Slovakia’s 2026 Tax Reform Reshapes Business Environment

Comprehensive Tax Changes Take Effect in 2026

From 1 January 2026, Slovakia implemented an extensive package of tax reforms affecting companies, entrepreneurs and employees. The measures form part of a broader fiscal consolidation strategy while aligning domestic legislation with European Union requirements. The changes cover income taxation, VAT, health and social contributions, financial transaction tax and digital reporting obligations.

While most measures increase the overall tax burden, selected incentives, such as the extension of Industry 4.0 super-deductions, aim to support long-term investment.

Higher Labour Costs Through Health and Social Contributions

Health insurance contributions increased by one percentage point in 2026, rising from 4 to 5 percent for employees and from 15 to 16 percent for self-employed individuals. Employers are now required to cover wage compensation for the first 14 days of temporary incapacity for work, compared to 10 days previously.

For self-employed persons, the minimum assessment base for social insurance contributions has increased from 50 to 60 percent of the average wage, while the contribution-free start-up period has been shortened from 12 months to six months.

Progressive Income Tax and Reduced Tax-Free Allowances

Amendments to the Income Tax Act introduced new progressive personal income tax rates of 30 and 35 percent in addition to the existing 19 and 25 percent rates. The highest rate applies to income exceeding €75,000 annually.

The threshold for applying the full personal tax-free allowance has been lowered. The full allowance for 2026 amounts to €5,967 and is available up to a tax base of €26,083, with gradual reduction thereafter.

For corporate taxpayers, the minimum tax for the largest companies has been increased, introducing a new bracket of €11,520 for entities with annual taxable income exceeding €5 million.

VAT Adjustments and Vehicle Deduction Reform

Amendments to the VAT Act introduced a flat-rate 50 percent input VAT deduction for passenger cars used partially for private purposes. Vehicles used exclusively for business require monthly electronic reporting.

The standard VAT rate of 23 percent continues to apply to most goods and services, including selected food products with higher sugar or salt content. Slovakia now ranks among EU countries with the highest standard VAT rates.

Authorities also introduced ex officio VAT group registration to combat artificial fragmentation of business activities aimed at avoiding VAT obligations.

Financial Transaction Tax and Expanded Permanent Establishment Rules

The financial transaction tax was amended in 2026, fully excluding sole traders from its scope, while legal entities remain subject to it. The concept of permanent establishment has been significantly broadened, potentially triggering tax liability for foreign entities providing services in Slovakia through digital interfaces, short-term construction projects or dependent agents.

Tax Amnesty and Digital Transformation Ahead

A temporary tax amnesty applies from 1 January to 30 June 2026, allowing taxpayers to settle arrears without penalties under specified conditions.

Looking ahead, mandatory electronic invoicing will be introduced from 2027 for domestic transactions under the EU’s VAT in the Digital Age framework, with cross-border reporting obligations extending from 2030. Businesses are expected to prepare during 2026 for the technological and compliance adjustments required.

As International Investment experts note, Slovakia’s 2026 reforms increase short-term fiscal pressure on companies, particularly through higher labour costs and indirect taxation, yet the planned digitalisation of tax administration may enhance transparency and long-term efficiency within the corporate sector.