Minimum tax for legal entities
Since when does the minimum tax for legal entities apply and what is the minimum tax?
With effect from January 1st, 2024, Act No. 595/2003 Coll. on income tax as amended (hereinafter referred to as the "Income Tax Act"), § 46b was supplemented by the institution of the minimum tax for legal entities (hereinafter referred to as the "minimum tax"). As of January 1st, 2024, the minimum corporate income tax will be re-introduced. This is similar to the once-known tax license, which was abolished in 2018. The law no longer uses the term tax license but replaces it with the term Minimum tax for legal entities.
The minimum tax applies only to legal entities. It does not apply to natural persons (e.g. self-employed employees, and other self-employed employees).
Who does the minimum tax apply to and when is it due?
According to §46b par. 1 of the Income Tax Act, almost every legal entity will have to pay this tax, after deducting the relevant tax credits, for each tax period for which:
- The tax liability calculated in the tax return is lower than the amount of the minimum tax that is established for an individual taxpayer,
- Reported a tax loss.
The new minimum tax for legal entities, will have to paid even if the entrepreneur (legal entity) did not perform any activity or had a loss. The obligation to pay the minimum tax, does not arise for an entrepreneur whose tax liability is higher than the amount of the minimum tax.
When is the minimum tax due?
According to §46b par. 4 of the Income Tax Act, the taxpayer is obliged to pay the minimum tax in the same period in which the taxpayer is obliged to file a tax return. Pursuant to §49 of the Income Tax Act, the tax return is submitted within 3 calendar months after the end of the tax period, unless the law provides otherwise.
The minimum tax will not be paid for the tax return for the period of 2023, which will be submitted in 2024. This obligation will arise for the first time for a legal entity when filing a tax return in 2025 for the tax period of 2024.
The amount of the minimum tax
The amount of the minimum tax ranges from EUR 340 to EUR 3840. It depends on the amount of taxable income (revenue) that the taxpayer achieved during the tax period. Pursuant to §46b par. 2 of the Income Tax Act, the minimum tax is paid by the taxpayer who achieved taxable income (income) for the tax period:
- Not exceeding the amount of EUR 50 000 (inclusive), in this case a minimum tax of EUR 340 is paid,
- Exceeding the amount of EUR 50 000 and not exceeding the amount of EUR 250 000 (inclusive), in this case he pays a minimum tax of EUR 960,
- Exceeding the amount of EUR 250 000 and not exceeding the amount of EUR 500 000 (inclusive), in this case he pays a minimum tax of EUR 1 920,
- Exceeding the amount of EUR 500 000, in this case a minimum tax of EUR 3 840 euros is payable.
Which taxpayers do not pay the minimum tax?
According to § 46b par. 7 of the Income Tax Act defines taxpayers who do not pay the minimum tax. The following legal entities do not have to pay the minimum tax:
- a taxpayer who is required to file a tax return for the tax period for the first time (newly established taxpayer),
- taxpayer not incorporated or established for business (public company and National Bank of Slovakia, etc.),
- a taxpayer who operates a protected workshop or a protected workplace,
- for tax periods according to § 41 par. 4, 6, 8, 12 to 14, Income Tax Act (e.g. company in bankruptcy or in liquidation),
- a taxpayer that is a land association, if it only achieves income (revenues) not exceeding the amount of EUR 10 000,
- the taxpayer starting with the tax period in which he was notified of the initiation of the company liquidation procedure.
There are many companies that file zero tax returns and are inactive but due to the mentioned change in the Income Tax Act, they will have to pay a minimum tax. However, there are several ways how to avoid this obligation, e.g. the liquidation of the company or its sale.
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