How foreign dividends are taxed for Slovak investors

A Slovak tax resident who receives a dividend from a foreign company has usually already lost some of it at the source. Slovakia then treats the same dividend as income in the annual return, and the two amounts are reconciled with a credit. Whether anything more is owed depends on how much the other country took.

Two taxes on one dividend

The first is the withholding tax of the country the company is based in, deducted before the money reaches your broker. It is covered in how dividend withholding tax works for EU investors. The second is Slovak income tax on the same dividend, because a Slovak tax resident is taxed on income from abroad as well.

Slovakia sets the rate on a dividend by the year of the profits it is paid out of: 7 percent for profits of 2017 to 2023, 10 percent for profits of 2024, and 7 percent again for profits from 2025 onward. A broker statement does not print the profit year, so the rate that applies to a particular payment is a point worth confirming rather than assuming.

How the credit works

Under the credit method, tax already paid abroad is set against the Slovak tax on the same income. The credit is capped at the Slovak tax on that income, so foreign tax above that level does not reduce anything further at home.

That gives three patterns for a gross dividend of 100 euro, using a 7 percent Slovak rate:

The first row is the common one for anyone holding US shares directly: the 15 percent withheld already exceeds the Slovak rate, so the credit absorbs the Slovak tax entirely. The second row is the reverse. With nothing withheld abroad there is nothing to credit, and the whole Slovak tax is due in the return.

The third row is a different problem. Tax withheld above the treaty rate is not something the Slovak credit will recognise, so it is recovered, if at all, from the source country’s tax authority through its own reclaim procedure. The sums are often small relative to the paperwork, which is why many small holders never pursue it.

What goes in the return

• The dividend is reported gross, before the foreign tax, even though the money you received was smaller.
• It goes in the annual personal income tax return, type B, in the annex for shares of profit, with the foreign tax stated so the credit can be applied.
• The usual deadline is 31 March of the following year, with longer deadlines available for income from abroad. The exact dates are set by the Financial Administration and are worth checking each year.

Statements from brokers vary in whether the foreign tax appears as its own row or is folded into a net amount, which decides how much reconstruction the return needs. The layout in each export is described in the broker export guide.

Funds are a different case

An accumulating fund pays you nothing, so there is no dividend of yours to put in the return, even though the fund itself lost tax on the dividends it received. A distributing fund does pay out, and what you receive is reported as the dividend from it. The tax on selling fund units is a separate set of rules that this article does not cover.

What this article leaves out

• Health insurance contributions, which may also apply to some dividend income and depend on details not covered here.
• Sales of shares and funds, which are taxed under different rules.
• Countries without a treaty with Slovakia, where the withheld amount and the credit can differ from the rows above.

Working out your own figures

The dividend withholding tax calculator runs the gross, withheld and home-country steps for a single payment, and the source pages below are where the current rates are published.

Sources

• PwC Worldwide Tax Summaries: Slovak Republic, individual income determination
• Grant Thornton Slovakia: foreign dividends in the tax return (in Slovak)