If you are looking to contract in a central European country with a rich culture and affordable cost of living, then Slovakia may be worth looking into. As a member of the EU, Slovakia is easily accessible to EU citizens. It also offers opportunities across a variety of work sectors.
As with any new country, it is essential to research beforehand what is required to contract with Slovakian clients. You also need to know how local regulations will affect immigration, taxation, and retained earnings. This guide will outline the basics. It will also show how to find support from local experts and third parties to assist you.
Do I need a visa to be a contractor in Slovakia?
Because Slovakia is an EU member nation, EU nationals do not need a work visa for contracting. However, they will need a residence permit for longer stays. Non-EU citizens will need a work visa from a valid Slovakian entity, typically in an employment relationship and subject to many limitations. All contractors will need to register for a trade license depending on the type of profession.
How do I get paid as a contractor in Slovakia?
There are several ways to contract and get paid while contracting in Slovakia. This depends on your experience, nationality, and willingness to engage intermediaries in the process.
Work as a self-employed freelancer
As an EU contractor, you can easily enter Slovakia and work right away as a self-employed freelancer. If you are new to Slovakia, you will have to find a way to establish your credibility and competence with new clients, but in most cases, a ‘trial’ contract or project should take care of that, in addition to having a trade license.
You will bill your client directly, and set up a preferred payment method based on completed time periods or milestones. You can work with multiple clients in this way, or focus on a single client that needs your skills. Non-EU citizens may find freelancing difficult due to visa requirements and might need to opt for a more employment-like relationship.
Set up your own limited company
Contractors that have been in an international setting for a while might have their own limited company, or want to set one up in Slovakia. This option does have several benefits including tax advantages, perceived business credibility, and separation of personal and business finances.
Your clients will contract with your limited company, and the company will lease you out to the client for completing projects. If you are using your limited company from another country, you will have to meet any registration and capitalization requirements just like any other foreign business.
Work with an umbrella company in Slovakia
Another choice for getting paid is to use a Slovakian umbrella company, and this may be the best method for non-EU contractors or those new to contracting. The umbrella company is a third party to the contract and can ease the burden of figuring out an entirely new tax and work system.
The client would remit payment to the umbrella company based on your completed work invoice. Then, you would get paid by the umbrella company with all taxes and contributions withheld. They can also sponsor work permits and help you sort out any double taxation or contribution issues with your home country.
How do taxes work for contractors in Slovakia?
The taxes in Slovakia are fairly straightforward and they rely on a flat tax rate system. This is very dependent on income level and the work status. If you are self-employed or contracting through your limited company, your client will be obligated to withhold taxes from your invoice payments.
In Slovakia, there is an overall flat tax rate of 19% up to EUR 37,163 and 25% on amounts over that. For independent contractors, there is a lower 15% flat rate for self-employment income up to EUR 49,790 in 2021 (previously EUR 100,000) and 25% after that amount.
Tax residency rule in Slovakia
Slovakia uses the 183-day rule for tax residency. Any stay beyond that in a consecutive 12-month period will result in taxation of worldwide income. To avoid double taxation in your home country you would have to look to a tax treaty that allows relief from that.
How to file taxes in Slovakia
If your client or umbrella company has withheld taxes, it may not be necessary to file a tax return if the client files an annual tax clearing for you. If you need to file, then you submit a Type A tax return.
Taxes can be filed in Slovakia in person, by post, or electronically through the Financial Administration Portal. If using the portal, you must first register there, where there are video instructions on how to proceed. Once you register you would have to wait for up to 10 days for authorization to file online.
What are the social security contributions in Slovakia?
There are multiple pension and insurance contributions required in Slovakia. These all add up to nearly a whopping 50% of earnings. For that reason, EU contractors may want to show they are still on their home country social security program, and avoid the contributions. Non-EU contractors would have to look to a bilateral social security agreement between Slovakia and their home country for the same outcome.
Here is a summary of the various social security contributions in Slovakia:
- Pension: 18%
- Disability: 6%
- Reserve Fund: 4.75%
- Sickness: 4.4%
- Unemployment: 2% (voluntary)
- Health: 14%
- Total: 49.15%
How do I stay compliant while contracting in Slovakia?
The main compliance concerns for international contractors in Slovakia are making correct tax payments, meeting immigration requirements, and paying social contributions. Each of these can apply to expat contractors in Slovakia, and depend on a number of criteria that may be difficult to learn if you are new to the country.
The easiest way to remain compliant given all the variables is to use an umbrella company as your local partner in Slovakia. They are already well-versed in the rules for self-employed contractors and can help you get started with the contract. They also facilitate all of the compliance-related steps on your behalf.
Using an umbrella company is the best way to avoid any misclassification issues or violating any self-employment rules. Aside from compliance, here are the other benefits of using an umbrella company:
- First, handle all client payments, tax withholding, and any social contributions
- Secondly, issue you a payslip each month, to a local or foreign account
- Thirdly, sponsor work permits for non-EU citizens
- Also, help set up the contract with the client
- Moderates any disputes with your client
- Last but not the least, advise on access to totalization and double taxation treaties
Contractor Taxation has experienced umbrella companies in Slovakia who are ready to help you right away, even before you leave home. Please contact us for more information on how an umbrella company can be your essential partner in international contracting.