Bank levy

What it means

The bank levy, officially the special levy on selected financial institutions, is a payment banks and branches of foreign banks in Slovakia make to the state alongside income tax. It is based on the bank's liabilities adjusted for equity and certain items.

The levy was introduced in 2012 in response to the financial crisis. It was originally meant to build a reserve for possible bank rescues but later became ordinary budget revenue, and its rate and duration have changed several times.

It belongs to the family of special levies, like the special levy on regulated industries, but unlike that levy it is calculated on liabilities rather than profit.

How it works in practice

Ordinary companies are not directly affected, but banks factor the levy into their pricing. A higher levy can show up in higher interest on loans, higher fees or lower deposit rates.

For banks the levy is a significant cost and is treated as a deductible expense for income tax. Together with capital adequacy requirements it influences how much banks can lend.

The revenue goes to the state budget, so debates about the levy return mainly during fiscal consolidation, when the state is looking for new income.

What to watch out for

When comparing loan offers, companies should look not only at the interest rate but at the total cost including fees. Levy changes feed into these in different ways.

The bank levy is not a financial transaction tax and does not apply to customers' payments. Claims about a „new bank fee“ on social media should be checked against the law and with the bank.