Investing and taxes in the Czech Republic vs. Slovakia: where is the better system?

Many Slovaks nowadays go to the Czech Republic for work or business. According to the available statistics, there are already hundreds of thousands of people. Is it just the labour market and language proximity, or do taxes also play a significant role? We raised this question in our Highgate Talks podcast #38where Peter Varga, together with his Czech colleagues Ondrej Malek and Patrik Koželuh from Bříza & Trubač, discussed the differences between the Slovak and Czech tax systems – and what these differences mean for investors, entrepreneurs and employees.

Exodus of Slovaks to the Czech Republic: the reality of recent years

The migration of Slovaks to the Czech Republic is a long-term trend. According to available data, hundreds of thousands of Slovaks are working or studying there today. In contrast, the number of Czechs working in Slovakia is significantly lower.

This disparity naturally raises the question of whether this is due to economic opportunities alone or also to differences in the tax systems of the two countries.

These differences were the main topic of discussion in our podcast Highgate Talks #38, in which Peter Varga together with Czech tax lawyers Ondrej Malek and Patrik Koželuha from Bříza & Trubač took part.

The discussion focused mainly on practical issues in the areas of:

• taxation of investments,
• Dividends,
• Cryptocurrencies,
• tax residency,
• or the liability of statutory officers for the tax liabilities of companies.

Investment and capital income: differences between Slovakia and the Czech Republic

One of the most interesting areas of comparison is the taxation of investment by individuals.

In Slovakia, there is a relatively well-known tax exemption for the sale of exchange-traded securities after one year of holding. This mechanism is often used by investors for ETFs or equity portfolios.

In the Czech Republic, a similar principle operates, but with a significantly longer time test. In order to qualify for tax exemption, the securities must be held for 3 years as a rule. The alternative is to limit the income from the sale of securities to a certain amount per year.

There are also differences in dividends. In the Czech Republic, dividends are taxed at a rate of 15%, while for higher incomes the rate can reach up to 23%. In Slovakia, the dividend tax rate for individuals is significantly lower.

For investment income, it is also important that the Czech system does not impose health levies on passive income, which may in some cases reduce the overall tax burden on the investor.

Tax residency: where you actually pay taxes

When moving abroad, one of the most important issues is determining tax residency.

In practice, it often turns out that relocation alone is not enough. The tax authorities look at the wider circumstances of the taxpayer’s life, for example:

• where he physically resides for most of the year,
• where he has family and economic ties,
• where it carries out current consumption.

In the Czech Republic, the basic criterion is mainly a stay of more than 183 days per year. In practice, however, the tax authorities also look at other factors that may demonstrate a so-called centre of vital interests.

At the same time, in recent years, the Czech financial administration has gained significantly broader analytical tools and access to data from various databases, which allows it to identify potential risk situations more effectively.

Statutory accountability and the business environment

The discussion also touched on the broader topic of the business environment and the legal liability of statutory officers.

In the Czech Republic, there are a number of mechanisms that allow creditors or the state to enforce a company’s obligations directly against statutory bodies if they have breached their duty to act with professional diligence.

For example, situations where:

• the statutory body fails to file a timely petition for bankruptcy,
• knowingly causes the company’s bankruptcy,
• or allow significant tax arrears to arise.

These rules are intended to strengthen discipline in the business environment and increase the accountability of company management.

Slovakia or Czech Republic?

The discussion showed that the comparison of tax systems is not black and white. Each country has its advantages and disadvantages.

Some areas are more profitable for investors in Slovakia, others may be more attractive in the Czech Republic. The key is always to consider the specific situation: type of income, investment strategy or business model.

That is why at Highgate Group we have long been involved in cross-border tax and legal issues, helping businesses set up their structures in a way that is legally secure, tax efficient and practically workable.

You can listen to the full interview on whether Slovakia or the Czech Republic is better in terms of taxation of income from investment assets in the Highgate Talks podcast below.

We are the Highgate Group – modern advisors for your law, tax and accounting under one roof.

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Do not hesitate to contact us:

• Peter Varga, e-mail: peter.varga@highgate.sk

Alternatively, you can address your specific questions in a consultation with our partner Peter Varga, who specialises in financial regulation and tax law. You can book a consultation here: