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Slovakia tax resident

I am looking for information to transfer my tax residence to Slovakia, I know that dividends from a foreign company (ex LLC) are free tax. However I find little information on the web, can you help me? thanks a lot!
Where did you get this?

Slovakia taxes dividends at 10% starting from 2024. And it had dividend taxes for quite a few years before that.

Also, Slovakia is governed by a socialist party. This might be irrelevant to you, but it is not particularly beneficial to its tax status, and they have been hiking taxes in recent times.
Also if you run a US LLC from Slovakia, you can expect it to be taxed in Slovakia, either as if it was a Slovakian company or as if it was your own personal income.
Transparent US LLCs cannot distribute dividends, by the way.
This is besides the point. A US LLC is not the only LLC that exists - there are LLC forms that are not tax transparent (e.g. Czech, Polish, Slovak - that we are discussing, Nevis), and Slovakia did not have dividend taxation at some point.
 
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This is besides the point. A US LLC is not the only LLC that exists - there are LLC forms that are not tax transparent (e.g. Czech, Polish, Slovak - that we are discussing, Nevis), and Slovakia did not have dividend taxation at some point.

Oh, I thought he had written US LLC. But the answer is the same. Your Czech or Nevis LLC will also be taxed by Slovakia like a Slovak company.
 
Oh, I thought he had written US LLC. But the answer is the same. Your Czech or Nevis LLC will also be taxed by Slovakia like a Slovak company.
Yes, this is true. It's just that there is one exemption that is not useful for most people but could work for a couple - if you are a shareholder of a non-Slovak entity that has retained profits from the tax years between 2004 and 2016, and you receive the dividends now as a Slovak tax resident, there is no applicable taxation.

So, if you own any foreign entity that still has profits from that time period, it is possible to avoid paying dividend taxes on them in this way.

Nevertheless, you are right, operating whatever foreign company from Slovakia will make it tax resident in Slovakia.

Theoretically, the current status, of 10% on dividends from foreign entities, can still be useful for tax strategies, because Slovakia is a nice place to live (if you can tolerate being in the EUSSR) and if you can demonstrate foreign substance, it's probably OK. Although being governed by SMER and SNS is not ideal.
 
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Where did you get this?

Slovakia taxes dividends at 10% starting from 2024. And it had dividend taxes for quite a few years before that.

Also, Slovakia is governed by a socialist party. This might be irrelevant to you, but it is not particularly beneficial to its tax status, and they have been hiking taxes in recent times.

This is besides the point. A US LLC is not the only LLC that exists - there are LLC forms that are not tax transparent (e.g. Czech, Polish, Slovak - that we are discussing, Nevis), and Slovakia did not have dividend taxation at some point.
Thanks so much for the feedback! A supplier of mine who has LLC consulting firm in WY and tax residency in Slovakia told me this. He said me he does not pay any tax on dividends
 
Thanks so much for the feedback! A supplier of mine who has LLC consulting firm in WY and tax residency in Slovakia told me this. He said me he does not pay any tax on dividends
LLC does not pay dividends. Wherease US LLC is transparent entity for tax purposes. All profit of the US LLC is passed through to the personal income tax return of the owner as a profit from sole proprietorship. That is absolutely the worst scenario. Because this person has to pay personal income tax (20-25 %) + health insurance 14 % + social insurance 33.15 %. So in total 67.15-72.15 %.
Law of the Slovakia see US LLC as a tax transparent entity. Slovakia has absolutely the same type of the companies. It is called "Verejna obchodna spolocnost". The only difference between a tax law of the USA and Slovakia is, that profits passed through US LLC is taxed in the USA just if it is effectively connected income in the USA, in Slovakia, all income of the VOS is taxed in Slovakia in a personal level even if there is absolutely no connection of fhe income to Slovakia.

Person is slovak tax resident if at least 1 of the conditions is met:

1. Person has a temporary or permanent residency permit
2. Person stays in Slovakia at least 183 days within year (even incomplete day is counted)
3. Person ownes or has rented a real estate where can live (even if does not live there) or is has in Slovakia a relative who allows a person stay in his property
 
Yes, this is true. It's just that there is one exemption that is not useful for most people but could work for a couple - if you are a shareholder of a non-Slovak entity that has retained profits from the tax years between 2004 and 2016, and you receive the dividends now as a Slovak tax resident, there is no applicable taxation.

So, if you own any foreign entity that still has profits from that time period, it is possible to avoid paying dividend taxes on them in this way.

Nevertheless, you are right, operating whatever foreign company from Slovakia will make it tax resident in Slovakia.

Theoretically, the current status, of 10% on dividends from foreign entities, can still be useful for tax strategies, because Slovakia is a nice place to live (if you can tolerate being in the EUSSR) and if you can demonstrate foreign substance, it's probably OK. Although being governed by SMER and SNS is not ideal.
That is right. Only problem in this case is that US LLC does not oay dividends. It is income passed through and by fhe law of Slovakia it is considered as income from sole proprietorship.
 
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That is right. Only problem in this case is that US LLC does not oay dividends. It is income passed through and by fhe law of Slovakia it is considered as income from sole proprietorship.

Would probably still be fine if you move to Slovakia now, since it would then be considered personal income earned before one became tax resident.
 
Oh, I thought he had written US LLC. But the answer is the same. Your Czech or Nevis LLC will also be taxed by Slovakia like a Slovak company.
Even Slovakia has CFC rules, US LLC is not taxed in Slovakia in a corporate level. US LLC is tax transparent entity. And Slovak law see is as a tax transparent entity. CFC rules would be applicable just in case if US LLC makes decision to be taxed ad Corporation in the USA.
Whereas there is a DTT between USA and Slovakia and CT rate is absolutely the same in both countries, there will be no tax due in Slovakia.
 
Even Slovakia has CFC rules, US LLC is not taxed in Slovakia in a corporate level. US LLC is tax transparent entity. And Slovak law see is as a tax transparent entity. CFC rules would be applicable just in case if US LLC makes decision to be taxed ad Corporation in the USA.
Whereas there is a DTT between USA and Slovakia and CT rate is absolutely the same in both countries, there will be no tax due in Slovakia.

Yes, the transparency question was not answered before, thanks for clearing that up.
If it was taxed as a corporation, it would still not be a CFC, the company would simply be resident in Slovakia.
 
Where did you get this?

Slovakia taxes dividends at 10% starting from 2024. And it had dividend taxes for quite a few years before that.

Also, Slovakia is governed by a socialist party. This might be irrelevant to you, but it is not particularly beneficial to its tax status, and they have been hiking taxes in recent times.

This is besides the point. A US LLC is not the only LLC that exists - there are LLC forms that are not tax transparent (e.g. Czech, Polish, Slovak - that we are discussing, Nevis), and Slovakia did not have dividend taxation at some point.

Would probably still be fine if you move to Slovakia now, since it would then be considered personal income earned before one became tax resident.
It would be not. Slovak law defines income at the personal level as taxable in a year when it is paid. So if US LLC profit was passed through in a previous year, but money are transfered in this fiscal year, it will be taxable in Slovakia as income of the actual fiscal year
 
Yes, the transparency question was not answered before, thanks for clearing that up.
If it was taxed as a corporation, it would still not be a CFC, the company would simply be resident in Slovakia.
If LLC which is in US taxed as a Corporation, is managed fron Slovakia, company will be tax resident of the USA and Slovakia. DDT will be applied and tax will be paid in the USA only.
 
It would be not. Slovak law defines income at the personal level as taxable in a yeat when it is paid. So if US LLC profit was passed through in a previous year, but money are transfered in this fiscal year, it will be taxable in Slovakia as income of the actual fiscal year
Yes, US LLC does not work for this purpose.

If you own whatever opaque company, like say BVI Ltd. that has profits from 2004-2016, move to Slovakia, receive the dividend as a tax resident, you will not pay taxes on that. That's the only benefit of that exception.

You are also correct with the classification of the US LLC, it's just a partnership like any other komanditná spoločnosť / verejná obchodná spoločnosť. It is not useful for saving taxes in Slovakia. Maybe you could hide it, which is probably what OP's friend is doing. It works at least temporarily but it is not in accordance with the law.

The only successful structure with this style in Slovakia would be a foreign company with local substance that looks reasonable for the conducted work in a country with no withholding tax and preferably low local corporate taxes. In that case, you could still benefit from the 10% dividend tax rate in Slovakia, which is pretty competitive.

Running a normal local business (s.r.o.) from Slovakia is not particularly effective, at least in comparison with neighbouring countries. There is not a lot of quality workforce access (most of them are in CZ haha); the taxation is worse, especially in comparison with Hungary or Poland, which do have low-ish CIT and some IP box available unlike Slovakia.
 
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Yes, US LLC does not work for this purpose.

If you own whatever opaque company, like say BVI Ltd. that has profits from 2004-2016, move to Slovakia, receive the dividend as a tax resident, you will not pay taxes on that. That's the only benefit of that exception.

You are also correct with the classification of the US LLC, it's just a partnership like any other komanditná spoločnosť / verejná obchodná spoločnosť. It is not useful for saving taxes in Slovakia. Maybe you could hide it, which is probably what OP's friend is doing. It works at least temporarily but it is not in accordance with the law.

The only successful structure with this style in Slovakia would be a foreign company with local substance that looks reasonable for the conducted work in a country with no withholding tax and preferably low local corporate taxes. In that case, you could still benefit from the 10% dividend tax rate in Slovakia, which is pretty competitive.

Running a normal local business (s.r.o.) from Slovakia is not particularly effective, at least in comparison with neighbouring countries. There is not a lot of quality workforce access (most of them are in CZ haha); the taxation is worse, especially in comparison with Hungary or Poland, which do have low-ish CIT and some IP box available unlike Slovakia.

Yes, but the company would be able to pay its 21% tax to the IRS instead of the Slovak tax agency and the Slovak tax agency would not complain. It would fit the DTT - but you would not save anything - you just pay 21% to one greedy state instead of another greedy state, lol. And you would have to document the US tax payment to the SK tax agency, they will get mad because they have to process more documents - i.e., you would just be wasting time to end up paying the same tax a normal local Slovak entity would pay.
Even 10 % dividend tax can be avoid, but there is more complex structure needed.

There is a way how Slovak resident can have a US LLC and pay no or almost no tax. But there has to be a really complex structure created. Which makes sense just for income starting at 7 digits.
 
Yes, US LLC does not work for this purpose.

If it is viewed as transparent, I can't see them tax income that was earned before moving to Slovakia. But obviously, everything earned after that point will be taxed in Slovakia.

Yes, but the company would be able to pay its 21% tax to the IRS instead of the Slovak tax agency and the Slovak tax agency would not complain. It would fit the DTT - but you would not save anything - you just pay 21% to one greedy state instead of another greedy state, lol. And you would have to document the US tax payment to the SK tax agency, they will get mad because they have to process more documents - i.e., you would just be wasting time to end up paying the same tax a normal local Slovak entity would pay.

No. Without substance, it will have to pay tax in Slovakia. It would be the other way around, you would be able to avoid tax in the US.
You can check the articles about residency (article 4) and permanent establishments in the DTT and you will see this.
 
LLC does not pay dividends. Wherease US LLC is transparent entity for tax purposes. All profit of the US LLC is passed through to the personal income tax return of the owner as a profit from sole proprietorship. That is absolutely the worst scenario. Because this person has to pay personal income tax (20-25 %) + health insurance 14 % + social insurance 33.15 %. So in total 67.15-72.15 %.
Law of the Slovakia see US LLC as a tax transparent entity. Slovakia has absolutely the same type of the companies. It is called "Verejna obchodna spolocnost". The only difference between a tax law of the USA and Slovakia is, that profits passed through US LLC is taxed in the USA just if it is effectively connected income in the USA, in Slovakia, all income of the VOS is taxed in Slovakia in a personal level even if there is absolutely no connection of fhe income to Slovakia.

Person is slovak tax resident if at least 1 of the conditions is met:

1. Person has a temporary or permanent residency permit
2. Person stays in Slovakia at least 183 days within year (even incomplete day is counted)
3. Person ownes or has rented a real estate where can live (even if does not live there) or is has in Slovakia a relative who allows a person stay in his property
Thank you very much for the very comprehensive answer. My supplier probably told me the wrong things and he probably isn't aware of it either but he is trusting his consultant.
I just don't understand what you mean by "LLC does not pay dividends". Do you mean there are no US taxes attributable to the LLC for the dividends? Thanks again
 
I just don't understand what you mean by "LLC does not pay dividends". Do you mean there are no US taxes attributable to the LLC for the dividends? Thanks again

A transparent (single-member) US LLC cannot pay dividends. It is a disregarded entity. For tax purposes, the company does not even exits. All income is automatically the income of the owner, as if the owner had earned the money under his own name. Only corporations can distribute dividends (after paying corporate income tax).
 
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