There are new VAT rates, changes in transaction tax payments, and higher levies

Since the beginning of the year, Slovak tax legislation has been undergoing changes that will affect both businesses and ordinary consumers.

The most significant changes concern VAT rates, financial transaction tax, and special levies in regulated industries.

VAT rates

From January 1, 2026, there will be a significant change in the reduced VAT rate system, which is intended to encourage producers to produce healthier foods. Products with excessive salt and sugar content will be excluded from the reduced 19% VAT rate and moved to the higher 23% category.

This measure does not apply to salt and sugar themselves. These will remain in their original category. The change applies exclusively to processed foods that contain excessive amounts of these ingredients, which may include, for example, sweets, salty snacks, and some ready-made meals.

At the same time, the rules for applying the reduced tax rate to printed matter are being relaxed. From 2026, magazines and newspapers that are published less than four times a week will also be able to benefit from the reduced 5% value added tax rate.

Fundamental tax reform

The most significant changes in the tax system from January 1, 2026, concern the financial transaction tax, also known as the transaction tax. This controversial tax, introduced in April 2025, is undergoing a fundamental transformation that will bring relief mainly to individuals as entrepreneurs.

From the new year, only legal entities will be subject to financial transaction tax. Specifically, this applies to legal entities based in Slovakia, as well as foreign legal entities carrying out activities defined in the law on Slovak territory. Individuals as entrepreneurs will thus be completely exempt from this tax. This change brings significant administrative relief to sole traders and self-employed persons. From 2026, they will no longer be required to carry out all business-related transactions exclusively through a business account, nor will they be required to set up or maintain such a payment account.

However, it is important to note that everything will remain the same until the end of 2025. Banks will continue to deduct tax from business accounts for taxable transactions, and all obligations of natural persons - entrepreneurs, including those with foreign payment accounts, will remain in force.

New definitions and rules

The law introduces a number of new definitions that clarify the application of the tax. The definition of a permanent establishment for taxpayers with limited tax liability is supplemented, which is broader and slightly different from the definition known from the Income Tax Act.

A distinction is made between taxpayers with unlimited tax liability based in the country and taxpayers with limited tax liability with a permanent establishment in the country. Taxpayers with unlimited tax liability are subject to taxation on all worldwide transactions, while taxpayers with limited tax liability pay tax only on transactions on domestic accounts and on those foreign transactions that are related to activities in the country through a permanent establishment.

The legislation also introduces a new concept of cost reallocation, which refers to a financial transaction carried out on behalf of a taxpayer by another person, whereby for taxpayers with limited tax liability, this transaction must be related to their domestic activities.

New penalties and liability

Liability is introduced for financial transactions that are subject to tax but which the taxpayer has carried out on a special account that they have reported to a Slovak bank as an account used for transactions excluded from the tax base. The tax administrator will be obliged to impose a fine for such conduct.

Since the launch of the transaction tax in April 2025, its negative effects have been clearly visible. The transaction tax causes secondary damage in the form of an increase in the gray economy by favoring cash transactions. The state has no control over cash transactions and often collects no tax on them. This approach only exacerbates the high tax and contribution burden on labor and the excessively high income tax for large companies. In short, the transaction tax explicitly encourages excessive optimization and non-recognition of other taxes by companies shifting part of their operations to cash.

The changes to the transaction tax from January 2026 do not change the essence of the negative impact on the Slovak economy. Self-employed people will be pleased, but companies that form the backbone of the Slovak economy will continue to be overburdened.

From January 1, 2026, there will be an increase in the special levy applicable to pension management companies managing pension funds under the second pillar, as well as to supplementary pension companies operating in the third pillar and management companies operating in the field of collective investment. A new special levy rate of 0.0125 percent per month will be introduced for all these entities.

If a regulated entity operates in several regulated areas at the same time, the highest applicable rate for that entity will always be used to calculate the special levy. The obligation to notify the tax administrator is not limited to the emergence of this obligation, but is also required in the event of a change in the special levy.