Dividends – payment and taxation for past accounting periods

Paying out dividends for past periods brings with it several important tax and contribution obligations, which depend on the accounting period for which the profit of the company or cooperative was generated. Below is an overview of the individual rules according to the period for which the dividends are paid.

Dividends for the 1993–2003 accounting periods

No health insurance contributions are paid on dividends from these accounting periods, but income tax is paid according to the following rules:

• Individuals (residents and non-residents): Tax is withheld at 7% when dividends are paid by companies with their registered office in the Slovak Republic, and also when dividends are paid from abroad to Slovak residents.
• Legal entities (residents): The profit share is taxed in the tax return. If the share is paid to a Slovak company with its registered office in the Slovak Republic that holds a direct interest of at least 25% in the share capital of the paying company in the EU, the profit share is not taxed.
• Legal entities (non-residents): The profit share is subject to withholding tax at 19%, unless it is paid to a foreign company with its registered office in the EU that holds a direct interest of at least 25% in the share capital of the paying company from the Slovak Republic.

Dividends for the 2004–2010 accounting periods

Neither tax nor health insurance is paid on dividends from these accounting periods, as the abolition of the double taxation of profits was part of the 2003 tax reform.

Dividends for the 2011–2016 accounting periods

No tax is paid on dividends from these accounting periods, but health insurance is:

• Accounting periods 2011–2012: The contribution rate is 10%, or 5% for persons with disabilities. The insured person reports the amount of the dividend paid to their health insurance company by 31 May of the year following the year of payment.
• Accounting periods 2013–2016: The contribution rate is 14% for everyone, with no exempt minimum. The contributions are paid by the legal entity as advance payments, by the 8th day after the month in which the dividends were paid.

Dividends for the 2017–2023 accounting periods

No health insurance contributions are paid on dividends from profits generated for these periods, only income tax:

• Commercial companies or cooperatives: Dividends paid to shareholders or statutory representatives are taxed if the profits were generated for 2017 at the earliest.
• Silent partners: Profit shares paid to silent partners from profits generated for 2017 at the earliest.
• Settlement shares and shares of the liquidation balance: These concern shares determined on the basis of financial statements for 2017 and later.
• Employees without a stake in the share capital: Profit shares are taxed if the decision to pay them was made in 2017 or later.
• Land communities (pozemkové spoločenstvá): Shares in profit and property paid to members of the community from profits generated for 2017 at the earliest.

Tax rates for Slovak individual taxpayers:

Taxation of profit shares paid by foreign companies

The rules set out above apply to profit shares paid to individuals. Legal entities tax the shares paid to them only if they are paid from abroad by a taxpayer from a non-treaty country, at a rate of 35%. The same rule also applies the other way round, when a Slovak legal entity pays a dividend abroad to a taxpayer from a non-treaty country.

Conclusion

When paying dividends for past periods, it is important to follow the rules that apply to the year for which the profit was reported. Complying with current legislative requirements is key to correct taxation and contributions.