More and More Companies Changing Tax Domicile
Various reports recently indicate a drain of companies from the Slovak Republic to more beneficial territories, with neighbouring Hungary and the Czech Republic cashing in on the exodus.
The Slovak government’s uncompromising efforts to rake in money using a consolidation package of measures is starting to take the edge off the competitiveness of Slovakia, with rising taxes, additional levies, and special funds all sucking away at corporate profits. Addressing the public finance deficit is all very well, but a balance has to be found.
Corporate profit tax is set to hike up to 23% (from 19%), for instance, while the net profit that is left in dividends will be subject to an additional 10% (to increase to 14% next year) in health insurance levies, which combined swallow up quite a big chunk of the cake.
According to daily Hospodarske Noviny, about 1,000 Slovak companies have registered their tax domicile in the Czech Republic in the past few years, but Hungary tops the list with an astonishing 10,000 or so Slovak companies now being based there instead of here, thanks to a lower corporate income tax for SME and no tax on dividends.
Thanks to the new consolidation measures, Slovakia will soon boast the highest corporate taxes in the Visegrad 4 countries, but the Ministry of Finance declares it has a plan to prevent companies from leaving. Other factors such as health and social contributions have to be taken into account if deciding to make the move, but at least no problem is posed by any language barrier, given the number of Hungarian speaking Slovaks and the mutual comprehension between Slovak and Czech.