Slovakia tax resident
- Thread starter Dave88
- Start date
- Status
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.
Transparent US LLCs cannot distribute dividends, by the way.
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 LLC︃ 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 at︅ some point.
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 LLC︃ 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 at︅ 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.
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 still︀ has profits from that time period, it is possible to avoid paying dividend taxes on︁ them in this way.
Nevertheless, you are right, operating whatever foreign company from Slovakia will︂ make it tax resident in Slovakia.
Theoretically, the current status, of 10% on dividends from︃ foreign entities, can still be useful for tax strategies, because Slovakia is a nice place︄ to live (if you can tolerate being in the EUSSR) and if you can demonstrate︅ foreign substance, it's probably OK. Although being governed by SMER and SNS is not ideal.︆
So, if you own any foreign entity that still︀ has profits from that time period, it is possible to avoid paying dividend taxes on︁ them in this way.
Nevertheless, you are right, operating whatever foreign company from Slovakia will︂ make it tax resident in Slovakia.
Theoretically, the current status, of 10% on dividends from︃ foreign entities, can still be useful for tax strategies, because Slovakia is a nice place︄ to live (if you can tolerate being in the EUSSR) and if you can demonstrate︅ foreign substance, it's probably OK. Although being governed by SMER and SNS is not ideal.︆
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 33.15︀ %. So in total 67.15-72.15 %.
Law of the Slovakia see US LLC as a︁ tax transparent entity. Slovakia has absolutely the same type of the companies. It is called︂ "Verejna obchodna spolocnost". The only difference between a tax law of the USA and Slovakia︃ is, that profits passed through US LLC is taxed in the USA just if it︄ is effectively connected income in the USA, in Slovakia, all income of the VOS is︅ taxed in Slovakia in a personal level even if there is absolutely no connection of︆ fhe income to Slovakia.
Person is slovak tax resident if at least 1 of the︇ conditions is met:
1. Person has a temporary or permanent residency permit
2. Person stays︈ in Slovakia at least 183 days within year (even incomplete day is counted)
3. Person︉ ownes or has rented a real estate where can live (even if does not live︊ there) or is has in Slovakia a relative who allows a person stay in his︋ property
Law of the Slovakia see US LLC as a︁ tax transparent entity. Slovakia has absolutely the same type of the companies. It is called︂ "Verejna obchodna spolocnost". The only difference between a tax law of the USA and Slovakia︃ is, that profits passed through US LLC is taxed in the USA just if it︄ is effectively connected income in the USA, in Slovakia, all income of the VOS is︅ taxed in Slovakia in a personal level even if there is absolutely no connection of︆ fhe income to Slovakia.
Person is slovak tax resident if at least 1 of the︇ conditions is met:
1. Person has a temporary or permanent residency permit
2. Person stays︈ in Slovakia at least 183 days within year (even incomplete day is counted)
3. Person︉ ownes or has rented a real estate where can live (even if does not live︊ there) or is has in Slovakia a relative who allows a person stay in his︋ property
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.
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 both︀ countries, there will be no tax due in Slovakia.
Whereas there is a DTT between USA and Slovakia and CT rate is absolutely the same in both︀ 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.︁
If it was taxed as a corporation,︀ it would still not be a CFC, the company would simply be resident in Slovakia.︁
It would be not. Slovak law defines income at the personal level︃ as taxable in a year when it is paid. So if US LLC profit was︄ passed through in a previous year, but money are transfered in this fiscal year, it︅ 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 just︀ a partnership like any other komanditná spoločnosť / verejná obchodná spoločnosť. It is not useful︁ for saving taxes in Slovakia. Maybe you could hide it, which is probably what OP's︂ friend is doing. It works at least temporarily but it is not in accordance with︃ the law.
The only successful structure with this style in Slovakia would be a foreign︄ company with local substance that looks reasonable for the conducted work in a country with︅ no withholding tax and preferably low local corporate taxes. In that case, you could still︆ benefit from the 10% dividend tax rate in Slovakia, which is pretty competitive.
Running a︇ normal local business (s.r.o.) from Slovakia is not particularly effective, at least in comparison with︈ neighbouring countries. There is not a lot of quality workforce access (most of them are︉ in CZ haha); the taxation is worse, especially in comparison with Hungary or Poland, which︊ do have low-ish CIT and some IP box available unlike Slovakia.
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 just︀ a partnership like any other komanditná spoločnosť / verejná obchodná spoločnosť. It is not useful︁ for saving taxes in Slovakia. Maybe you could hide it, which is probably what OP's︂ friend is doing. It works at least temporarily but it is not in accordance with︃ the law.
The only successful structure with this style in Slovakia would be a foreign︄ company with local substance that looks reasonable for the conducted work in a country with︅ no withholding tax and preferably low local corporate taxes. In that case, you could still︆ benefit from the 10% dividend tax rate in Slovakia, which is pretty competitive.
Running a︇ normal local business (s.r.o.) from Slovakia is not particularly effective, at least in comparison with︈ neighbouring countries. There is not a lot of quality workforce access (most of them are︉ in CZ haha); the taxation is worse, especially in comparison with Hungary or Poland, which︊ do have low-ish CIT and some IP box available unlike Slovakia.
Even 10 % dividend tax can be avoid, but there is more complex structure️ 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.
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.
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.
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 in︄ the US.
You can check the articles about residency (article 4) and permanent establishments in︅ the DTT and you will see this.
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 in︄ the US.
You can check the articles about residency (article 4) and permanent establishments in︅ the DTT and you will see this.
Thank you very much for︉ the very comprehensive answer. My supplier probably told me the wrong things and he probably︊ isn't aware of it either but he is trusting his consultant.
I just don't understand︋ what you mean by "LLC does not pay dividends". Do you mean there are no︌ US taxes attributable to the LLC for the dividends? Thanks again
I just don't understand︋ what you mean by "LLC does not pay dividends". Do you mean there are no︌ 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).
- Status