Although income tax is 19% in Slovakia, the  available incentives are so large, that an average apartment owner ends up with paying less than 2% tax on gross rental income. Here is how.

The deadline for submitting the 2009 Tax Return in the Slovak Republic is March 31, 2010. This applies to individuals who own property in Slovakia and receive an income from the rent.

Where should I pay this tax?

This has already been decided. It must be paid in Slovakia.

Double Taxation Treaties are conventions between two countries that aim to eliminate the double taxation of income or gains arising in one territory and paid to residents of another territory. They work by dividing the tax rights each country claims by its domestic laws over the same income and gains. Slovakia signed a Double Taxation Agreement with the United Kingdom, for example, on November 5, 1990, which came into force on December 20, 1991, and was published under Law 89/1992. The document may be downloaded here (HM Revenue & Customs). The same agreement between Ireland and Slovakia can be found here (Revenue, Irish Tax & Customs). The updated list of countries may be downloaded from the web site of the Slovak Ministry of Finance here. Since these agreements between countries follow an international standard, they are very similar. Article 6 of the Agreement discusses "Income from immovable property." It provides for each government to levy income tax in the country where the real estate is located: "Income from immovable property may be taxed in the Contracting State in which such property is situated." The tax paid in Slovakia can be deducted from the tax base in the country of residence.

What if I have already paid tax on my 2009 worldwide income in my home country?

Strictly, you should have first completed tax returns and paid any tax in Slovakia. Then when you completed your tax returns in your home country, you would have been given credit for the tax you paid in Slovakia, against your domestic tax liabilities. However, in the case you have completed your tax returns in your country, and have paid tax on the rental profit but have not had credit for any Slovak tax, you now need to complete a tax return in Slovakia and pay any tax in Slovakia. Once you have done so, you will need to obtain credit for the Slovak tax against the domestic tax you have paid.

Those apartment owners who have not yet registered the income-producing activity of rental with the Slovak Tax Authority, are strongly encouraged to do so. Otherwise they risk serious penalties for years to come. If no tax has been paid on rental income in Slovakia so far, as far as the Tax Authority is concerned, the apartment has not been rented. In many cases this situation cannot continue, especially if there are regular bank transfers to investor's account from the property management company, which indicate commercial activity. This proves the apartment owner has regular income in the country.

There are significant tax incentives available for individuals who provide housing in Slovakia:

1.Deductable amount for rental activity (odpočítateľná položka): currently 830 euros

2.Across-the-board tax cut (paušálne výdavky): currently 40%

3.Deductable amount for the tax payer (odpočítateľná položka pre daňovníka): currently 4025.70 euros

Net rent and utilities (energies, as they are called in Slovakia) are always combined to form the total rental income of an apartment.

Therefore, if an apartment is rented for say 600 euros/month and energy and common costs are 150 euros/month, the total annual income is (600 + 150) x 12 = 9000 euros. 830 euros may be deducted from this gross sum, which gives us 8170 euros. The 40% tax cut further reduces our tax base to 4902 euros. subtract the fixed amount of 4025.70 euros from this to get the final annual tax base of 876.30 euros. Income tax is taxed at 19%, so we pay 166.50 euros tax. This comes out to 1.85% of the gross income of the apartment.

The above calculation indicates that it is possible to arrive at a zero figure for tax in a given year. In this case a Tax Return still has to be submitted.

CE Invest will prepare and submit the tax return for you, issue rental invoices, and do the accounting for an annual fee. It is also possible to perform a mock tax audit and calculate unpaid tax in retrospect.

Companies are taxed at 19% corporate tax on profits. There is no income tax to be paid on dividends in Slovakia, however such income must be declared in the country of residence, after which income tax is due.

CE Invest is the #1 Rental Agency of Gozsdu Court in Budapest, Hungary

Apartments for Sale in this Exclusive Location

Rented Apartment in Gozsdu Udvar

Price: €110,000
1 bedroom
Facing inner court
1st Floor
Size: 45 m2
Price includes underground garage space
Price includes furniture

Rented for 500 EUR/month until 31st January 2011
Rental potential: €500-550

Duplex Apartment in Gozsdu Udvar, Budapest, for Sale

Price: €140,000
Bedrooms: 1 bedroom + loft (duplex apartment)
Facing inner court
4th floor/attic
Rental potential: €550-600 depending on furnishing quality
Size: 77 m2 registered (73.5 m2 full ceiling height 1.9m)

BUILDING

Gozsdu Court is truly one of the most impressive new developments at present in central Budapest. A monumental classical renovation, Gozsdu has become not only one of the city’s premier residences, but also a key cultural centre in Budapest. The prestigious building, and first class facilities including the stunning Holmes Place gym combined with the central location offer the best in city centre living.

LOCATION

Located between Kiraly utca and Dob utca, Gozsdu Court, a secure gated development, is located in what has become one of the most sought after and fashionable areas in Budapest. The street Kiraly utca has undergone significant development over the last few years and is now home to various cafés and terraces, museums, art galleries, exhibitions and more. The galleries of Gozsdu Court itself are also drawing attention including the White Label gallery. Also close by are all the amenities of Andrassy Avenue, and the Deak Ferenc and Varosmarty Squares.

SERVICES

Gozsdu Court benefits from on-site concierge services and 24-hour security. Residents at Gozsdu can apply for membership at without a doubt Hungary’s most impressive new fitness gym. A spectacular world-class club, Holmes Place, frequented by foreigners, is a 2000 sqm wellness centre, and features the best in modern facilities. Several fitness and conditioning halls as well as various saunas, a steam room and a swimming pool are also located at Gozsdu Court.

Andras Patkai www.ceinvest.hu