Tax non-resident

What it means

A tax non-resident has a limited tax liability in Slovakia: only income from the Slovak sources listed in the Income Tax Act is taxed here. Everything else is taxed by the state where the person is resident.

The list of Slovak sources is closed: activity carried out on the territory, a permanent establishment, royalties, interest, rent of local property and income from selling it. Simply invoicing a Slovak company does not create a Slovak source.

Non-residence concerns income tax. VAT has rules of its own: a foreign company supplying goods or services with the place of supply in Slovakia may have to register for VAT here even though it pays no income tax here at all. One status does not follow from the other.

How it works in practice

For many of these incomes the tax is taken at source when the payment is made. Without a certificate of tax residence for the recipient the payer cannot apply the reduced treaty rate and withholds at the statutory one.

Some payments abroad trigger tax securing: the Slovak customer holds back part of the payment and remits it to the tax office. The non-resident then credits it in the return it files.

A non-resident who lets a flat in Slovakia files a Slovak return personally, because rent is not taxed by withholding. If they do not live here, it is practical to have a representative under a power of attorney, so that the office’s requests do not go undelivered and deadlines do not run without their knowledge.

What to watch out for

The payer, not the recipient, answers for tax that was not withheld. A company that paid a royalty abroad in full and withheld nothing pays the tax out of its own pocket, and for a payment to a non-treaty state the rate is markedly higher.

A company does not feel present just because it has no office here. A long-running construction job, an installation, or a person who concludes contracts here on its behalf can create a permanent establishment with a duty of registration and tax on the profit attributable to it; finding that out in an audit means paying for several years at once.