Recent tax changes will increase the income of small companies and employees

Some changes face criticism, though.

Illustrative stock photoIllustrative stock photo(Source: SME archive)

Small companies and self-proprietors should pay less on taxes as of next year. This stems from the amendment to the law on income taxes, drafted by the Slovak National Party (SNS), that reduces the income tax of corporate bodies and natural persons with an annual turnover below €100,000 from the current 21 percent to only 15 percent.

At the same time, employees and the self-employed should see their net incomes increase as the parliament also approved the Most-Híd-drafted proposal to increase the non-taxed part of the tax base.

Both changes will now have to be signed by President Zuzana Čaputová. However, some critical voices have already emerged in connection with the latter.

SNS proposal reduces taxes

The reduced income tax is a compromise proposal. SNS originally wanted all companies to pay 15-percent income tax. However, the Council for Budget Responsibility calculated at the time that such a proposal would cut budget incomes by €800 million. The Finance Ministry subsequently announced that the change would derail Slovakia from its path towards a balanced budget, the SITA newswire reported.

Coalition talks followed, at which parties agreed on reducing the tax to 15 percent only for companies and the self-employed with an annual turnover below €100,000. The incomes to state coffers are expected to drop by €41 million in the case of corporate entities and a further 17 million in the case of the self-employed.

SNS chair Andrej Danko considers this change the first step towards the plan to introduce a 15-percent tax for all companies, SITA wrote.

Changes to non-taxed part criticised

The amendment to income tax drafted by Most-Híd increases the non-taxed part of the tax base from the current 19.2 times the subsistence wage to 21 times the subsistence wage as of next year. This means that natural persons could deduct €4,414.20 from the tax base in 2020. This year, the annual sum of the non-taxable part amounted to €3,937.34.

As a result, the income tax of employees and the self-employed may drop by more than €90 a year. The concrete impact will depend on an individual taxpayer, SITA wrote.

The change has been heavily criticised by municipalities. As they pointed out, while it increases the net incomes of working people, it also cuts their budget by about €150 million a year.

The representatives of municipalities thus called the change a dirty trick from the side of MPs, SITA reported.

Most-Híd MPs refuse the criticism, saying that the municipalities have not submitted one constructive proposal during the discussion over the matter.

Meanwhile, the Union of Towns in Slovakia and the Association of the Self-Governing Regions SK8 want to ask the president to refrain from signing the amendment, the TASR newswire reported.

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