Capital Gains Tax Guide Slovakia for 2023

Slovakia has a relatively simple tax system compared to other European countries. However, navigating the system as an investor, especially as a foreigner, still isn’t easy. Our tax guide to capital gains tax in Slovakia covers everything you need to know about taxes on stocks, ETFs, mutual funds, dividends, crypto, and property sales and how to calculate and report your gains or losses to the Financial Administration of the Slovak Republic (Finančná správa Slovenskej republiky).

Does Slovakia tax capital gains?

Yes, in Slovakia, most types of capital gains are taxed at either 19% or 25%. Dividends are taxed at 7% or 35%. Some types of investment income are also subject to a health insurance contribution tax of 14%. This means taxes can go as high as 33% or 39% if you are not careful in picking your investment type. 

Fortunately, certain types of capital gains can be tax-exempt under certain conditions, and deductions are available for certain types of capital losses. For example, capital gains from the sale of shares and ETFs listed on a recognised stock exchange are taxed at 0% if held for more than one year. Personally owned properties can also be sold tax-free after five years.

Does the Finančná správa know about my investments?

Yes, it’s very likely that the Slovak tax authority, the Finančná správa, knows about your financial investments and also your foreign bank accounts. If you hold stocks, bonds, ETFs, or other regulated financial products with a European or international investment platform, then they will almost certainly have your data already or in the future. Luckily, there’s no reason to play foolish games with the Slovak tax man since you have tax-free investment vehicles available to you.

The reason why you cannot hide is that brokerages and banks located in countries participating in the Common Reporting Standard (CRS) will share your information with their local tax authorities, which in turn share it with the Slovak authorities. This information typically includes your name and address, tax residence country and tax identification number, date of birth and place of birth, username, account balance at year-end, the gross amount of interest, dividend and other income, and gross sale proceeds from the sale or redemption of financial assets. 

You can also not hide your property ownership. The Slovak Cadastral Office maintains thorough records of land and property ownership, land boundaries, mortgages and other related information. The register is available to the public and can be accessed by anyone who wishes to check the ownership status of a particular property.

Overview of capital gains taxes in Slovakia

Slovakia doesn’t have a separate capital gains tax. Instead, capital gains from financial assets are treated as income for tax purposes. This means the rules for capital gains follow the Slovak Income Tax Act, formally called Act No. 595/2003. If you want to dig into the specifics, you can read the whole thing on the website of the Ministry of Finance of the Slovak Republic.

The Income Tax Act divides investment income into two categories. The first category, §7 Income from Capital Property, includes things like interest payments and bond coupon payments, and most other types of yields. This type of income is typically taxed at 19%. They usually do not require any health insurance contributions; however, there are a few exceptions.

The second category, §8 Other Income, includes profits from selling stocks, ETFs, crypto, and real estate. This type of income is taxed at either 19% or 25% and requires health insurance contributions. However, there are certain types of investments in this second category that can be sold without paying taxes and health contributions if they have been held for at least one year.

Tax on stocks, ETFs, crypto, and property

Let’s first look at the second category, §8 Other Income, since this is usually the one most investors care about. This category covers the treatment of profits from stocks, ETFs, derivatives, options, cryptocurrencies, property, and a number of other income types.

Here is an overview of how capital gains from these assets are taxed in Slovakia:

• Stocks, ETFs: The sale of securities, such as stocks and ETFs, is subject to income tax at a rate of 19% or 25%. Additionally, 14% of health contributions must also be paid. This income is classified under § 8 ods. 1 písm. e).
• Options: The sale of options is also subject to income tax at a rate of 19% or 25%, as well as 14% health contributions. This income is classified under § 8 ods. 1 písm. d).
• Private shares: The transfer of shares in a limited liability company, a joint-stock company or a cooperative is subject to income tax at a rate of 19% or 25%, as well as 14% health contributions. This income is classified under § 8 ods. 1 písm. f).
• Derivatives: Income from derivatives is subject to income tax at a rate of 19% or 25%, as well as 14% health contributions. This income is classified under § 8 ods. 1 písm. k).
• Property: The sale of real estate is subject to income tax at a rate of 19% or 25%, as well as 14% health contributions. This income is classified under § 8 ods. 1 písm. b).
• Crypto: The sale of cryptocurrencies is subject to income tax at a rate of 19% or 25%, as well as 14% health contributions. This income is classified under § 8 ods. 1 písm. t).

Example

If you sell shares of Microsoft stock for a profit of €1,000, you need to pay €190 in income tax (19%) and €140 in health contributions (14%). The combined effective tax rate would be 33% (€190 + €140 = €330, €330/€1000 = 0.33). If you belong to the higher tax bracket, you would need to pay €250 in income tax (25%) and €140 in health contributions, bringing the combined tax rate to 39%.

Important details: The FIFO principle

When you sell a portion or all of your shares, the sale proceeds are calculated using the FIFO (first in, first out) method. This means that the shares you bought first are the ones that get sold first. 

It’s important to keep track of your purchases and rebalancing to ensure that you meet the annual time test and qualify for tax exemption. For example, if you bought 10 shares of Company X over a year ago and 10 more shares this year, you may consider selling only 10 shares in order to qualify for tax exemption. Of course, it’s not always feasible to wait. 

Tax-free capital gains in Slovakia

As you can see from the example above, the tax on investment profits in Slovakia can be burdensome. Fortunately, the Slovak tax system isn’t completely unreasonable, as it offers a few different ways to lower your investment income taxes to 0%.

Tax-exemptions for stocks and ETF profits

If you own a security, like a stock or an ETF, for more than a year before selling it and you trade it on a regulated exchange, you don’t have to pay any tax on the profits, according to §9, ods. 1, písm. k). You also don’t have to pay health insurance contributions. This means Slovakia is one of the countries in Europe that doesn’t tax capital gains on shares and ETFs as long as you meet the required criteria.

In other words, you need to fulfil two conditions: hold the security for at least one year and buy and sell it on a regulated stock exchange. It’s important to notice that the exemption only applies to securities and not cryptocurrencies or other assets.

€500 yearly tax allowance

As an individual, you have a tax-free allowance of €500 per year, according to §9, 1, i). This allowance applies to all types of income combined, not to each individual income source. This type of tax-exempt income is also not subject to health insurance contributions. 

The allowance can be used to offset any short-term profits made from selling securities held for less than one year. For example, if you made a profit of €1,000, you will only be taxed on the remaining €500.  

Tax-free property sales profits

If you own a property in Slovakia for less than five years, the profits you make from selling it will be taxed, according to §8. However, if you have owned the property for 5 years or more and did not use it for business purposes, you can sell the property tax-free. This exemption is stated in §9, 1. a). The profits will also be exempt from health contributions.

How is crypto taxed in Slovakia?

According to Article 8, paragraph 1, letter t of Slovakia’s Income Tax Act, cryptocurrency gains are treated as income and taxed at either 19% or 25%, depending on the taxpayer’s tax base. Crypto profits are also subject to 14% health contributions. This means that the total tax burden for cryptocurrency profits is either 33% or 39%. Unlike stocks and other securities, there is no tax exemption for holding cryptocurrency for a year or more.

Example

If you bought 1 BTC for €10,000 and later sold it for €30,000, the taxable profit would be €30,000 – €10,000 = €20,000. Based on the Slovak tax laws, you would have to pay income tax on this profit, which would be calculated at a rate of 19% or 25%. If your tax rate is 19%, the income tax you would owe would be €20,000 * 19% = €3,800. Furthermore, you would also have to pay health insurance contributions, which are calculated as 14% of your taxable profit, or €2,800. In total, you would have to pay €3,800 + €2,800 = €6,600 to the state.

Is trading one cryptocurrency for another a taxable event?

Yes. Trading one cryptocurrency for another is considered a disposal and, therefore, a taxable event in Slovakia. For example, if you swap Bitcoin for Ether or Bitcoin for a stablecoin, you would need to calculate and declare your profit or loss for each trade. If you are actively trading cryptocurrencies, it may be worth considering doing so through a company, as the tax and health insurance taxes can quickly spin out of control.

Tax-free crypto profits

Crypto profits are taxable in Slovakia, but there are two ways to legally avoid taxes. One is to move to a country where crypto profits are treated more favourably. Another way is to invest in securities, such as an ETF, that follow or are connected to the price of the cryptocurrency you want exposure to. But if you buy the underlying asset directly, the profits will be taxable when you sell.

Tax on bonds in Slovakia

The second category of investment income in Slovakia is Income from Capital Property, § 7. This category covers interest from bonds (coupon payments), profits from selling bonds (capital gains), income from certificates, income from loans and bills, payments from insurances, and most other types of interest-yielding assets. All these types of income are taxed at 19%. Some types of interest are subject to health insurance contributions. 

Here is an overview of how bonds, coupon payments, interest and other types of yields are taxed in Slovakia: 

• Interest income from securities issued in Slovakia is subject to withholding tax at a rate of 19%. This means that the issuer of the securities is responsible for deducting the tax before paying the interest to the holder. No health insurance contributions are applicable on this type of income.
• Interest income from securities issued abroad is subject to self-assessment by the taxpayer at a rate of 19%. This means that the taxpayer is responsible for declaring and paying the tax on this income themselves. No health insurance contributions are applicable on this type of income.
• Payments from annuities taken out for the purpose of reaching a certain age, if issued in Slovakia, are subject to withholding tax at a rate of 19%. This means that the issuer of the annuity is responsible for deducting the tax before paying the payments to the holder. No health insurance contributions are applicable on this type of income.
• Payments from annuities taken out for the purpose of reaching a certain age, if issued abroad, are subject to self-assessment by the taxpayer at a rate of 19%. This means that the taxpayer is responsible for declaring and paying the tax on this income themselves. No health insurance contributions are applicable on this type of income.
• Income from bills of exchange, other than from their sale, if issued in Slovakia, is subject to self-assessment by the taxpayer at a rate of 19%. Health insurance contributions of 14% are also applicable on this type of income.
• Income from shares (from redemption) issued in Slovakia is subject to withholding tax at a rate of 19%. No health insurance contributions are applicable on this type of income.
• Income from shares (from redemption) issued abroad is subject to self-assessment by the taxpayer at a rate of 19%. No health insurance contributions are applicable on this type of income.
• Income from government bonds issued in Slovakia is subject to self-assessment by the taxpayer at a rate of 19%. Health insurance contributions of 14% are also applicable on this type of income.
• Income at maturity of securities issued in Slovakia is subject to withholding tax at a rate of 19%. No health insurance contributions are applicable on this type of income.
• Income at maturity of securities issued abroad is subject to self-assessment by the taxpayer at a rate of 19%. Health insurance contributions of 14% are also applicable on this type of income.

How are bonds taxed in Slovakia?

Interest payments from bonds (coupon payments) are taxed at 19%, and for some types of bonds, you will also have to pay health insurance contributions of 14%. The potential profit from selling a bond (the capital gain) is taxable at 19% or 25%, plus health insurance contributions of 14%. You cannot deduct losses from your gains. 

If the bond issuer is a Slovak entity, you don’t need to report the bond coupon payments on your tax return. The paying entity is responsible for withholding and paying the taxable amount on your behalf. If the issuer is a non-Slovak entity, you must include it on your tax return.

Tax on coupon payments from bonds

Entity	Responsible for reporting	Tax %	Health levies	Relevant paragraph
domestic	Paying entity	19%	no	§ 7, 1, a)
foreign	taxpayer	19%	no	§ 7, 1, a)
state	taxpayer	19%	14%	§ 7, 1, h)

Tax on capital gains from bonds

Point of taxation	Responsible for reporting	Tax rate	Health levies	Relevant paragraph
at maturity	taxpayer	19%	14%	§ 7, 2 and 3
before maturity	taxpayer	19/25%	14%	§ 8, 1, e)

Tax-free bonds in Slovakia

You cannot avoid paying taxes on coupon payments from bonds in Slovakia. However, you can legally avoid paying tax on the profits you make from selling bonds. The easiest way to do this is to invest in bond ETFs. This is because bond ETFs are technically shares (of a fund that owns bonds on your behalf), and the profits from selling these shares are free from taxation after one year of ownership. 

The tax-free allowance that applies to stocks and ETFs does not apply to bonds. This means you cannot claim the exemption of €500 for bond income. You can also not avoid paying tax by holding the bond for a certain period of time. 

Tax on mutual funds in Slovakia

Income from mutual funds is taxed at 19%. You cannot avoid the tax by simply holding onto the investment for a year as with ETFs. This is because, unlike ETFs, mutual funds are not traded on stock exchanges, so they do not qualify tax exemptions. This may seem odd, as they are comparable investment products. 

Tax on dividends in Slovakia

Dividends are taxable income in Slovakia, according to § 3, 1, e). Slovak politicians have an unfortunate habit of changing the rates frequently, so make sure to research the latest rates. How much tax you will pay on dividends depends on whether the dividend-paying company is located in Slovakia or abroad. The current tax rate of dividends is 7%

Tax on dividends from a Slovak company

You will pay 7% tax if the dividends come from a Slovak company. The dividend-paying Slovak company is responsible for withholding and paying the tax on your behalf. You don’t pay health care taxes on dividends. As the dividend-paying company in charge of settling taxes, you don’t have to report the income in your tax return. See §43 for more information.

Tax on dividends from a foreign company

If the company is not located in Slovakia, the foreign company will typically withhold taxes on behalf of its investors. If the company is based in the U.S., your broker will ask you to fill out the form W8-BEN.

If the dividends come from a company in a country that has a tax treaty with Slovakia, dividends are taxed at 7%. If your broker withheld more than that, you can ask for a credit on your tax return to bring your tax rate down to 7%.

If the dividends come from a country that doesn’t have a double tax treaty with Slovakia, dividends are taxed at 35%.

Dividends from ETFs and mutual funds

If an ETF or mutual fund pays out dividends, it’s not technically considered a dividend under Slovak law. The Income Tax Act defines a dividend as a portion of a company’s profits distributed to its shareholders, but ETFs and mutual funds do not meet this definition.

FAQs

How are stocks taxed in Slovakia?

If you hold securities, such as shares, for at least one year before selling and trade them on a recognised stock exchange, you will be exempt from paying taxes from the sale, regardless of how much profit you have made. This is known as the annual time test and is outlined in § 9, 1 letter k. If you hold a security for less than one year, you’ll be taxed at a rate of 19% or 25% (depending on your tax bracket) for the income from their sale, but no extra health insurance contributions are required.

How are ETFs taxed in Slovakia?

ETFs are securities, like stocks, so you will pay 19% or 25% tax on the profits in Slovakia, depending on what tax bracket you belong to. However, you can sell ETFs tax-free if you hold them for more than a year and trade them on a regulated exchange. 

How are mutual funds taxed in Slovakia?

Mutual funds are taxed at 19% and are not treated the same way as ETFs, despite being very similar in nature. For this reason, many Slovak tax advisors recommend ETFs over mutual funds.

How are bonds taxed in Slovakia?

Coupon payments from bonds are taxed at 19%, and capital gains from bonds are also taxed at 19%. If you own bonds through an ETF, they may be tax-free if you hold them for at least one year and trade them on a recognised stock exchange.

Sources

1. Income Tax Act. 595/2003, Ministry of Finance of the Slovak Republic