:

• the relation between tax resident taxpayer and his permanent establishments abroad,
• the relation between tax non-resident and his permanent establishments in Slovakia,
• the relation among permanent establishments of taxpayers that are considered as related parties in the sense of the abovementioned, and the relation between such permanent establishment and such taxpayer
• also the relation among permanent establishments of the taxpayer.

Content

The transfer pricing documentation represents a set of information, data and facts which demonstrate and explain the method of taxpayer’s price formation in controlled transactions.

Transfer pricing documentation in general consists of general and of specific part.

General rules

Transfer pricing documentation shall be prepared for each controlled transaction separately or for each group of aggregated controlled transactions.

The documentation should be prepared in Slovak language. However, as from January 1, 2023, it can be filed with the tax administrator also in a foreign language. If the latter occurs, the tax authority may upon request ask for translation to Slovak within 15 days from the delivery of the request.

Transfer pricing documentation shall be kept for the respective tax period. If no new facts occur – facts that would affect the valuation method for controlled transactions, when preparing documentation for the next period – a taxpayer may refer to information stated in documentation for the previous taxation periods.

Deadlines

The taxpayer shall submit the transfer pricing documentation within 15 days from delivery of the tax administration’s or financial directorate’s request. Such request may be for the transfer pricing documentation for the relevant tax period, sent no earlier than on the first day following expiry of the period for tax return filing for that particular tax period. Due to short 15-day period it is recommended having the documentation prepared in advance.

Documentation types

There are three different types of transfer pricing documentation in terms of the required minimum scope:

Obligation to keep the documentation

Starting with the tax period, which begins after December 31, 2017, complete documentation has to be kept by the following taxpayers:

• taxpayers who follow for statutory purposes the IFRS in booking or closing of booking – the obligation to keep a complete documentation is with respect to significant cross-border controlled transactions;
• taxpayers that are engaged in the cross-border controlled transaction with value exceeding 10 million EUR per tax period;
• taxpayers who perform significant business transactions with a related party seated in a state which Slovakia has no double tax treaty or international tax information exchange agreement with;
• taxpayers who are engaged in the controlled transactions with respect to which they opt for an APA (Advance Pricing Agreement)
• taxpayers who asks for secondary adjustments for the controlled transaction according to double tax treaties
• taxpayers who are engaged in the controlled transactions with respect to which there was a request filed for a mutual agreement procedure according to a tax treaty;
• taxpayers who claim a tax relief – the obligation to keep a complete documentation is with respect to significant cross-border controlled transactions.

In other cases, the taxpayer is obliged to keep a basic documentation for the following transactions:

• cross-border controlled transactions with annual value exceeding 1 million EUR;
• non-significant transactions with a related party seated in a state which Slovakia has no double tax treaty or international tax information exchange agreement with;
• significant cross-border controlled transactions, if the taxpayer’s total operating and financial revenues per tax period exceed 8 million EUR;
• significant domestic controlled transactions, if the taxpayer claims a tax relief.

If neither complete documentation nor basic documentation is prepared on controlled transaction, taxpayer is obliged to keep on such transaction a shortened documentation (following the template prepared by the Slovak Ministry of Finance), except for some cases, when it is sufficient to properly report controlled transactions in income tax return only.

Also, some Slovak public entities may qualify for keeping of shortened documentation.

In that respect it has to be mentioned that simplified types of documentation may in the listed cases be sufficient from administrative point of view but will not help a taxpayer to prove the application of the arm’s length principle, unless a comparability analysis is made. Therefore, any material transaction from the perspective taxpayer is recommended to be followed by functional and risk analysis and benchmarking.

Any traditional and other transfer pricing methods according to OECD Transfer Pricing Guidelines can be used while the principle of the best method shall be applied. Also, combination of more methods is possible if necessary. If appropriate, other methods may be used by Slovak taxpayers, too.

Methods based on comparison of prices

Methods based on comparison of profits

Taxpayers in Slovakia can ask the tax authority for an Advance Pricing Agreement (APA) – an approval of a particular method of transfer pricing – at least 60 days before the beginning of the tax period during which the approved method shall apply. By this way they can approve the chosen methodology and avoid potential disputes as far as the method is concerned. Only the method can be approved with the APA, not the used transfer prices itself.

The tax administration shall issue a decision on the approval of the valuation method valid for no more than five tax periods. Extension for next five years is possible if the taxpayer demonstrates that no change has occurred in the conditions upon which the decision was issued.

The fee for applying for the APA as from January 1, 2017 does no longer depend on the value of the business case, but is to be set as follows:

From January 1, 2022, the statutory fee is half for a taxpayer who is considered highly reliable at the time of application based on the evaluation of the tax reliability index. For further information regarding the tax reliability index of taxpayers valid from January 1, 2022 please see our News Flash.

The reduced amount of the fee for the APA for highly reliable taxpayers will be applicable only after the first delivery of the notification of the index of tax reliability.

For non-compliance with the Transfer Pricing documentation obligations a penalty up to EUR 3,000 for a breach of a non-monetary obligation can be levied. Moreover, the tax base may be adjusted and additional tax may be levied by Slovak tax authorities during the tax inspection.

The tax authority can assess a tax difference up to 10 years after the end of year, in which the obligation to submit a tax return has arisen, i.e. tax return can be a subject of tax inspection for 11 years.

6*ECB rate or 20% p.a. is the penalty rate from the tax difference instead of 10% p.a. or 3*ECB rate (higher rate shall be applicable). As from January 1^st, 2017 stricter penalties apply for intentional breach of the arm´s length principle. Doubled penalties will apply to taxpayers who decrease their tax base or increase their tax loss intentionally with the help of Transfer Pricing. 

VAT

The possibility to decrease a tax base if a supplier’s receivable becomes uncollectible

From January 1, 2021, a possibility to correct a tax base when suppling goods or services is introduced directly into the act, if the taxpayer or the supplier didn’t receive a payment or if his receivable became uncollectible. This applies to the supply of goods and services in the domestic country, at a price at which the tax was applied by the taxpayer.

The receivables are considered as uncollectible for this purpose when it may concern cases such as receivables recovered in execution proceedings, receivables from customers in bankruptcy proceedings, in the process of discharge from debt or in a case of the customer´s extinction or death.

The receivable or its part with a value not exceeding EUR 300 including the tax becomes uncollectible after 12 months from the due date of the receivable, if the taxpayer can prove that he took the steps to collect the receivable within his regular business activities.

The taxpayer might not be able to correct the tax base in case of, e.g. supply of goods and services to persons with a special relationship to the taxpayer, i.e. persons with close business, employment and family ties with the taxpayer, who have a high probability of jointly coordinated business proceedings.

If any payment is received after the adjustment of the tax base in connection with an uncollectible receivable, the taxpayer is obliged to make a correction of the reduced tax base in the amount corresponding to the tax base and the tax calculated from the received payment. The recognition of a tax base adjustment at the supplier is conditioned by the preparation and distribution of the correction document.

The possibility of a tax base correction applies as well to cases when a taxpayer supplies goods and services for which the tax base is specifically determined (sale of tourism services, supply of used goods, antiques, collectibles and artworks) and when a customer or a third party doesn’t pay the taxpayer or pays only partially.

The period within which the taxpayer can correct the tax base in case of total or partial non-payment of the consideration is 3 years.

Export of goods

From January 1, 2020, an option is given to the taxpayer to prove the dispatch or transport of the goods which he supplies to the destination in the territory of third countries, in cases when:

• under customs legislation, the taxpayer may lodge an oral customs declaration for the export customs procedures, or
• in a case of an act treated under the customs legislation as a customs declaration for the export customs procedures,
• also by other evidence. According to the customs regulations, the evidence may be for example, a proof of payment, a copy of the delivery note confirmed by the recipient and others.

Provision of services and distance sale of goods (e-commerce)

The change in the term „distance sale“

From July 1, 2021, the term “distance sale” shall be replaced by the term “intra-Community distance sale of goods” and by term “distance sale of goods imported from third countries”.

Intra-Community distance sale of goods

The place of the delivery of goods shall be the member state in which the dispatch and transport of goods for the customer ends (so-called the member state of consumption).

The threshold EUR 10.000 for the application of the exemption:

• To support micro-companies trading in the territory of the European Union, a single threshold of EUR 10.000 has been set for all member states. Whereas, in addition to the distance sale of goods, this threshold shall also apply to the supply of telecommunication services, radio and TV broadcasting services and electronically supplied services if they are provided to a non-taxable person.
• In a case when the entrepreneur has his registered office, a place of business or a residence in only one member state and the total value of the goods sold at distance, and of the above-mentioned digital services provided to another member state other than the one in which the entrepreneur is established doesn’t exceed the value of EUR 10.000 in the current or previous calendar year, excluding the tax, the entrepreneur shall be entitled to taxation of the supply of such service by the tax of the member state, in which he has a registered office. When selling goods at distance to another member state, the entrepreneur is entitled to pay the tax of the member state in which the transport of the goods begins (usually it is a supply of goods from the member state where the supplier is established).
• In a case when the entrepreneur meets all conditions for taxation of distance sale of goods in the member state where the transport of the goods begins, he may choose administratively more demanding taxation of goods in the member state of the termination of the transport of the goods to the customer and taxation of the services in the member state of the establishment of the customer. However, it is necessary to do so for at least two calendar years.

Distance sale of goods imported from third countries

The place of the delivery shall be determined based on the facts whether the member state of the import is identical to the member state of the dispatch or transport termination. If this is not the case, the place of the delivery of the goods is the member state in which the dispatch or transport to the buyer ends (so-called member state of consumption).

In case when the goods are sold at distance and are imported to the same member state as the member state of the dispatch and transport termination, the place of the delivery of the goods is in this member state only in a case, when the supplier applies a special scheme for such sale of goods (“one stop shop”) according to § 68c. If the supplier doesn’t apply the mentioned special scheme to such deliveries, the place of the delivery shall be determined according to the basic principle and the tax shall be levied exclusively on the import of goods.

New fiction of supply of goods from July 1, 2021

If a taxable person facilitates the supply of goods in the territory of EU made by a taxable person not established in the EU through electronic interface, he shall be deemed in accordance with the amendment as a person who received these goods from the supplier and who supplied them to the buyer himself.

The legal fiction in the sale of goods to the final consumer via the online platform, this from economic point of view one transaction shall be considered, for the VAT purposes, as two transactions. Separately shall be determined the place of the delivery of goods for the first supply to the platform operator and separately for the second supply to the customer by the platform operator. The transport will be assigned to the supply of goods by the taxable person to the final customer and at the same time, the supply of goods by the original supplier to this taxable person in the EU shall be exempt from VAT with the right to deduct the tax.

If the taxable person facilitates the distance selling of goods imported from the territory of third countries in consignments with their intrinsic value not exceeding EUR 150 through the use of an electronic communication interface, the fiction that the taxable person has received and delivered the goods shall also apply.

Import of consignments whose value doesn’t exceed EUR 22

From July 1, 2021, the exemption from tax on the imports of consignments with a value not exceeding EUR 22 is abolished.

Optional special schemes “one-stop-shop” (OSS)

The optional one-stop-shop scheme will be possible from July 1, 2021 also for other services provided to non-taxable persons whose place of the delivery is in the member state of the consumption, as well as for the intra-Community distance sale of goods and certain domestic supplies of goods. The possibility to apply OSS to certain distance sales of goods imported from third countries shall be also introduced.

The persons applying the special schemes of the OSS shall submit only single tax return in a single member state of the EU for all deliveries in the whole EU.

More detailed information about OSS scheme and VAT changes can be found HERE or in our eBook about VAT changes in the EU and their impact on e-commerce valid from July 1, 2021 HERE.

Income tax

Income tax registration

The registration of taxpayer ex officio should be postponed from January 1, 2021 to January 1, 2022 due to technical reasons of the Financial Administration and the individual registers. The current method will be valid until December 31, 2021.

From January 1, 2021, the obligation to register taxpayers who have a business license granted in another state, but due to the existence of a place of effective management in Slovakia, they are taxpayers with unlimited tax liability in Slovakia.

Request for annual settlement

From January 1, 2021, an employee may ask any employer for the annual settlement, who is a taxpayer and who has paid him a taxable wage during the tax period.

Changes in the case of application of employee tax benefits

From January 1, 2021, the law should explicitly regulate that if an employee´s employment is terminated, the employer will take into account the tax bonus and the non-taxable part of the tax base for the last time in the calendar month in which the employee´s employment ended, unless declared by employee otherwise.

Tax advances

In the case of advances on corporate income tax, the obligation to pay the difference on tax advances paid from the beginning of the next tax period to the deadline for submitting a tax return should be cancelled from January 1, 2021, in case that on the basis of the submitted tax return, the taxpayer would be obliged to pay higher tax advances for the following tax period.

The tax administrator will send a notification on the amount and maturity of income tax advances to all taxpayers from January 1, 2022.

Extension of incomes of non-residents that are considered as incomes from a source in Slovakia

The income of a taxpayer with limited tax liability from a source in Slovakia shall include also the income from the sale of virtual currency if the payment comes from a taxpayer with unlimited tax liability in the territory of Slovakia.

Extension of CFC rules to natural persons

In order to limit a tax avoidance and to tax in Slovakia shares in profits (dividends) of a foreign company or of an entity, whose income weren´t tax at least at the minimum effective tax rate or are domiciled in non-cooperating countries, the amendment to the Income Tax Act shall introduce rules for controlled foreign companies (so-called CFC rules) from January 1, 2022, even for natural persons. Originally, the change was proposed to be accepted from January 1, 2021, but it was approved with a delayed effectiveness from January 1, 2022.

By applying the CFC rules, in Slovakia, the profit shares (dividends) in a CFC company shall be taxed at the moment of their potential claim of a natural person’s taxpayer.

The tax rates apply the same as for the taxation of profit shares, i.e. 7 % or 35 % for non-cooperating countries. The taxpayer will be able to set off the tax paid in the following tax periods when the dividends are essentially paid.

More detailed information about the amendment to the act from the natural person point of view in Slovakia can be found HERE.

Reverse hybrid entities

In connection with the implementation of Council Directive (EU) 2017/952 (the so-called ATAD 2 Directive), the proposed act supplements the Income Tax Act with legislation concerning a reverse hybrid entity. At the same time, the definition of a transparent company was introduced,

Pursuant to the new provision of the Income Tax Act for a reverse hybrid entity, the incomes attributable to foreign (non-resident) shareholders meeting the criteria of 50 % or more in relation to transparent companies will be taxed at the level of a transparent company at corporate income tax rate of 21 %, if these incomes of the non-resident cannot be taxed through a permanent establishment in Slovakia according to Section 16 (3) or according to Section 16 of the Income Tax Act and the incomes will not be taxed in the country of residence of the non-resident, nor abroad.

The subjects of collective investment that have a wide range of unit-holders where the ownership of the fund is dispersed and where no unit-holder has a controlling interest, diversified portfolio of securities and are subject to investor protection regulation in Slovakia are granted the exemption to the application of this provision.

The provisions concerning the tax regime of a reverse hybrid entity shall apply for the first time in a tax period beginning on January 1, 2022 at the earliest.

Adjustment of the tax residence

From January 1, 2021, the Income Tax Act cancels the exemption from tax residence for natural persons who cross the borders of the Slovak republic on a daily basis for the purpose of performing a dependent activity in the Slovak republic and who would otherwise be taxpayers with unlimited liability in Slovakia. The aim is that the tax residence of natural persons who cross the borders of Slovakia on daily basis for the purpose of performing dependent activity should be determined according to the tie-breaker rule in the relevant double tax treaty.

Besides, the definition of the place of the effective management of a legal person for the purposes of determining tax residence is clarified. The place of effective management is considered a place where most of the business and management decisions are made or taken on behalf of the legal entity, regardless of who makes these decisions.

More detailed information about the changes in the Income Tax Act in Slovakia can be found HERE.

A new institute of a “micro-taxpayer”

From 2021, new institute of so-called “micro-taxpayer” came into effect in Slovakia and its main purpose is to support SMEs. A micro-taxpayer is a natural person – entrepreneur, i.e. a self-employed person or a legal person whose taxable incomes (revenues) for the taxation period don’t exceed the amount of EUR 49,780. The definition also contains a negative description, e.g. for dependant persons carrying a controlled transaction.

Taxpayers who are considered as „micro-taxpayers“ apply several benefits, such as:

• Preferential regime when depreciating movable assets
• Preferential regime for tax provisions
• More convenient rules for amortization of tax losses

More detailed information about the „micro-taxpayer“ institute in Slovakia can be found HERE.

DAC 6: Reporting obligation for cross-border arrangements

The reportable cross-border arrangement is every cross-border arrangement if it contains at least one of the hallmarks listed in the Annex no. 1a of Act no. 442/2012 Coll. as amended. The first reporting obligations must be fulfilled by January 31, 2021 and by February 28, 2021 in relation to reportable cross-border arrangements introduced between June 2018 and December 2020.

Information on the reportable cross-border arrangement shall be notified by the obliged person to the Financial Directorate of the Slovak republic, electronically via the financial administration portal and using the electronic structured DAC6 Notification form.

In relation to the new arrangements from January 1, 2021, the obliged person is obliged to file the information within 30 days from the availability, preparation or implementation of the reportable arrangement and subsequently within 30 days from the last day of the calendar quarter, if new information is available to the intermediary since the last submission.

The tax office is entitled to impose a fine of up to EUR 30,000, even repeatedly, in the event of non-compliance with the above obligation.

More detailed information about the reporting obligation for the cross-border arrangements can be found HERE.

Exemption from interest for late payment and imposition of a sanction

Interest for late payment and imposition of a sanction for not paying or levying tax, tax difference or tax advances which became due from March 12, 2020 to December 31, 2020 within the statutory period and amount are exempted, if the taxpayer pays for them or levies them no later than June 30, 2021.

Motor vehicle tax

A change for tractors and semi-trailers

A new annex to the Act no. 1a is being introduced, and it sets fixed tax rates specifically for tractors and semi-trailers. For every tractor and semi-trailer without semi-trailer combination of vehicles, the next lower tax rate for the relevant category will be applied. At the same time, obligatory pairing of tractors and semi-trailers to semi-trailer combination of vehicles in order to apply the next lower tax rate was abolished.

Annual tax rate adjustment

A preferential adjustment of the annual tax rate according to the age of the vehicle was introduced for vehicles of categories M2, M3, N3. The tax rate for vehicles of a category M2, M3, N3:

• is decreased by 50% during the first 36 months from the date of the first vehicle registration,
• is decreased by 40% during the following 36 months,
• is decreased by 30% during the following 36 months,
• is decreased by 20% during the following 36 months,
• is decreased by 10% during the following 12 months,
• annual tax rate is used from 157. month.

The annual tax rate for vehicles of a category O4 is decreased by 60% regardless the age of the vehicle.

More detailed information about the motor vehicle tax can be found HERE.

New obligations for auditing individual financial statement

New package of obligations called „Lex korona“ made changes also in § 19 Verification of financial statements by an auditor in the Accounting Act.

Since 2021, companies are obliged to audit their financial statements for two consecutive accounting periods, if they meet at least two of following criteria:

• net turnover exceeded EUR 6,000,000,
• total sum of the assets exceeded EUR 3,000,000,
• average number of employees exceeded 40.

These limits will increase again from 2022.

Changes in the accounting procedures for subsidies

Act no. 349/2020 Coll. with effect from December 9, 2020 changed Act no. 71/2013 Coll. on the provision of subsidies within the competence of the Ministry of Economy of the Slovak Republic (referred to as “Act No. 71/2013 Coll.”), to pay rent in the next wave of a pandemic related to the spread of COVID-19.

A landlord in the name of a tenant and on his own behalf applies for rent subsidy. Upon request, the tenant shall immediately provide the landlord with the cooperation necessary for the purpose of providing the rent subsidy. The rent subsidy may be provided to the tenant in the amount in which the rent discount was provided upon agreement between the landlord and the tenant, but not more than 50 % of the rent for the period of difficult use.

More detailed information can be found on the website of Ministry of Finance of the Slovak republic.

In § 52a of the measure of the Ministry of Finance of the Slovak Republic no. 23054/2002-92, by which the details on accounting procedures and framework financial statements for entrepreneurs accounting in double-entry bookkeeping (referred to as „DE accounting procedures), paragraph 8 is added, according to which in the tenant´s accounting on the basis of the subsidy approval notice, the regulation of the rent subsidy is charged to account 346 – Subsidies from the state budget and with a corresponding entry in favour of account 648 – Other income from economic activity in material and temporal connection with the incurred rental costs.

The amount in which the tenant waived the performance from the rent subsidy in favour of the landlord is charged to account 321 – Suppliers and with corresponding entry in the favour of account 346 – Subsidies from the state budget. In the landlord´s accounting, the amount in which the tenant waived the performance from the rent subsidy in favour of the landlord is charged in favour to the materially relevant receivables account and with a corresponding entry to the debit of account 315 – Other receivables.

Changes in accounting for goodwill in 2021

From December 31, 2020 (Measure no. MF/011805/2020-74), the second sentence is specified in § 37 par. 11 of accounting procedures, which adjusts the calculation of goodwill on a merge if the merging entity has an interest in the successor entity, whereas it is not a merge in which own shares or own business shares are created according to the Commercial Code (it is not a merge according to the § 26 par. 7 of accounting measures).

In this case, the goodwill shall be booked as a difference between the real value of the share attributable to the carrying amount of the assets and liabilities in the successor entity and the value of equity of the successor entity, which falls on the share of the merging entity in the successor entity.

Changes in accounting for unforeseeable receivables

From January 1, 2021 (Measure no. MF/011805/2020-74), in § 52 par. 11 of accounting measures, a method of accounting is established: – reduced VAT, if after the tax liability arose, the taxpayer did not pay in full or partially for the supply of goods or services and his receivable from this supply became unforeseeable according to the § 25a of Act no. 222/2005 Coll. on value added tax, as amended by Act no. 344/2020 Coll. Such VAT reduction shall be charged to account 343 – Value added tax with a corresponding entry in the accounts receivable; – corrections of deducted VAT in case of unforeseeable receivable according to the § 53b of the cited act. Such a correction of  deducted VAT shall be charged to account 343 – Value added tax with a corresponding entry in the accounts payables.

Minimum wage

From January 2021, the minimum wage was increased from EUR 580 to the amount of EUR 623. The hourly minimum wage increased from EUR 3.333 to EUR 3.580 per hour.

Increase in the minimum wage will also affect the amount of minimum wage entitlement that is based on the degree of work difficulty and wage benefits for night shifts, on-call duty, Saturday work and Sunday work.

The non-taxable part of the taxpayer also increases to EUR 375.95 per month. The maximum assessment base for social insurance is also increased from January 1, 2021 to EUR 7,644.

Tax bonus for dependent child

January 1, 2021 – June 30, 2021

• EUR 46.44 – child up to 6 years
• EUR 23.22 – dependent child over 6 years

July 1, 2021 – December 31, 2021

• EUR 46.44 – child up to 6 years
• EUR 39.47 – child over 6 years and up to 15 years
• EUR 23.22 – dependent child over 15 years

Meal vouchers and financial contribution for meal

From March 1, 2021, it is possible to provide financial contribution for meal to employees other than those listed above, with an exception of those whom the employer provides meals in his own catering facility or a catering facility of another employer.

The employer is obliged to allow his employees to choose between a meal voucher or a financial contribution for meal.

More information about meal vouchers and financial contribution for meal in Slovakia can be found HERE.

Housework and telework

The amendment to the Labour Code introduced clarification of the conditions for housework and telework. If the employee performs work that could be performed at the employer´s workplace, regularly and within specified weekly working time or its part in his/her household, it is considered as a housework, respectively a telework, if he performs work using information technologies, in which electronic data transmission at a distance takes place on a regular basis.

The amendment also specified obligations of the employer regarding the measures to be taken by employees in such a form of work and extended them to housework. On the employee side, a new obligation for employee performing housework or telework is to immediately inform the employer about technical issues associated with malfunction of technical or software equipment, malfunction of internet connection or other similar causes that prevent him from performing work.

More information about the housework and telework can be found HERE.

CFC rules mean an extension of the rules for controlled foreign companies even to natural persons, respectively the owners of companies who are trying to reduce or eliminate their tax obligations in Slovakia by shifting their income to tax havens. However, this situation will not be possible from January 1, 2021. The application of the CFC rules in Slovakia contributes to the taxation of the profits (dividends) from controlled foreign companies at the moment of their potential claim by natural persons and not when they are paid, as has been the case so far.

The controlled foreign companies will pay such forced dividends so the taxpayer (natural person) may subsequently set off the tax already collected from these assigned profit shares. However, the tax deduction will occur even when the controlled foreign company decides to reinvest the profit. The company´s previous losses are not considered.

Therefore, the tax rates applied to the allocated and not yet paid income will be the same as in the case of actually paid profit shares (dividends) – 7%, respectively 35%. The higher tax rate will apply to controlled foreign companies from non-cooperating countries. In the case of natural persons (tax residents of the Slovak republic), these incomes will be taxed through a special tax base. For the first time, the amount allocated to the allocable taxpayer will be taken from the economic result (profit or loss) of the controlled foreign company for the tax period ending during 2021.

The attributable amount is calculated from the positive economic result reported by the controlled foreign company, decreased by corporate income tax and demonstrably paid in the proportion that in the case of direct participation, the profit share would apply, if it would have been due. Or in a case of another income (revenue) due to actually exercised control over the company, unless there is no right to a share of the profit (dividend) and when paying the real share of the profit (dividend), the exemption method would not apply to this income in the case of double taxation treaties.

The same applies in the case of indirect participation or in the proportion of actual control, if the controlled foreign company does not have capital. The difference is in the so-called offset of the tax paid by the company abroad.

The income is allocated from the economic result of the controlled foreign company as reported abroad. It is not necessary to transform the income into an economic result according to the Slovak regulations. The economic result may similarly to §17 par. 1 of the Income Tax Act be based on double-entry bookkeeping, IFRS (International Financial Reporting Standards) or in the case of non-bookkeeping, e.g. from the difference between revenues and expenses.

It will be possible to extend the deadline for tax return filling by 6 months even if the natural person will tax her/his incomes according to the special tax base. The real control means the right to decide on the management of the company´s or entity´s assets and the income from these assets, as well.

By this term we mean a legal entity or another entity with a corporate seat abroad, if the following conditions are met:

• natural person alone or together with the dependent persons has a direct, indirect or indirect derived share in the capital, voting rights or has the right to share in the profit of at least 10%, or has real control over this company
• the controlled foreign company is a taxpayer of a non-cooperating state or is a non-taxpayer of a non-cooperating country, but the effective taxation of income is less than 10%

The effective taxation is calculated by the taxpayer as a share of demonstrably paid tax of the controlled foreign company and its economic result (profit or loss) is expressed as a percentage.

The CFC rules have three exemptions:

• a minimum threshold of EUR 100,000, at which the taxpayer does not have to apply the rule. However, if the attributable income exceeds this minimum threshold the full amount of income shall be included in the special tax base.
• they are primarily applied by a legal entity according to the 17h of the Income Tax Act. If the legal entity does not include the income of a controlled foreign company in the tax base in the relevant tax period, a natural person will apply the CFC rules by including the income attributable to the special tax base.
• The CFC rules exclude situation in which a controlled foreign company from an EU Member State or from a country, that is a contracting party to the EEA (European Economic Area) Agreement and the taxpayer can prove that this company actually carries on business activities in that country, while he/she can support the statement by the real existence of company premises, the employee´s activities, material equipment and so on.

If a natural person cannot obtain information on the economic result of the controlled foreign company, nor the amount of the tax paid within the extended deadline for filing a tax return of natural persons, then it will be based on the amount of the expected economic result and expected tax paid by this company

If a natural person subsequently finds out the data necessary for the correct taxation of income and he/she submits an additional tax return, the tax office will not apply the procedure under the Tax Code applied when filing the additional tax return.

The tax administrator shall proceed in the same way, even if the taxpayer submits additional tax return due to the fact the demonstrably paid tax has been adjusted in the controlled foreign company. If the tax administrator finds out that the taxpayer has not taxed the income under CFC rules, he will impose a fine in the amount of the tax difference levied on the taxpayer = 100% fine.

It is important to consider whether it is direct, indirect or indirectly derived share.

• Direct participation – if a natural person has a direct participation in a controlled foreign company and the dividends from the relevant tax period are actually received from this company subsequently or if a share on business (participation) in the company is sold, then in these cases the taxpayer will be able to reduce the calculated tax by the tax paid under the CFC rules by individual companies. In the case when an entire direct share in the company is about to be sold and the income from the sale of this share would not be taxable in Slovakia, the amount of tax collected will be returned to the taxpayer.
• Indirect participation – a taxpayer who has an indirect participation in a controlled foreign company cannot receive dividends, respectively to sell a share in participation, to which he/she could apply a reduction of the already collected tax. In order to avoid double taxation, it is possible to reduce the calculated tax by the provably paid tax by the company abroad in the proportion attributable to the taxpayer when assigning the amount of the company´s income. However, this does not apply to non-cooperating countries.

Obligation to audit financial statement by an auditor

Since 1 January 2020, obligation to audit ordinary and extraordinary financial statements arises to Public Company and Limited Partnership, which meet the size criteria.

In accounting period from 1 January 2020, audit of financial statements by auditor arises to Cooperative, Simple joint stock company, Limited Liability Company, Joint Stock Company, Public Company and Limited Partnership, which on the balance sheet date for the previous accounting period met at least two of following criteria:

• total sum of the assets exceeds 2 000 000 EUR,
• net turnover exceeds 4 000 000 EUR,
• average number of employees exceed 30 in the accounting period.

Auditor’s obligation using IFRS

Following the amendment to the Act on Accounting, auditors have to audit whether an accounting entity has data in their statement of the selected data presented from financial statement compiled in accordance with IFRS.

Minimum wage

From January 2020, the minimum wage was increased from EUR 520 to the amount of EUR 580. The hourly minimum wage increased from EUR 2.989 to EUR 3.333 per hour.

Increase in the minimum wage will also affect the amount of wage benefits for night shifts, on-call duty, Saturday work and Sunday work.

Tax bonus for dependent child

The increase in the minimum wage also affects the taxable income threshold for applying a tax bonus for dependent child. It is 6 times the minimum wage per year, therefore for 2020 it will be in the amount of EUR 3,480.

If an employee does not apply the tax bonus monthly but once a year in the annual accounts or tax return and will be temporarily incapable of work for such a period that he will not have the taxable income of at least EUR 3,480 in 2020, he/she will not be entitled to the tax bonus.

However, if the employee applies the tax bonus on a monthly basis, he/she will be entitled to a tax bonus in each month when he/she receives taxable income of more than EUR 290 and even if the taxable income does not reach EUR 3,480 for the entire taxation period, he does not have to refund the tax bonus.

Annual leave for parents

The annual leave entitlement is 5 weeks for every employee who permanently takes care of a child, regardless of the age.

Stricter appraisal of non-payment of alimony

Since 1 January 2020, criminal liability for not paying alimony arises to natural persons already after 2 months of non-compliance with their obligation. Its purpose it to tighten the body of the crime by shortening the length of non-payment of alimony from three to two month.

In the terms of this novel, culpability of this criminal act doesn’t extinguish if the alimony replacement is provided by the Office of Labor, Social Affairs and Family (ÚPSVaR).

Employment of family members

Since 1 January 2020, family members can assist not only self-employed, but also limited liability company which has only one shareholder that is a natural person.

Allowance to child’s sports activity

By amendment of the Labor code, which entered into force on 1 January 2020, allowance for the child’s sporting activity was established Its purpose is to support sports activities between children and youth. The employer’s role is to refund employee’s expenses in the form of voluntary allowances, which are connected to the regular sports activities of his/her child.

The allowance is designed for children and youth, who engage in sports activity under the supervision of authorized person that is registered as a sport organization in the register of legal persons in the field of sports.

An employer can provide the allowance covering up to 55% of eligible costs, amounting up to maximum of 275 EUR in the calendar year for all employee’s children. The allowance is exempt from taxes and other contributions.

Vacation days

In the Federation of Bosnia and Herzegovina, employees who established an employment relationship or have a discontinuance of employment longer than 15 workdays, are entitled to min. 20 and max. 30 vacation days, which are granted after 6 months of continuous work. Until the half year is fulfilled, the employee has the right to 1 day off for each month spent working.

Once entitled to the full possible amount of vacation days, employees must take at least one vacation at once with the minimum duration of 12 working days.

In the Republic of Srpska, employees who established an employment relationship or have a discontinuance of employment longer than 30 workdays are entitled to at least 20 vacation days, but extra vacation days can be granted by the employer. The employees are entitled to vacation after 6 months of continuous work. Until the half year is fulfilled, they have the right to 1 day off for each month spent working.

Once entitled to the full possible amount of vacation days, employees must take at least one vacation at once with the minimum duration of 12 working days.

Additional paid leave

Employees in the Federation of Bosnia and Herzegovina are given altogether 7 working days of additional leave per year, which can be drawn in case of a marriage of the given employee, birth of a child, sickness or death of a close family member or voluntary donation of blood. In the Republic of Srpska, the additional leave for the same reasons amounts to 5 working days.

In the calendar year there are 10 public holidays celebrated in the Federation of Bosnia and Herzegovina and 12 in the Republic of Srpska, however, none of them are included in the paid annual leave; neither are national holidays and weekly rest days.

The impact of employment termination and probation period on the vacation leave

In Bosnia and Hercegovina, in case an employee’s contract is terminated but their vacation leave was not fully drawn due to the employer, the employer has to pay compensation for the remaining vacation days. There are no further consequences in case the vacation leave is overdrawn by an employee, who’s contract has been terminated, since their employment ends with the termination date as written in their termination agreement.

As for the probation period, which can last up to maximum 6 months, employees have the right to 1 day off for each month worked, unless prior to the date of employment they worked for another employer for more than 6 months and were entitled to a full annual leave.

Child- and health-related absence

The compulsory maternity leave lasts for 42 days in the federation of Bosnia and Herzegovina, but mothers may take one full year off after a child is born. Upon agreement, after the 42-day compulsory maternity leave, the father may continue to use the leave (which is considered as the paternity leave) instead of the mother. The same is applicable to the Republic of Srpska, however, the compulsory leave for mothers lasts for 60 days. When an employee draws their maternity or paternity leave, their right to vacation days is dismissed. Upon the employee’s return from the leave, they regain the right to a paid vacation. Parental leave is granted only in case of an adoption of a child, or in case a child with serious developmental disability is born; however, there are no detailed regulations in this regard.

Each employee is entitled to health care and a paid doctor’s visit during their annual leave. This is applicable also to employed pregnant women. As for other employees, there is no limitation for the duration of sick leave, however, it depends on the legal basis of the leave or illness, and on the place of exact residence. A compensation of salary is granted when health-related leave is taken.

Vacation allowance and compensation

The vacation allowance and compensation are regulated individually in the Employment Rulebook by employers. In the Federation of Bosnia and Herzegovina, the allowance is calculated in the amount equalling max. the 50% of the average net salary paid in the preceding calendar quarter. This amount is non-taxable as specified by the Income Tax Law, but the rest above the 50% is subject to taxation. In the Republic of Srpska, the employee receives the vacation allowance in the amount of at least 100% of their average salary from the decisive period, which is subject to taxation.

Vacation days

According to the Croatian Labour Code, after 6 months of work each employee is entitled to at least 4 weeks of vacation leave in a year, which equals to 20 working days. During those 6 months, employees are granted only the proportional amount of overall vacation days.

Each year, one part of the vacation leave must be taken in one block, at least in amount of two weeks, i.e. 10 working days.

Additional paid leave

Additional leave can be drawn but must be either due to important personal needs such as wedding of the employee, childbirth or death of a close family member. The extra days off can amount to max. 7 working days each year.

In Croatia, there are 14 public holidays in one calendar year as of 2020, however, they are not included in the paid annual leave; neither are national holidays and weekly rest days.

The impact of employment termination and probation period on the vacation leave

When a contract is terminated or comes to an end without renewal, an employee receives a compensation for their remaining vacation days. In case an employee’s vacation leave is overdrawn, the employer cannot request a compensation from the employee even though they took more vacation days than entitled to.

Employees who are in a probation period have the right to a proportional amount of vacation days, i.e. to one-twelfth of vacation leave for each full month of work.

Child- and health-related absence

During maternity leave, employees exercise the right of compulsory maternity leave for a continuous period of 98 days, of which 28 days are taken before the expected birth and 70 days after the birth of the child. These employees are entitled to vacation days when returning from maternity leave. Parental leave may be drawn after the child reaches 6 months of age and may be used until age 8. As for paternity leave, mothers may pass on their remaining leave to fathers after their compulsory  leave.

As for the health-related absence, the employer pays for a sick leave up to 42 days. After that, the sick leave is drawn at the expense of the Croatian Institute for Health Insurance. According to the Labour Code, the minimum amount of the paid sickness benefit is 70% of the salary compensation base, but the employer may also pay a higher amount than obliged. Therefore, an employee is entitled to a salary compensation while on sick leave. As for a doctor’s visit, is treated as a sick leave. Pregnant female employees are entitled to at least 1 examination per month.

Vacation allowance and compensation

When the vacation leave is drawn, an allowance is paid to the employee, calculated from the average monthly salary of the preceding calendar quarter. Due to this calculation, the amount of wage compensation can be affected and increased e.g. by bonus payments and other monetary rewards in the decisive period. If the employee is provided a wage or part of a wage that pertains for a longer period than one calendar quarter (e.g. yearly bonuses) during the decisive period, its proportionate part is used for the calculation of average earnings.

Vacation days

In the Czech Republic, employees are granted 20 working days of vacation leave, or 4 weeks altogether, as specified in the Labour Code. Exceptions concern some professions, such as government sector workers, who are granted 5 weeks or teachers and academic staff with 8 weeks of vacation days.

Requirements for the vacation days to be granted are the following:

• Continuous employment under the same employer;
• Duration of work performance for at least 60 days in one calendar year;
• If an employment does not last for a whole year, the employee is entitled to a proportional part of the annual vacation leave – i.e. one twelfth of the leave for each calendar month of employment duration;
• In case an employee performed less than 60 days of work, they have the one twelfth of annual vacation leave for every 21 working days.

If the vacation days are not taken at once in one block, at least one leave must take 2 weeks long, unless agreed otherwise with the employer.

Additional paid leave

Additional leave is granted in the amount of 5 working days per year to workers who are performing particularly hard work or are exposed to risks of health (further specified in Section 215 of the Labour Code) and had a continuous employment under the same employer for at least one calendar year. In case the one year is not fulfilled, the entitlement of the additional leave is decreased to a proportional part, i.e. one twelfth of annual leave for every 21 days of work.

In the Czech Republic, there are 13 public holidays in one calendar year. They are not included in the paid annual leave, however, employees are entitled to salary compensation for salary loss due to such public holiday. National holidays and weekly rest days are not included in the paid annual leave either.

Additional paid leave can be drawn but must be either due to important personal needs such as wedding of the employee, childbirth or death of a close family member.

The impact of employment termination and probation period on the vacation leave

In general, when an employee does not draw all their vacation leave in the Czech Republic, the remaining days get transferred to the next year and must be scheduled till the 30th of June.

If an employee’s contract is terminated, but their vacation leave has not been fully drawn, the employee is entitled to a salary compensation for the remaining days of their leave. In some cases, when a new employment immediately follows the terminated one, the remaining leave may be transferred to the new employer upon the employee’s request, based on an agreement between all parties involved.

If an employee’s contract is terminated and their vacation leave has been overdrawn, the employee must return to the employer the salary compensation paid in excess.

During the probation period, the proportional vacation entitlement is applicable. The general basic rule is, however, that not the employee schedules the vacation leave but the employer, who must respect the employee´s legitimate interests and take into consideration their operational needs. Therefore, in principle, the employer may rule out the possibility of taking a vacation during the probationary period either generally or in specific cases, which is then subject to the principle of equal treatment. Regardless, taking vacation proportionately prolongs the probationary period in the amount of days drawn.

Child- and health-related absence

Maternity leave, which lasts 28 weeks in the Czech Republic, is considered as work performance for the purposes of leave entitlement, and thus the entitlement for vacation leave emerges during the maternity leave. On the other hand, no vacation entitlement arises during parental leave, which can last up to 3 years of the child’s age, and the allowance may be decreased according to the statutory provisions. The Labour Code allows an employee to take their remaining vacation between maternity and parental leave, but not during any of them.

The paid paternity leave lasts 1 week (i.e. 7 calendar days without interruption) and starts based on the employee’s choice. The paternity leave may be taken within the first 6 weeks from the date of the child´s birth, or from the date when the child is taken into foster care. The father may also take parental leave starting from the day when the child is born.

Regarding health-related absences, an employee is entitled to an unlimited paid time off during medical examination or treatment in a health care institution for the necessary time period, if such procedure is performed in a suitable facility nearest to the employee´s home or workplace and could not have been performed outside the working hours. The same applies to doctor´s visits during an employee´s pregnancy.

Vacation allowance and compensation

As stated above, the vacation allowance equals the proportional part of leave, where less than 1 day is rounded to half a day. The same applies when calculating one twelfth of the leave entitlement.

Salary compensation is calculated in the amount of average earnings, i.e. the average gross earnings from the decisive period (including bonuses and other variable payments), which is the preceding calendar quarter, divided by the hours of work performed in the given period.

The average earnings are ascertained on the first day of the calendar month following the decisive period. In case the employee did not perform work for at least 21 days within the decisive period, probable earnings are taken into consideration according to Section 355 of the Labour Code.

Taking the vacation leave after a quarter when premiums, extraordinary monthly or quarterly bonuses were paid, the value of average earnings is increased based on the calculation. However, this does not apply to the payment of annual bonuses, as those are distributed within the 4 quarters when the average earning is calculated.

Vacation days

Hungarian employees have the right to take 20 working days of vacation leave annually, which is granted in a proportional amount to the time spent at work in the given year. Vacation days are allocated by the employer and should contain at least 14 consecutive calendar days once in a calendar year, when the employee is exempt from work and availability. The weekly rest period, public holidays and any further days off are taken into consideration.

Additional paid leave

Additional leave is granted to workers according specific criteria, based on:

• Age: employees older than 25 years are entitled to 1 extra day off. Employees above 28 years receive 2 extra days, above 31 years 3 days, above 33 years 4 days, above 35 years 5 days, above 37 years 6 days, above 39 years 7 days, above 41 years 8 days and above 43 years 9 days. After the age of 45, employees have the right to 10 days of additional leave each year.
• Number of children raised: only child parents are entitled to 2 additional days off; employees with two children are granted 4 extra days; more than 2 children bring 7 extra days off each year.

Additional leave is also granted for employees with reduced ability to work, employees eligible for disability allowance or employees eligible for special aid for the blind and employed minors under the age of 18.

In Hungary, there are 11 public holidays in one calendar year, however, they are not included in the paid annual leave; neither are national holidays and weekly rest days.

The impact of employment termination and probation period on the vacation leave

In Hungary, in case an employee’s contract is terminated but they still have remaining days of vacation leave left, compensation shall be provided. No certain rule applies in case an employee’s contract is terminated and their vacation leave has been overdrawn, but the compensation paid in excess might be reclaimed by the employer.

During the probation period, which can last no longer than 3 months, an employee may take vacation leave only based on the employer’s decision. In principle, the employer may rule out the possibility of granting a vacation during the probationary period.

Child- and health-related absence

Maternity leave lasts 24 weeks in Hungary and is considered as time spent at work in terms of the calculation of annual leave. Male employees are granted a fathers’ leave of 5 days; in case of twins the amount of extra days off is 7. In both cases, the leave may be drawn only once. Additional unpaid parental leave may be taken for the purposes of taking care of a child up to 3 years of age, or a prolonged unpaid leave for taking a personal care of a child until the age of 10 years.

The Hungarian Labour Code does not specify any entitlement of an employee to a paid doctor’s visit, neither in the case of pregnancy.

Vacation allowance and compensation

Employers are entitled to a salary compensation for the time spent on vacation, which is calculated from the wage base or fixed supplement in effect at the time when the vacation was drawn or from the performance-based wage or wage compensation paid in the preceding six calendar months before the vacation.

Vacation days

According to the Polish Labour Code, employees are entitled to a specific amount of vacation days, based on the number of years worked, such as:

• An employee, who has worked less than 10 years, is entitled to 20 days per year;
• An employee, who has worked 10 years or more, is entitled to 26 days per year.

Furthermore, employees in Poland shall draw at least 14 consecutive calendar days at once, which is precisely the half of the overall vacation leave. However, there are no sanctions foreseen for not meeting the obligation and, upon request, the vacation can be shorter than 14 days in bulk, being divided into parts.

Additional paid leave

Additional paid leave may be granted upon the occurrence of extraordinary family events, mainly:

• Marriage of employee, birth of a child or funeral of employee’s spouse, child, father, mother, step-father or step-mother; in these cases, employees are granted 2 additional days off;
• Marriage of employee’s child, or the death and funeral of their sister, brother, mother-in-law, father-in-law, grandmother, grandfather or any other person falling under the employee’s care; in these cases, employees are granted 1 additional day off;

In Poland, there are 13 public holidays in one calendar year, however, they are not included in the paid annual leave; neither are national holidays and weekly rest days.

The impact of employment termination and probation period on the vacation leave

In case the allocated leave has not been drawn in full extent due to the termination or expiry of an employment relationship, an employee shall receive an equivalent compensation. In case the allocated leave has been overdrawn by the employee and their contract has been terminated, the employer cannot reclaim any compensation.

An employee during the probationary period is entitled to a leave proportional to the period they carry out working. They acquire the right to take vacation after each month of work amounting to one twelfth of the leave they are entitled to after one full year of employment.

Child- and health-related absence

Maternity leave lasts 20 weeks in Poland, while a compulsory time off is 14 weeks. The length of the leave increases in case of the birth of twins. During maternity, employees retain their vacation rights, whereas the amount of days depend on the number of years worked, just as during regular employment. The vacation leave may be taken all at once, right after returning from maternity leave. In addition, employees are entitled to 32 or 34 weeks, depending on the number of children born in one delivery, while male employees may also take two weeks of paid paternity leave in the first 24 months of the child.

In case a medical examination prescribed by a doctor in connection with pregnancy cannot be carried out outside of working hours, the employer is obliged to grant paid time off to the pregnant employee.

Regarding health-related absences, employees in Poland are not granted a limited amount of days for sick leave, however, the employer reimburses the sick leave up to 33 days of illness per calendar year (or 14 days, in case the employee is aged over 50). After this period, a sickness allowance is paid by the Social Insurance Institute up to 182 days, or 270 in case of tuberculosis or the incapacity to work occurs during pregnancy.

Vacation allowance and compensation

Employees are entitled to remuneration for their vacation leave, in case they fulfilled their working duties during their employment. Remunerations are due for periods no longer than one month and are calculated based on the total amount paid to the employee during the preceding calendar quarter.

If the preceding three months, which are subject to the calculation of the remuneration, include a considerable fluctuation, such as annual bonuses, the salary compensation shall be calculated based on the total amount paid to the employee during a period which does not exceed 12 calendar months preceding the month when the vacation was drawn by the employee.

The remuneration for vacation days are calculated the following way:

• The basis for assessment is divided by the number of hours when the employee performed work within the period in which such basis was determined, and then
• The remuneration for one hour of work is multiplied by the number of hours the employee would have worked during the vacation within the regular working time, according to the work schedule applicable to the given employee.

In case of substantial differences in the amounts of remuneration within one year, the period over which the basis for assessment is calculated may be extended up to 12 months. Therefore, there is no specific period in a year when taking a vacation is financially more advantageous.

Vacation days

The Romanian Labour Code specifies 20 working days as annual paid leave, which is guaranteed to all employees. Vacation days are granted based on the labour contract and are mandatory in case of employment. While the effective duration of the vacation leave is established in the individual employment contract, in compliance with the law and the applicable collective labour contracts, the minimum duration of the vacation leave defined in general is 20 working days.

If vacation leave is scheduled in fractions, the employer falls under the obligation to do the distribution of vacation in one calendar year in a way that each employee benefits from at least 10 workdays of uninterrupted leave.

Additional paid leave

Additional leave may be granted up to at least 3 working days per calendar year, according to the following specifications:

• Employees who work under difficult, dangerous or harmful conditions, blind persons, other disabled people and young people less than 18 years old shall benefit from an additional leave of at least 3 workdays;
• Employees who follow an in vitro fertilization procedure benefit from 3 additional paid days of annual vacation, which is granted as follows:

1. 1 day from the date of ovarian puncture,
2. 2 days from the date of embryo transfer.

In Romania, there are 11 public holidays in a year, counting up to 15 days of lawful holiday annually, however, they are not included in the paid annual leave; neither are national holidays and weekly rest days. Statutory public holidays are considered non-working days.

The impact of employment termination and probation period on the vacation leave

In case of a terminated employment, the rest of unused vacation days, to which the employee is entitled to, shall be compensated due to the contract termination. The employee who draws more vacation days than entitled to is obliged to return the allowance related to these days, for this allowance represents an undue payment.

During the probationary period, the employee benefits from all the rights provided by the Labour Code, as well as in the individual employment contract. However, it is generally recommended not use vacation days during probation, as this period serves for verifying the employee’s professional and personal skills in order to assess its ability to handle the job.

Child- and health-related absence

Maternity in Romania lasts at least 126 calendar days, while the salary received by the female employee is calculated from the amount equal to the 85% of their average salary in the preceding 2 quarters. Male employees are entitled to a paternity leave of 5 workdays within the first 8 weeks after the birth of a child, and additional 10 workdays, if the father of the newborn child has obtained a graduation certificate from a childcare course. Employees may also take up to two years of additional childcare leave.

When establishing the duration of the vacation leave, the periods of temporary incapacity for work related to the maternity leave, the maternal risk leave and the leave for the care of the sick child are considered as periods of activity. Therefore, the respective periods do not affect the number of rest days to which the employee is entitled each year.

Based on the maternity protection at workplace, pregnant employees are entitled to undergo medical examinations during pregnancy up to 16 hours per month without loss of pay, in case the medical check-ups can take place only during working hours.

For health-related reasons, Romanian employees are entitled to medical leave. In case of temporary incapacity for work, employees may take sick leave up to 183 days per year, based on a medical certificate issued by the doctor in accordance to law provisions.

Vacation allowance and compensation

When the vacation days are drawn, an employee is entitled to an allowance which may not be lower than the basic wage, emoluments and permanent additions due for that period, as stipulated in the individual labour contract. This allowance represents the daily average of the wages in the preceding calendar quarter, multiplied by the number of leave days.

Vacation rights

According to the Labour Code in Serbia, for each calendar year an employee has the right to no less than 20 working days of vacation. The duration of the leave is determined in the general act and employment contract, while the number of vacation days per year is determined by the work contribution, conditions of work, work experience, professional qualifications and other criteria. Based on that, the min. amount of 20 days of vacation leave may be increased.

The right to vacation arises after a month of continuous work from the stating date of employment. In general, an employee is entitled to one-twelfth of the vacation leave under Article 69 of the Labour Code for each month of work in which the employment either started or got terminated.

The vacation leave can be drawn at once or in two or more parts, based on a mutual agreement with the employer. If an employee takes it in parts, the first part shall be used in the duration of at least two consecutive working weeks during the calendar year, while the remaining shall be used by 30th of June of the following year the latest.

Additional paid leave

An employee is entitled to take a paid leave from work for a total duration of 5 workdays in a calendar year, which may be drawn either for getting married, due to a spouse’s childbirth, a serious illness of a close family member or in other cases determined by law or the employment contract.

In addition, the employee is entitled to paid leave in the amount of:

• Five workdays in case of a death of a close family member;
• Two consecutive days for voluntary blood giving.

Close family members include spouse, children, brothers, sisters, parents, adoptive parent, adoptee or legal guardian. The employer may grant the leave to the employee for relatives other than listed and for other persons who live in the same family household with the employee, for a period specified by the employer. Furthermore, the duration of paid leave may be exceeded upon agreement.

In Serbia, there are 10 public holidays in one calendar year, however, they are not included in the paid annual leave; neither are national holidays and weekly rest days.

The impact of employment termination and probation period on the vacation leave

When terminating the employment contract of an employee who did not draw the full amount of their vacation days, the employer shall reimburse the remaining leave. In case the employee took more vacation days than entitled to, the employer can request a compensation. However, this is not common practice.

As for the probation period, an employee gains the right to vacation after a month of continuous work starting from the date of employment.

Child- and health-related absence

Female employees during pregnancy are entitled to a leave in case of temporary incapacity due to complication related to pregnancy. During the leave, they are entitled to a salary compensation in the amount of 100%  of the average salary from the preceding 12 months.

Maternity leave in Serbia lasts for 3 months and can be extended with parental leave up to additional 9 months. In case of 3 or more children, the leave can be extended with 12 months. Male employees are entitled to 5 days of paid paternity leave (as listed among the additional leave). An employee, who has not taken vacation leave within a given calendar year due to absence from work for maternity leave, the absence for childcare and special child care, has the right to use the remaining vacation leave till the 30th of June at latest of the following year.

When it comes to health-related absence, female employees during pregnancy are entitled to a paid leave from work for medical examinations related to pregnancy, as instructed by a physician, and in accordance with the law, whereof she is obliged to notify the employer in time.

Furthermore, all employees are entitled to salary compensation for the time of absence from work due to temporary impairment lasting up to 30 days, as follows:

• In the minimum amount of 65% of the average salary from the preceding 12 months before the month in which temporary impairment occurred. However, it may not be lower than the minimum salary determined in conformity with the present Act where the impairment was caused by illness or injury sustained outside of work, unless otherwise determined by law;
• In the amount of 100% of the average salary from the preceding 12 months before the month in which temporary impairment occurred. However, it may not be lower than the minimum salary determined in conformity with the present Act, if the impairment was caused by an injury sustained at work or by a professional illness, unless otherwise determined by law.

Vacation allowance and compensation

The compensation for the annual vacation is calculated from the amount of average earnings in the previous 12 months, in proportion to the number of days of vacation leave. The allowance and compensation are calculated according to the general act and the employment contract. Due to the way of calculation, there is no specific period when the allowance is financially more advantageous.

Vacation days

The basic scope of the paid vacation leave in Slovakia is at least 4 weeks, i.e. 20 working days. The paid vacation leave of an employee who at the end of the relevant calendar year will be at least 33 years old, increases to 5 weeks per year, i.e. 25 working days.

An employee who, during the continuous duration of an employment relationship with the same employer, performed work for at least 60 days in the calendar year, is entitled to a paid leave or a proportional part thereof. Under Section 102 of the Labour Code, the proportional part of the paid vacation leave for each whole calendar month of continuous duration of the same employment relationship shall be one twelfth of paid leave.

An employee who is not entitled to paid vacation nor the proportional part, as they have not performed at least 60 days of work in the calendar year with the same employer, shall be entitled to a paid vacation leave for days worked to the extent of one twelfth of leave for each 21 days worked in the particular calendar year.

At least one part of the paid vacation leave must have a duration of minimum two weeks, according to the Section 111(5) of the Labour Code, unless the employee and employer agree otherwise.

Additional paid leave

5 working days are granted as additional paid leave according to the Slovak Labour Code for specific professions. For instance, an employee working underground over a whole calendar year in the extraction of minerals, drilling tunnels or passages and an employee who performs particularly difficult or health-endangering work, shall be entitled to additional paid leave of one week. If the employee works under such conditions for only a part of the calendar year, they are entitled to one twelfth of additional paid leave for each 21 days of work.

To be more precise, the additional leave is granted for employees, who are:

• Permanently working in health-care facilities, where patients with a contagious form of tuberculosis or acquired immune deficiency syndrome (HIV/AIDS) are treated,
• Exposed to a direct threat of contagion when working at a workplace with contagious materials,
• Exposed to the adverse effects of ionisation radiation to a significant degree,
• Working with the mentally ill or mentally handicapped for at least half the determined weekly worktime,
• Working continuously in a tropical or other health-demanding area for at least one year,
• Performing exceptionally difficult work, exposed to damaging physical or chemical effects which may inevitably affect the employee’s health to a significant degree,
• Working with known chemical carcinogens.

These types of particularly difficult or health detrimental professions or workplaces can be found in more details in a generally binding regulation Directive No. 75/1967 Coll. issued by the Ministry of Labour, Social Affairs and the Family of the Slovak Republic and the Ministry of Foreign Affairs and European Affairs of the Slovak Republic on such employees and their compensation for the loss of earnings resulting in the incapacity for work due to certain occupational diseases.

In the Slovakia, there are 15 public holidays in one calendar year, however, they are not included in the paid annual leave; neither are national holidays and weekly rest days.

The impact of employment termination and probation period on the vacation leave

In case the vacation leave is not fully drawn by an employee, who’s contract has been terminated, Section 116(3) of the Labour Code allows financial reimbursement of unused leave due to termination of the employment relationship.

If an employee uses all their vacation entitlement for a current year before it is fully accrued, which is possible only with the approval of the employer, they are deemed as not legally entitled to the full vacation leave but only to a proportional part based on the length of the employment relationship in the respective year, and therefore they should return the wage compensation or part to which they are not entitled. In case the employee does not return the wage compensation voluntarily, the amount is deduced from the employee’s wage according to the Section 131(2)(g) of the Labour Code.

During the probationary period, the same rules and conditions apply for vacation rights as for the annual leave in general. According to Section 113(1) of the Labour Code, the employer may let the employee to take a leave, regardless whether the employee met the conditions to be entitled to vacation days, given that they are expected to fulfil them by the end of the calendar year in which the vacation is taken. In conclusion, taking a vacation leave during probationary period depends on individual agreement between the employer and employee.

Child- and health-related absence

Maternity leave or paternity leave for men employees (i.e. as other insured person for the purposes of social insurance) is justified work leave provided by an employer in accordance with the Labour Code related to childbirth or care of a newborn. Male employees can take parental leave on the first 6 weeks from the birth if they take care of the child personally.

The basic extent of leave and financial support granted to women by legislation in respect to child birth and taking care of a child is a 34-weeks long leave. In case of a single parent the leave is 37 weeks; in case of 2 or more children born at the same time it increases to 43 weeks. For other insured individuals for the purposes of social insurance the leave amounts to 28 weeks; in case of a single parent it is 31 and in case of 2 or more children born at the same time it equals 37 weeks.

During maternity and parental leave, which is considered as performance of work, the employee is entitled to regular annual leave, if the full extent or part of the maternity or parental leave falls into the time period which is treated as a performance of work in extent of 60 days within the calendar year.

Parental leave for women and men is considered as a justified leave from work, which is provided by the employer to the employee (the parent) until the day the child turns three years old for the purpose of deepening the care of the child if the employee requests so. If a child requires special care due to a long-term unfavourable health state, the employer shall be obliged to provide the employee with parental leave until the day the child turns six years old. Parental leave shall be provided for the length requested by the parent, but not less than one month. The vacation days for parental leave can be reduced or not granted at all, as parental leave is not considered as work performance for the purposes of annual leave entitlements.

For health-related absence, the employer must grant the employee time off from work according to Section 141(2) of the Labour Code for the following reasons:

• Examination or treatment of an employee in a medical facility, when time off from work is provided:

1. With wage compensation for a necessary time, usually for 7 days in a calendar year, if the examination or treatment could not be performed out of worktime,
2. Without wage compensation for a necessary time, if the examination or treatment could not be performed out of worktime,
3. With wage compensation for a necessary time for preventative medical examination related to pregnancy, if they could not be performed out of worktime.

• Birth of an employee’s child, when time off from work with wage compensation is provided for the time necessary to transport the mother of the child to a medical facility and back,
• Time off from work with wage compensation provided to only one family member for a necessary time for accompanying:

1. A family member to a medical facility for examination or treatment upon sudden disease or accident, and for predetermined examination, treatment or cure; maximum seven days are granted for such purposes in a calendar year, in case the accompanying is necessary, and the relevant activities could not be performed out of worktime,
2. A handicapped child to a social care facility or special school; maximum ten days are granted for such purposes in the calendar year.

Vacation allowance and compensation

The wage compensation for vacation leave is calculated based on the average earnings during the preceding calendar quarter in which the vacation is drawn, which is therefore considered as the decisive period. The average earnings are always ascertained on the first day of the calendar month following the decisive period and used during the entire following quarter. The average earnings are ascertained as average hourly earnings and rounded to four decimal places.

In case an employee did not work at least for 22 days or 170 hours during the decisive period, the probable earnings are used for calculations instead of average earnings. Probable earnings are ascertained from wages that the employee has attained since the beginning of the decisive period, or from wages they would evidently attain.

Due to the way the wage compensation for vacation leave is calculated, the amount of wage compensation can be affected and increased, for example, due to the payment of bonuses and other monetary rewards in the decisive period. If an employee during the decisive period is provided with a wage or part of a wage that belongs to them for a period longer than one calendar quarter (e.g. yearly bonuses, etc), its proportionate part that pertains to the calendar quarter is determined and used for calculation of average earnings.

Vacation days

Slovenian employees are entitled to at least 20 working days of vacation each calendar year. With employment, the rights for vacation leave are automatically gained, however, additional leave is granted according to the amount of years spent working or the employee’s age, tariff class, having children under 15 years old or having a disability.

Furthermore, employees shall draw at least 14 consecutive calendar days at once, i.e. 10 working days, which is precisely the half of the overall vacation leave.

Additional paid leave

The amount of additional leave is not specified in the Slovenian Labour Code, but extra days off may be granted upon the death of a close relative, marriage of the employee, childbirth or for the purposes of relocation.

In Slovenia, there are 12 public holidays in one calendar year, however, they are not included in the paid annual leave; neither are national holidays and weekly rest days.

The impact of employment termination and probation period on the vacation leave

If an employee’s contract is terminated, but their vacation leave has not been fully drawn, the remaining days may be compensated upon agreement between the employer and the employee.

The law in Slovenia does not specify whether the allowance must be returned in case the employee overdrew the vacation leave and their contact has been terminated; it is a matter of agreement with the employer.

During the probation period, employees have the same entitlement to vacation days as employees who already finished their probation.

Child- and health-related absence

Employees, who leave for maternity, are entitled to 105 days of paid leave calculated from the average of their salary, or 30 days of paternity leave, both entitled to the same amount of vacation days as other working employees. The parental leave lasts 130 days for both parents or 260 in case only one of them takes them. In addition to child-related absences, pregnant women are entitled to a paid doctor’s visit during their pregnancy.

As for health-related absence, if not caused by a work-related illness or injury, the leave is compensated in an amount equal up to 80% of their wage. If the source of sick-leave is work-related, the compensation equals 100% of the wage. In general, the employer covers the costs of the first 30 working days of sick leave; after then the state finances the compensation.

Vacation allowance and compensation

Slovenian employees receive a vacation allowance for their vacation leave, which has to be paid until the 30^th of June of the current year. The amount of the allowance must be at least equal to the amount of the gross minimum wage in Slovenia (approx. EUR 941) and is except from taxation. Allowance is not limited upward and is not taxed up to the amount of the average gross salary in Slovenia (which equals approx. EUR 1700). Allowance in excess of the gross national average wage is subject to taxation.

Vacation days and public holidays

Vacation leave is part of the paid annual leave, usually granted by the local Labour Code to employees and financed by the employer, guaranteeing a reimbursed time off work. Most countries define a minimum duration of one vacation leave, e.g. 2 weeks, but in common practice the amount of days taken at once depends on a mutual agreement between employee and employer.

Public holidays are not included in the paid annual leave, but when not falling on a weekly rest day, i.e. weekend, they may bring the benefit of extra days spent off work for employees.

Table no. 1: Comparison of vacation days and public holidays

*Expressed in working days; **Expressed in calendar days

Legend: Federation of Bosnia and Herzegovina (BIH), Republic of Srpska (SRP), Croatia (HR), Czech Republic (CZ), Hungary (HU), Poland (PL), Romania (RO), Serbia (SR), Slovakia (SK), Slovenia (SI)

The impact of employment termination and probation period on the vacation leave

When an employee’s contract is terminated, but they did not fully draw their vacation days, in most cases they have the right to compensation for the remaining leave. In case they took more vacation days than entitled to, sometimes they must compensate the employer. In both cases, the outcome depends on the local legislation.

The same applies to probation period and vacation – country Labour Codes specify different rights when it comes to new employees, but usually grant only a part of what regular employees are entitled to for a specific time.

Table no. 2: Comparison of the impact a terminated employment and probation period have on vacation leave

*Financial reimbursement of employee for unused vacation leave in case of contract termination; **Financial reimbursement of employer for overdrawn vacation leave in case of contract termination; ***No specific rule applies in case of overdrawn vacation leave, but the employer might reclaim the compensation paid in excess

Legend: Federation of Bosnia and Herzegovina (BIH), Republic of Srpska (SRP), Croatia (HR), Czech Republic (CZ), Hungary (HU), Poland (PL), Romania (RO), Serbia (SR), Slovakia (SK), Slovenia (SI)

Child- and health-related absence

When a child is born, employees are entitled either to a maternity or paternity leave, based on their gender, and an additional parental leave. Their length depends on local legislation and may be voluntary, such as paternity and parental leave.

Health-related absence can be defined as time spent off work due to illness or health-related matters, such as medical examination. Labour Codes may define either paid or unpaid days of sick leave, with specified or unspecified number of days per year.

Table no. 3: Comparison of child- and health-related absences

*Parents may agree that the father and not the mother continues to use the leave after the expiration of the compulsory maternity leave, **Based on the number of children, ***Based on the health conditions of the child; ****The number of weeks increases in case of twins; *****Depends on whether both parents take the leave or only one of them

Legend: Federation of Bosnia and Herzegovina (BIH), Republic of Srpska (SRP), Croatia (HR), Czech Republic (CZ), Hungary (HU), Poland (PL), Romania (RO), Serbia (SR), Slovakia (SK), Slovenia (SI)

Vacation allowance

Vacation allowance is paid to employees for each day of vacation taken in a calendar year. They are calculated usually from the average wage from the decisive period, which varies for each country.

Table no. 4: Comparison of vacation allowances and the way they are calculated

*The period from which the vacation allowance is calculated; **But not more than 2150,68 RUR per day

Legend: Federation of Bosnia and Herzegovina (BIH), Republic of Srpska (SRP), Croatia (HR), Czech Republic (CZ), Hungary (HU), Poland (PL), Romania (RO), Serbia (SR), Slovakia (SK), Slovenia (SI)

According to the current law effective until 31 December 2018, the insurance companies have duty to pay the 8% levy on received insurance premium from the mandatory contractual liability insurance for liability arising from the use of land motor vehicles and the 8% levy on received insurance premium from the other insurance classes of non-life insurance, which was introduced from 1 January 2017. The experiences shown that this non-life insurance premium levy is a systemless measure and it causes various problems to the insurance companies in practice. Further, it causes the unequal treatment because this levy concerns only the agreements concluded after 1 January 2017. As a reaction to these issues, by approving of the Act No. 213/2018 Coll., a new indirect tax – Insurance Premium Tax is introduced in the Slovak legislation, effective from 1 January 2019. The subject to this tax is insurance in classes of non-life insurance, if insurance risk is located in the Slovak Republic. In fact, this tax will apply on all insurance agreements, regardless the date of the concluding of the agreement, if the insurance period starts to lapse after 31 December 2018. By approving of this Act on Insurance Premium Tax, the current levy on received insurance premium is going to be abolished. However, the levy on received insurance premium from the mandatory contractual liability insurance for liability arising from the use of land motor vehicles will remain still effective.

Insurance premium tax is used by the majority of the EU member states for the reason that insurance services are VAT exempted, based on the Council Directive 2006/112/EC on the common system of value added tax. In recent years, we can see the tendency to establish the insurance premium tax mainly in the region of Middle and Eastern Europe. So far, this tax is not harmonized and the member states have sovereignty to set their own conditions for this tax, e.g. tax rate.

Generally, the person liable to pay the Insurance Premium Tax shall be the insurance company, however, this obligation may concern also to policyholder (any person who concluded the agreement with the insurer), if this person pays the premium to a third-country insurance undertaking, which does not have a branch in the territory of the Slovak republic or to a legal person to which the costs of such insurance are recharged.

The subject to tax is an insurance, which meets the following two requirements simultaneously:

1. Insurance is covered by non-life insurance classes listed by the law. This list is broad and covers settled non-life insurance classes. An overview of the listed classes you can find in the annex no. 1 of this material. Reinsurance is not subject to the tax.
2. Insurance risk is located in the domestic territory. The situations, when the risk is considered to be located in the domestic territory, are mentioned in the table below.

According to mentioned requirements, the Insurance Premium Tax will concern for example also the situation, when a parent company signs a policy with third-country insurance company and this policy covers insurance risks, which concerns property substance and personal substance of its subsidiary company in the Slovak Republic, as well. In the case that the part of insurance costs are paid by that subsidiary company or allocated to that subsidiary company, these costs will represent the insurance premium tax base.

The general rule is that the liability to pay Insurance Premium Tax has:

• Insurer
  • Insurance undertaking with its seat in Slovakia,
  • Insurance undertaking from another Member State (pursuant to Act on Insurance) (EU Member State or a Member State of the EEA, i.e. Norway, Liechtenstein, Iceland),
  • Branch of a third-country insurance undertaking,
  • Slovak Insurers´ Bureau
  • The Export-Import Bank of the Slovak Republic

Two following situations are an exception to the general rule and in these situations, the tax liability is shifted to another person, which is:

• A policyholder – in the case that the policyholder has paid premium to a third-country insurance undertaking, which does not have a branch in the Slovak Republic; if the policyholder recharges premium to another legal person (e.g., subsidiary company), shall be the payer in the amount of premium that is not recharged to such person,
• A legal person to which insurance costs are recharged
  Note: „Recharged insurance costs” shall mean a premium or a part thereof paid to a third-country insurance undertaking, which does not have a branch in the territory of the Slovak Republic, which is required from a legal person or allocated to a legal person by the policyholder or a person other than the policyholder.

For the purposes of determining the moment of occurrence of tax liability, it is important who is the person obliged to pay the tax.

In addition, in cases where such person is the insurer, the act offers several options how to determine this moment and it is on the insurer to decide for one of them. The selected option is then required to apply for at least eight consecutive calendar quarters.

Below is a brief overview of when the tax liability occurrences:

Taxation period is calendar quarter. A person obliged to pay the tax (a payer) is obliged to report the tax liability in the tax return for the relevant tax period.

A payer is obliged to file a tax return using electronic means in the manner under a separate regulation by the end of the calendar month following the end of the taxation period in which the tax liability to pay due tax occurred. At the same time, the tax is payable.

The very first deadlines for filing tax return are:

The tax administrator of the insurance premium tax is the tax office by local jurisdiction.

The payer who, in the time of occurrence of tax liability does not have a tax identification number in the Slovak Republic assigned is obliged to apply for registration for tax. The request for tax registration shall be submitted within five days of the end of the taxable period for which it is required to file the tax return. The deadline for the tax administrator to attend to the request for tax registration is ten days.

Entities that until the end of 2018 paid a special insurance levy do not have the registration obligation and they will be registered payers ex lege.