Inheritance and gift tax

What it means

Inheritance tax and gift tax were taxes on acquiring property for free, which Slovakia abolished from 2004. Since then no special tax is paid on inherited or gifted property, whether it is a flat, money, a car or a business share.

The abolition was part of a tax reform that simplified the system and introduced a flat tax. The real estate transfer tax was abolished later too, so today neither a buyer nor a donee pays tax to the state on a property transfer, only the fee for registration in the land register.

Inheritances and gifts from other people are also exempt from personal income tax. The exception is gifts connected with business or employment, such as a gift from an employer or from a business partner to a sole trader, which are taxed as income.

How it works in practice

Probate is handled by a court commissioner, who is a notary, and ends with a certificate of inheritance. On that basis property is entered in the land register without any further tax; only the notary's fee and a court fee based on the estate's value are payable.

When inherited or gifted property is sold, however, income tax comes into play. The exemption after five years of ownership also applies to heirs, and for inheritance in the direct line the deceased's period of ownership counts towards it.

If a company or sole trader receives a gift in connection with the business, it is not exempt income. The gifted asset is booked as revenue, and a VAT payer must consider VAT as well. Gifts between relatives outside business, by contrast, are tax neutral.

What to watch out for

An inheritance or gift from abroad may be taxed in another country, for example in the Czech Republic for more distant relatives, or in Germany or Austria under their rules. No Slovak tax arises, but the foreign obligation remains.

Large gifts or money from relatives may interest a bank checking the source of funds under AML rules, and a tax authority checking where a person's wealth came from. Keep the deed of gift and proof of transfer even though no tax is due on the gift.