Economic Overview
Slovakia is a high-income advanced economy with a very high Human Development Index, a very high standard of living and performs favorably in measurements of civil liberties, press freedom, internet freedom, democratic governance and peacefulness.
The country maintains a combination of market economy with a comprehensive social security system.
Citizens of Slovakia are provided with universal health care, free education and one of the longest paid maternity leave in the OECD.
The country joined the European Union in 2004 and the Eurozone on 1 January 2009.
Slovakia is also a member of the Schengen Area, NATO, the United Nations, the OECD, the WTO, CERN, the OSCE, the Council of Europe and the Visegrád Group.
Although regional income inequality is high, 90% of citizens own their homes. In 2018, Slovak citizens had visa-free or visa-on-arrival access to 167 countries and territories, ranking the Slovak passport 12th in the world.
The car industry represents 43% of Slovakia’s industrial output, and a quarter of its exports.
The economy of Slovakia is based upon Slovakia becoming an EU member state in 2004, and adopting the euro at the beginning of 2009. Its capital, Bratislava, is the largest financial center in Slovakia. As of 2018 (1.Q.), the unemployment rate was 5.72%.
Slovakia’s economic freedom score is 65.3, making its economy the 59th freest in the 2018 Index.
Its overall score has decreased by 0.4 point, with lower scores for the government spending and government integrity indicators outweighing an improvement in fiscal health.
Slovakia is ranked 29th among 44 countries in the Europe region, and its overall score is below the regional average but above the world average.
Key sectors in Slovakia
Services
Slovak service sector grew rapidly during the last 10 years and now employs about 69% of the population and contributes with over 61% to GDP.
Slovakia’s tourism has been rising in recent years, income has doubled from 640 million USD in 2001 to 1.2 billion USD in 2005. However, this sector still remains underdeveloped in comparison with neighboring countries.
Agriculture
Over 40% of the land in Slovakia is cultivated. The southern part of Slovakia (bordering with Hungary) is known for its rich farmland. Growing wheat, rye, corn, potatoes, sugar beets, grains, fruits and sunflowers.
Vineyards are concentrated in Little Carpathians, Tokaj, and other southern regions. The breeding of livestock, including pigs, cattle, sheep, and poultry is also important.
Industry
Slovakia became industrialized mostly in the second half of the 20th century.
Heavy industry was built for strategic reasons because Slovakia was less exposed to the military threat than the western parts of Czechoslovakia. In 2010, industry (including construction) accounted for 35.6% of GDP, compared with 49% in 1990.
Nowadays, building on a long-standing tradition and a highly skilled labor force, main industries with potential of growth are following sectors: Automotive, Electronics, Mechanical engineering, Chemical engineering, Information technology.
The automotive sector is among the fastest growing sectors in Slovakia due to the recent large investments of Volkswagen (Bratislava), Peugeot (Trnava), Kia Motors (Žilina) and since 2018 also Jaguar Land Rover in Nitra.
Taxes in Slovakia
Income Tax for an Individual
– An individual in Slovakia is liable for tax on his income as an employee and on income as a self-employed person. In the case of an individual who answers the test of a “permanent resident” of Slovakia, tax will be calculated on his worldwide income.
A foreign resident who is employed in Slovakia pays tax only on his Slovak source income.
– To be considered a Slovak resident, permanent residence permit should be obtained or residence of at least 183 days during any calendar tax year must be established.
– An employer is obligated to deduct, immediately, each month, the amount of tax and national insurance (health insurance and social insurance) due from a salaried worker.
– A self-employed individual is obligated to make quarterly advance payments on income tax based on his previous year tax liability.
The advance payments on income tax will be offset on filing an annual report. In the case of a new business, the advance payments will be calculated according to the estimates of the owner of the business.
– Certain payments are deducted from taxable income as detailed below.
– Losses from various activities of individuals can be offset against each other, however none of them can be offset against employment income.
Slovakia Corporate Tax
– Slovak companies are taxable on their worldwide income.
Foreign companies in Slovakia are taxable only on income that has its source in Slovakia.
Capital Gains in Slovakia
– A capital gain in Slovakia is added to regular income and is taxable at the same rate as regular income for both an individual and a company.
– A capital loss from the sale of an asset may not be offset against regular taxable income.
Investing in Slovakia
Slovakia is an ideal investment destination because of its political economic stability strengthened by the common European currency Euro, competitive taxation system tax, and availability of highly skilled and educated workforce offering the highest labour productivity in the CEE region with favorable labour costs.
Steadily growing infrastructure, large selection of industrial land and offices available for purchase or lease, harmonized investment incentives and high innovation potential for R&D projects are further assets of the country. Last but not least, the country has a favorable location in the heart of the Europe, between East and West, and between Poland, Hungary, Austria and the Czech Republic.
Top Reasons Why to Invest in Slovakia
– safe investment environment: political and economic stability
– Central European hub & favorable geographic location with great export potential
– fastest growing Eurozone member within the last 10 years (CAGR)
– Slovakia 10 Year CEE Leadership in Doing Business 2004 – 2013 (World Bank)
– CEE Leader in Physical Property Rights Security (PRA)
– CEE leader in labor productivity and in TOP 10 hard working countries (OECD)
– High adaptability of labor force to different culture management styles
– No. 9 worldwide in adapting to new technologies & high innovation potential
– Official currency EURO as one of a few countries in CEE
– Large selection of industrial land & offices
– Steadily growing infrastructure network
– Attractive investment incentives