Capital gain

What it means

A capital gain is the difference between the price at which an asset is sold and the price at which it was acquired, increased by related costs. It arises on selling securities, a stake in a company, property, cryptocurrencies or other assets. If the sale price is lower, it is a capital loss.

The Slovak Income Tax Act has no separate category of “capital gains”. For individuals, selling assets that are not business assets is usually taxed as other income, while dividends and interest are capital income and taxed differently.

For companies a capital gain is part of the ordinary result and taxed at the corporate income tax rate. The exception is the sale of a stake in another company, which may be exempt if conditions such as a sufficiently long holding and stake size are met.

How it works in practice

Individuals have several exemptions tied to a holding period test. Selling property after five years of ownership is generally exempt, as is selling securities traded on a regulated market after a year if they were not business assets. For a stake in an s. r. o. the holding period does not give an exemption, except under special rules for stakes acquired before 2004.

Where no exemption applies, the income goes into the type B tax return, and the acquisition cost and related fees are deductible. For cryptocurrencies the law does not allow a loss on one trade to be offset against gains from another type of other income, so precise records of all trades are essential.

Health insurance contributions are also payable on capital gains taxed as other income, settled in the health insurer’s annual reconciliation. For larger sales we therefore calculate the total burden of tax and contributions, not just the tax.

What to watch out for

The most common mistake is miscounting the holding period, for example from signing the contract rather than from registration in the land register, or from buying the last batch of shares. For inherited property, the deceased’s period of ownership counts towards the period, but only under certain conditions.

Watch for missing proof of the purchase price too. With crypto, older shares or property bought long ago it can be hard to prove the acquisition cost, and without evidence tax is computed on the whole sale amount. Purchase records are worth keeping for as long as the asset is held.