3rd December 2018
Introducing the Slovakian Tax System
Slovakia, a country we’ve mentioned before on this blog, is a prime destination for contractors. With beautiful landscapes, rapid economic growth, and large talent shortages, it is no wonder the country is attracting a lot of attention from professionals. However, agencies looking to profit from placing contractors in the destination should be wary of the extremely complex tax and compliance landscape they will face. This week, a piece in the Slovakian newspaper, Spectator, titled ‘It takes companies 192 hours to fulfil their tax duties in Slovakia’, reflected upon the difficult circumstances in the growing economy.
Here’s what you need to know:
Slovakian Tax – An ‘alarming’ situation
Slovakia took 48th place in the rankings of PWC’s Paying Taxes 2019 report, with tax duties allegedly taking companies 192 hours to fulfil. Despite this being one position higher than last year, the country has lost its place as the leader of its regional neighbours, the V4, or Visegrad Group, to the Czech Republic.
The report monitored the ease of paying tax in 190 countries. The ranking of the countries was based on four criteria – overall tax and levy burden, the time needed to fulfil tax and levy duties, number of payments required and the post-filing index for processes such as correcting an error or claiming a VAT refund.
According to Christiana Serugová, leader of PwC in Slovakia, the tax burden of work and income tax for ordinary people in the country is very uneven, and she recommended various improvements:
“Besides the continuous introduction of electronic devices in financial administration, lowering the tax and levy burden and simplifying the tax system would improve the overall ‘tax grade’ for Slovakia,”
The lack of tax technology and electronic systems expediting the payment of tax is also hurting Slovakia, whereas other Baltic countries are racing up the rankings due to reforms in this space. In Estonia for instance, companies need only 50 hours to fulfil their tax duties.
In fact, Slovakia’s tax system is more demanding than many countries which are economically far worse off and living under oppressive regimes. As Serugová highlighted:
“The comparison of our position with countries that scored higher than us due to reforms, such as Georgia, Azerbaijan, Macedonia and Moldova, is alarming,”
Take the load off
With a tax system as complex and laborious as Slovakia’s, agencies looking to exploit the talent shortages in the destination are likely to encounter a logistical nightmare. However, the penalties for failing at compliance are severe, and having a contractor in breach of the laws could do damage to your agency. Also, when taking into account the more general worldwide move towards tackling tax fraud, with schemes such as the Common Reporting Standard, then it is even easier to unintentionally fall foul of the law. This is why we advise agencies to employ the services of an expert contractor management service to take the load off. That way you can rest easy in the knowledge that your compliance burden is being handled and put those 192 hours towards something more useful.
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