Investment Incentives

The Slovak Republic provides investment incentives/aid for approved projects involving the start of new production or service activities, or the expansion or modernization of existing production or service activities. Specific activities eligible for incentives include industry, technology centers, shared services centers, and tourism. Investment incentives are also provided for approved R&D investment.

The incentives are subject to special rules in the State Aid Act and the Investment Stimulus Act, and the maximum limits are determined by the EU State aid regulations. Both foreign and domestic investors may be eligible.

The available forms of incentives/aid include:

100% tax exemption for up to 10 years;
Regional aid in the form of a financial grant or discount on the market price of immovable assets;
Cash grants for the acquisition of both tangible fixed assets such as land, buildings and plant/machinery, and tangible fixed assets such as patents, licenses, know-how or unpatented technical knowledge, etc.;
Cash grants on newly created jobs based on the anticipated wage costs related to the newly created jobs and the regional location of the project taking into account the regional unemployment rate; and
Cash grants on training based on the percentage of eligible training costs, which vary according to the region.

Conditions for eligibility for the incentives/aid include:

Minimum investment amount:

Generally, EUR 10 million with at least 50% covered by equity;
EUR 5 million when in a region with higher than average unemployment, with at least 50% covered by equity; or
EUR 3 million when in a region with an unemployment rate exceeding the average by 50% or more, with at least 50% covered by equity;

The investment must create new jobs;
The investment must be in a single location; and
The investment must meet certain environmental criteria.

The National Council of the Slovak Republic introduced a new incentive for investment plans from 2022 (section 30e in the Income Tax Act), which inter alia provides for an additional deduction equal to a percentage of investment costs in the implementation of a qualifying investment plan. The incentive is introduced vide Law of 27 October 2021.

Qualifying investment plans include investments in production and logistics systems consisting of equipment, machinery, ancillary equipment, automation and communication technology, computer programs (software) for real-time production, logistics process management and certain specific tangible assets. Further, a company must submit a four-year investment plan for the period 2022 to 2025 and meet certain other conditions, to be eligible for the incentives.

The percentage allowed for the additional deduction depends on the value of the planned investment, as well as the proportion of the investment as compared to investment in the previous three tax periods:

If the investment plan value is 700% to 1,399.99% of the investment amount in the previous three tax periods, the additional deduction is equal to:

15% if the total planned investment is EUR 1 million up to 20 million;
25% if the total planned investment is more than EUR 20 million up to 50 million; and
50% if the total planned investment is more than EUR 50 million.

If the investment plan value is 1,400% or more of the investment amount in the previous three tax periods, the additional deduction is equal to:

20% if the total planned investment is EUR 1 million up to 20 million;
30% if the total planned investment is more than EUR 20 million up to 50 million; and
55% if the total planned investment is more than EUR 50 million.

The additional deduction may be claimed over the depreciation period of the relevant assets, limited to a maximum period of 10 years.

R&D Investment

Grants and income tax relief are also available for R&D investments that create new jobs. However, minimum investment requirements do not apply. Qualifying R&D expenses are eligible for a 200% (increased from 150%, effective 1 January 2020) deduction, however effective 2022 the said deduction would be restricted to 100%. Additional allowances are also available for certain qualifying expenses, such as:

25% of real costs incurred for R&D;
25% of wage costs of newly-hired graduates, deductible in the year when the graduates are hired; and
25% of the year-on-year increase of costs incurred for R&D.

Intellectual Property Management Regimes

A patent box regime has been introduced effective 1 January 2018, in line with the modified nexus approach of BEPS Action 5. Under the regime, a 50% tax exemption is available on qualifying IP income in relation to patents, utility models, and computer software developed by the taxpayer, as well as an extended patent box that provides a similar exemption for qualifying income from selling goods that were manufactured on the basis of a protected patent or a utility model.

COVID-19 Emergency Measures

In response to the COVID-19 pandemic and in line with the EU State Aid Temporary Framework, the Slovak Republic announced an aid scheme to compensate tourism sector businesses for a part of their uncovered fixed costs. Businesses which suffered a decline in revenue of at least 40% during the period starting from 1 April 2020 up to 31 December 2021 in comparison to the same period in 2019 can avail the government aid up to 10% of the nominal decrease in net turnover.

Further, the aid:

Will not exceed 70% of the uncovered fixed costs, except for micro and small enterprises for which it is capped at 90% of the uncovered fixed costs;
Will not exceed EUR 10 million per beneficiary; and
Will be granted no later than 31 December 2021.

The European Union approved the State aid scheme on 4 May 2021.

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