Minimum corporate tax

What it means

The minimum corporate tax is due even where the company reported a tax loss or a nil base. The amount is banded according to taxable income.

It is not an extra tax: if the calculated income tax exceeds the minimum, only the higher amount is paid. What was paid above can be credited over the next three years, if there is tax to credit it against.

The minimum tax should not be confused with the global minimum tax, which applies only to large multinational groups and is meant to keep their effective taxation from falling below a certain level. The minimum tax under the Income Tax Act is a different tool: it applies to ordinary Slovak companies, including small s. r. o. companies, and it is a fixed amount set by income band.

How it works in practice

New businesses are generally exempt in their first year. It is also not due for a year in which the company entered liquidation or bankruptcy, though that turns on the exact dates.

For advance and cash flow planning it is treated as a fixed annual cost. For dormant group companies it is often the single reason to wind them up.

For each client we record, year by year, the difference between the minimum tax paid and the tax calculated, with the year it arose and the amount still available for offset. In the tax return for the following year we then apply it in the right order, so the offset does not lapse simply because nobody remembered it.

What to watch out for

The credit lapses if the company fails to report enough tax within three years. Keeping an empty company alive in the hope of recovering the money later does not pay.

Owners of dormant s. r. o. companies sometimes assume that without activity nothing needs to be filed. The income tax return is filed even with zero income, however, and the minimum tax must be paid on time. If it is not paid, arrears arise with late payment interest, and for an unfiled return a penalty is added to the annual amount.