Solvakia 2011 Real Estate Review
 

Solvakia 2011 Real Estate Review

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2011 Real Estate Review for Solvakia

2011 Real Estate Review for Solvakia

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Solvakia 2011 Real Estate Review Solvakia 2011 Real Estate Review Document Transcript

  • COLLIERS INTERNATIONAL2011 SLOVAKIA REAL ESTATE REVIEWAlbania Bulgaria Croatia Czech Republic Greece Hungary Poland Romania Russia Serbia Slovakia UkraineAccelerating success.
  • 2011 COLLIerS reAL eStAte reVIew » COUNtrYSlovakia MARKET Dear clients, colleagues and friends, Development of the real estate market reflected modest growth of the Slovak economy in 2010. office space leasing came alive due to tenants moving from the older business centers to A class premises. Market with retail premises has been quite busy. Awaited projects have been delivered on the market: eurovea, River park, Aupark in Piestany and in Zilina, Mirage Shopping Center also in Zilina or retail park tesco in Prievidza. they contributed to saturation of the demand for retail spaces for a long period even in Slovak regions. the success of Zilina Mirage shopping center confirmed the skills and experience of the Colliers international Retail Agency team. As an exclusive leasing agent for Mirage shopping center we managed to introduce new brands to the local Ermanno Boeris markets not only in Zilina, but in Slovakia as well. managing director colliers international slovakia At the end of the year we succeeded on the industrial market due to theAddress Europeum Business Center construction of a new manufacturing plant in Kosice. this happened 1 Suché Mýto despite continuing stagnation in this segment. the previous year has been 81103 Bratislava, Slovakia extremely dynamic for the Slovak branch of Colliers international. GlobalPhone +421 259 980 980 rebranding, relocation of Colliers office and new team members openedEmail Ermanno.Boeris@Colliers.com way to offer our clients comprehensive services with added value. We use the synergy of individual divisions to deliver to Client effective solutions, professional advice with local knowledge and superior care. Forecasts indicate that 2011 will be challenging for the real estate market. Balance between demand and supply of new office premises, continuing problematic access to financing for developers, changes in the future use of projects, reducing yields and presence of barriers in refinancing existing properties will be the main characteristics of this year. Despite these expectations we are awaiting positive signals from the industrial market that will move mainly in regions. Colliers international as a team of experienced professionals is prepared to meet the needs and gain the trust of each client. Best regards, ermanno BoerisP. 137 | CollieRS inteRnAtionAl Research: Firstname.Lastname@Colliers.com
  • 2011 COLLIerS reAL eStAte reVIew » SLOVAKIA ECONOMIC OVERVIEW GDP 12% SUMMARY Looking forward, whilst it may 8% Source: Statistical Office of the Slovak Republic, Focus Economics Slovakia rebounded relatively quickly dampen retail and business trade, the from the global economic slowdown. The fact that most other countries face 4% prudent regulatory framework for the similar austerity dilemmas keeps 0% financial sector, combined with Slovakia in a competitive position. -4% competitive tax rates, has ensured -8% | | | | | | | | | Slovakia’s transition into a flexible and PROGNOSIS 2006 2007 2008 2009 Q1 Q2 Q3 Q4 Q1 2010 2010 2010 2010 2011 vibrant economy with a considerable According to FocusEconomics degree of resilience. analysis, the consensus forecasts of banks estimates that the overall GDP GDP was strong over 2010 increasing growth in 2011 will reach 3.1%. UNEMPLOYMENT560,000 18% by 4.7% y-o-y, even though the rate of Source: Statistical Office of the Slovak Republic480,000 15% growth declined slightly toward year GDP should be driven mainly by net400,000 end. Industrial production was exports, although a moderate recovery in 12%320,000 particularly strong, at ca. 17% growth for domestic demand is possible, stimulated 9%240,000 the year, helping to drive GDP growth to by labor market improvement.160,000 6% more than double the EU27 average of 80,000 3% 2.2% in 2010. Inflation shows an upward trend in 0 | | | | | | | | 0% 2011. Consumer prices could increase by 2005 2006 2007 2008 2009 Q1 2010 Q2 2010 Q3 2010 Despite positive economic growth, the 2% as the first quarter in 2011. ▄ Number of unemployed ▬ Unemployment rate (%) unemployment rate increased to 14.1%, up by 1.6% over the year. Despite Unemployment is expected to increasing unemployment, the average decrease further over the year, but at a nominal monthly wage of employees in moderate pace. CONSUMER PRICES 5.0% the Slovak economy increased by 3.7%, 4.0% Source: Statistical Office of the amounting to €750 in third quarter. Real The coalition government has Slovak Republic, Focus Economics (inflation adjusted) wages increased by proposed a consolidation plan to cut the 3.0% 2.6%. The average nominal monthly deficit from a revised 7.8% of GDP in 2.0% wages of employees increased most 2010 to 5% in 2011 and confirmed a 1.0% within the information and target of 3% for 2013. 0.0% | | | | | | | | | communication (€1,354) business sector. 2006 2007 2008 2009 Q1 Q2 Q3 Q4 Q1 2010 2010 2010 2010 2011 Roughly half of next year’s Consumer prices also increased in consolidation should come from revenue 2010 by 1% on average over the year. measures (raising VAT by 1 pp, excise Prices increased the most in the food taxes on beer and tobacco, energy taxes, and non-alcoholic beverage sector by etc.) and half from cost-cutting in public 6.2%, in education by 4.5% and in administration this could dampen miscellaneous goods and services by economic growth prospects accordingly, 1.9%. with retail sales set to suffer as a result. In addition to market changes, the basic rate of value added tax increased over the year from 19 to 20%. The changes are part of a government package to reduce the public finance deficit which reached nearly 8% of gross domestic product last year. These are suggested as temporary measures which will expire when the deficit is below 3%, the EU target. This will take a number of years to reach.Research: Diana.LiptajovaColliers.com CollieRS inteRnAtionAl | P. 138
  • 2011 COLLIerS reAL eStAte reVIew » SLOVAKIA OFFICE MARKET CHANGE IN STOCK OVER TIME50,000 SUPPLY VACANCY/AVAILABILITY40,000 Source: BRF/Colliers International By the end of the fourth quarter 2010, The vacancy rate reached 9.6% by the total office stock in Bratislava stands year end, which represents the lowest30,000 at 1.367 Mln Sqm which remains rate compared to the previous quarters.20,000 unchanged from the previous quarter. However, there is still 132,000 Sqm of10,000 More than 60% of the space is Grade A vacant space that has not been leased. In 0 | | | | | | | | space and almost 40% is Grade B space. first quarter of 2010 vacancy rate Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2009 2009 2009 2009 2010 2010 2010 2010 reached its top, as it was 14.2%. Over the year, total office stock in Bratislava increased by approximately The highest vacancy rate was 70,000 Sqm – 48% fall in new supply in recorded in the City Centre (13.5%), OFFICE MARKET INDICATORS200,000 18% comparison with 2009. followed by Outer City (8.4%) and Inner Source: BRF/Colliers International City (7.2%). Among the five Bratislava160,000 12% Over 102,000 Sqm of the office space districts Bratislava V remains the120,000 6% is currently under construction, of which location with the least office amount of 80,000 0% 60,000 Sqm is planned to be completed space available for lease (2.5%). by the end of the year 2011. These 40,000 -6% include Pannon Office (6,000 Sqm) in RENTS 0 | | | | | | | | -12% the City Centre and Westend (18,000 Prime office headline rents recorded Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Sqm) in Outer City. slightly increasing trend in 2010. Rents ▄ Vacant space (sqm) ▄ Take-up (sqm) ▬ Vacancy ▬ GDP (variation %) now range from 14 to €18 Sqm/pcm in DEMAND the City Centre, 11 to €14 Sqm/pcm in Transactions in the last quarter of the Inner City and 9 to €12 Sqm/pcm in 2010 rose significantly in the final the Outer City. TAKE UP BY SUBMARKET AND QUARTER30,000 quarter of the year, reaching 53,000 Source: BRF/Colliers International25,000 Sqm. This represents a 45% increase The Prime headline rent currently20,000 over Q3 take-up and is indicative of stands at €15 Sqm/pcm, while average15,000 much larger take-up levels for the year. headline rents stand at €11 Sqm/pcm.10,000 Landlords and developers continue to 5,000 The total take-up for 2010 reached provide discounts and incentives to keep 0 almost 154,000 Sqm, what represents a their existing clients and attract potential | | | | Q1 2010 Q2 2010 Q3 2010 Q4 2010 ▄ City Centre ▄ Inner City ▄ Outer City very significant increase in activity in the tenants. For a client above 1,000 Sqm office market – a 60% increase on 2009. developers are offering a rent-free In fact this appears to be Bratislava’s period of ca. 6 months. record year for take-up, 50% higher than the previous highs of take-up in 2006/7. PROGNOSIS The situation on the market is Almost one quarter of all activity is becoming more optimistic due to a represented by pre-leases and higher number of closed transactions. renegotiations represent almost 10%. Although several projects came back from standby, the pipeline only matches Total take-up in 2010 was mostly up to 50% of 2008 delivery. driven by companies from the IT sector (24%) followed by the Finance/Banking/ We expect the overall vacancy rate to Insurance sector (24%) and Professional decrease continuously during the next 6 services (13%). to 12 months. The best case scenario would be a decrease of up to 7 – 8% by The majority of transactions were in the end of 2011. units of less than 500 Sqm (70%). Units in the range of 501 – 1,000 Sqm Prime rents as well as effective rents accounted for 3% of signed deals and a are expected to increase slightly during further 27% comprised leases signed for the next 6 – 12 months. units of 1,001+ Sqm.P. 139 | CollieRS inteRnAtionAl Research: Diana.LiptajovaColliers.com
  • 2011 COLLIerS reAL eStAte reVIew » SLOVAKIA INDUSTRIAL MARKET TOTAL STOCK BY REGIONS Presov Zilina SUPPLY — Lease renegotiation and extension 0.80% Trencin 2.98% By the end of the year the total in AXA Logistic park Trnava (Q4) – 5.87% modern stock of industrial space 10,500 Sqm. Bratislava increased by 5,000 Sqm and reached — Lease extension of Faurecia exhaust Trnava 68.87% 21.48% 1,005,500 Sqm. division in Zilina (Q4) – 1,700 Sqm. Approximately 69% of total stock is Colliers represented Martinrea Fluid located in the Bratislava region, 21.5% in Systems Svaty Jur in expansion of the Trnava region, 5.9% in the Trencin current operation. Colliers executed region, while the rest is split between the market research and site overview. Zilina and Presov region. There are no VACANCY / TAKE UP100,000 logistic parks providing class A Colliers assisted Delphi in market Source: Colliers International80,000 warehouse premises in other regions of research and site search as part of Slovakia. optimalization project which resulted in60,000 extension of Delphi Hungary operation.40,000 Developers share of the total stock20,000 (as a ratio between total stock of a VACANCY/AVAILABILITY 0 | | | | | | | | developer and the total stock of the Across the country, the vacancy rate Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2009 2009 2009 2009 2010 2010 2010 2010 market) stayed at same level for the has steadily decreased since the ▄ Vacant Space ▄ Take Up whole of 2010. The biggest developers beginning of the year 2010. It reached share is held by ProLogis (38%), approximately 8% in the first half of year providing 384,000 Sqm of leasable class 2010 and in the second half of the year A warehouse premises, followed by HB the rate declined below 8%, reaching TOTAL STOCK / VACANCY RATE1,020,000 10% Reavis (12%) and AIG Lincoln (11%). 7.4% by end Q4. This leaves only ca. Source: Colliers International 995,000 Other developers share of the total stock 74,820 Sqm of leasable space available 8% is below 10%. for take up. 970,000 6% 945,000 4% DEMAND RENTS 920,000 Total leasing activity in 2010 reached Rental levels either remained stable 895,000 2% 43,150 Sqm, what represents a decrease or increased slightly over the year, in 870,000 | | | | | | | | 0% of 69% compared with 2009. After no response to the falling levels of vacancy Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 leasing activity in the first quarter, the and low supply. Typical rents at year-end ▄ Total Stock ▬ Vacancy Rate industrial market slowly woke up in are now as follows (€Sqm/pcm): second and third quarters, reaching — Base warehouse area: 3.60 – 4.15 24,850 Sqm and 13,300 Sqm — Base production area: 3.95 – 4.60 respectively. At the end of the year — Base office area: 8.00 – 9.00 industrial market recorded transaction in Presov (5,000 Sqm in Chemako PROGNOSIS industrial park leased by Kolormax). Due to low vacancy rates Colliers expects developers in the Senec area to Regionally, the largest volume of launch new developments. We predict demand was accommodated in the strong pre-lease campaigns for Zilina, Bratislava region (81%), followed by the Presov and Kosice at rents higher than Presov region (11%), Trnava (5%) and current levels. Trencin (3%). Developers continue to focus on CORPORATE CLIENT SERVICES. Permit ready locations with the Colliers represented Faurecia in possibility to launch pre-lease following transactions: developments. So far they secured land — Lease renegotiation and extension plots on an option-to-buy basis. in AIG/Lincoln park Lozorno (Q1) – 11,500 Sqm. — Swap of facilities in DaK Kuester DNV park (Q1 – Q4) – 3,200 Sqm.Research: Diana.LiptajovaColliers.com CollieRS inteRnAtionAl | P. 140
  • 2011 COLLIerS reAL eStAte reVIew » SLOVAKIA RETAIL MARKET NEW COMPLETIONS OF SC IN 2010 BY REGIONS OVERVIEW RENTS Nitra Presov 2% The retail market in Slovakia came For the past few months rental rates 5% Trnava back to life in 2010, although retailers in shopping centers and high street have 5% Bratislava remain very cautious. Declines in retail remained at the same level. Average Trencin 45% 8% sales, decreasing disposable income and prime rents in traditional shopping purchasing power of inhabitants, centers are typically €35 Sqm/pcm, high Zilina increasing unemployment and job street rents are around €30 Sqm/pcm. 35% insecurity caused some retailers to close unprofitable stores in order to focus on Average rents in traditional shopping those units which were profitable. centers in Bratislava are as follows: — Fashion units: €11 – 35 Sqm/pcm SHOPPING CENTER STOCK, BRATISLAVA500,000 Concurrently, the boom in the — Sport units: €10 – 31 Sqm/pcm400,000 Source: Colliers International construction of shopping centers — Shoes units: €13 – 34 Sqm/pcm300,000 continued unabted despite the crisis. — Lingerie units: €30 – 38 Sqm/pcm200,000 Across 2010 Slovakia, approximately — Fast food units: €18 – 37 Sqm/pcm 190,000 Sqm of new shopping center — Café units: €27 – 39 Sqm/pcm100,000 space was registered, the largest 0 increase in the last 20 years. | | | | | | 2005 2006 2007 2008 2009 2010 PROGNOSIS ▄ Traditional SC ▄ Specialized SC The gap between successful and The largest increase was in the unsuccessful centers will deepen, with Bratislava Region, representing 44% of location and accessibility the most all completions in Slovakia. The second crucial for their success. The importance CHANGE IN SC STOCK OVER TIME, BRATISLAVA100,000 most popular destination was the Zilina of marketing is also increasing. 80,000 Source: Colliers International Region with 36%, including the schemes 60,000 Aupark (25,700 Sqm) and Mirage Retailers will also remain cautious in 40,000 (20,900 Sqm). terms of expanding in 2011. Expiration of lease agreements will create a relatively 20,000 SUPPLY new leasing market. 0 Total shopping centre stock in | | | | | | | | | | | 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Bratislava reached 452,000 Sqm in Rents will remain stable and the 2010, as 85,000 Sqm was added in 2010 market will remain tenant driven. Strong – this is approximately 50% more new and popular tenants are still demanding supply than in 2009. concessions such as fit-out contribution, rent-free periods, turnover or step-up The most significant projects, rents. completed 2010 in Bratislava were Eurovea (55,000 Sqm), River Park Landlords and tenants need to be (5,500 Sqm), Galeria Cubicon (7,800 creative and pro-active to address their Sqm) and Storeland (16,500 Sqm). message as the competition is stronger. The majority of total stock is located in Bratislava II district, where there is now a total of 200,900 Sqm (44%) and Bratislava V (22%). The least amount of stock is located in Bratislava IV, with only 9% of total stock in Bratislava.P. 141 | CollieRS inteRnAtionAl Research: Diana.LiptajovaColliers.com
  • 2011 COLLIerS reAL eStAte reVIew » SLOVAKIA INVESTMENT MARKET YIELDS 12 SUMMARY Development activity appears During 2010, the investment market in restricted by requirements for high levels 10 Central and Eastern Europe continued to of presales/preleases. And rightly so. 8 witness a recovery in transaction The market needs to consolidate before 6 volumes and market sentiment, more it can underpin further development 4 than doubling the activity witnessed in activity without over-saturating the office 2 2009. and retail markets in particular. Source: Colliers International 0 Most of institutional investor focused | | | | | | | 2005 2006 2007 2008 2009 Mid 2010 2010 PROGNOSIS ▬ Office ▬ Retail ▬ Industrial their investment mostly in Poland and For 2011 we expect the realization of Czech Republic. As typical investment transactions that have been postponed transactions, in Slovakia we recorded during 2010 as well as more investors one hotel deal in Bratislava and three re-entering the Slovak market based on INVESTMENT VOLUMES (€ MLN) 700 TESCO Stores (representing two the solid macroeconomic fundamentals 600 transactions). of the Slovak economy. 500 400 300 Completed transactions confirmed the This will be supported by a more 200 actual investment trend for our market: stable office occupier market, for good 100 0 | | | | | | | single and strong tenant with lease quality product at least. Industrial 2004 2005 2006 2007 2008 2009 2010 agreement over 10 years. production is reporting steady growth with a number of companies considering Pricing, reflected in yields, has possible expansions. The logistics market witnessed dual behavior with prime and is already receiving the attention of secondary stock showing a widening developers seeking land purchase pricing/risk gap. On the one side, there is opportunities. a reduced group of top class properties where net initial yields range between Inflation may become an important 7.0 – 7.5%. issue during 2011 and many investors may see the investment on income On the other side, there is an producing properties offering indexed expanding group of properties presenting rents as a good protection against a range of risk (i.e. low occupancy or potential inflation risks. location) factors, where net initial yields move in a range of 8.5% and higher. From a regional perspective, the pressure on returns in the Polish market Development and investment finance reflected in low yields, currently make remains available on the market, and at Slovak yields look more attractive for non-prohibitive rates in terms of loan to those investors less concerned with value/loan to cost ratios. Whilst the local market liquidity. This should product may not be there, the money increase overall activity in the market. appears to be. Development Finance, loan to costs: — 60 – 70% LTC; — High ratio of presales/preleases required; — Interest rate: 3M euribor + margin (3 – 4%). Investment Finance, loan to value: — 70% LTV; — Debt Service Cover Ratio: min. 1.2; — Interest rate: 3M euribor + margin (2.5 – 3.5%).Research: Diana.LiptajovaColliers.com CollieRS inteRnAtionAl | P. 142
  • 2011 COLLIerS reAL eStAte reVIew » SLOVAKIASLOVAKIA LEGAL OVERVIEW BASIC FORMS OF TITLE TAxES With some exceptions, land may be Presently, there is no real estate transferowned, used and transferred freely in tax, inheritance tax or gift tax applicable inSlovakia. The most common title to real the Slovak Republic. Value Added Tax may beestate is full ownership (“vlastnícke právo", payable in certain cases on the transfer ofius proprietas), which is similar to a real property. Following fiscal“freehold” title and entitles the owner to a full decentralisation, municipalities administerrange of perpetual rights to use and enjoy real estate tax.real property. It is also possible to use realestate on the basis of (i) an easement ("vecné LEASESbremeno") or (ii) a lease ("nájomné právo"), Leases in the Slovak Republic are freelywhich can be either for a definite or for an negotiable, but are subject to certainindefinite period of time. mandatory provisions of the Civil Code and the Act on the Lease and Sublease of ACqUISITION OF REAL ESTATE BY Non-Residential Premises. These mandatory FOREIGNERS provisions may not be varied by contract. The With limited exceptions concerning most important restrictions concern leaseforestland and agriculture land in the outer commencement and termination rights,areas of a municipality (“extravilán”), where the contractual freedom is limited, orforeigners may freely acquire real estate in even excluded.Slovakia as of May 1, 2004. Foreigners whoare EU nationals may acquire commercial RESTITUTION CLAIMSreal estate directly; they may also directly There are comprehensive restitution lawsacquire forestland and agriculture land in the in the Slovak Republic. All deadlines forouter areas of municipality, but only under claims have passed. However, certaincertain conditions. Indirect acquisitions may proceedings may still be pending.be made through the establishment of aSlovak legal entity, such as a limited liability NOTARIES AND NOTARIAL FEEScompany (spoločnost s ručením Legal agreements establishing the sale ofobmedzeným), which may be wholly owned real estate and the transfer of usufruct rightsby a foreigner. to real estate (such as easements, pre- emption etc.) that are to be registered in the REGISTRATION SYSTEM Cadastral Register do not need to be in The Cadastral Register ("kataster notarial form to be enforceable in the Slovaknehnuteľností”) discloses the property owner Republic. However, in certain cases, theand indicates the extent to which the land is signatures of transferors in such legalencumbered by mortgages and other agreements have to be certified by a notaryservitudes. Any right in rem becomes public, local municipality or advocates.effective through registration in the CadastralRegister as of the day the registration LANGUAGEdecision is issued. Registration is performed Any document that is to be submitted toby cadastral offices ("správa katastra"). As a any Slovak state authority (such as thegeneral rule, “good faith” purchasers of land Cadastral Register or the Commercialare entitled to rely upon information Register) must be translated into Slovak.contained in the registers, unless such However, it is common for English or otherinformation is proven to be unreliable. languages to be used as a second andNon-binding data from the Cadastral Register governing language.is also available online. Acceleratedregistrations (subject to higher fees) of any Information contained in this general outline does not constitute achanges relating to real estate registered in legal opinion and is not meant to be comprehensive. As a result of pending and new legislation, laws and regulations changethe Cadastral Register take a maximum 15 frequently in Slovakia and are often subject to varyingdays. interpretations. Professional advice should be sought regarding all aspects of real estate in Slovakia.P. 143 | CollieRS inteRnAtionAl
  • 2011 COLLIerS reAL eStAte reVIew » SLOVAKIASLOVAKIA TAX SUMMARY GENERAL are Slovak tax non-residents not having a losses being carried forward. The ability to The Slovak tax system has been relatively permanent establishment in Slovakia. utilize tax losses is unaffected by a change ofstable since the implementation of major tax ownership of a company but can be affectedreforms effective from 2004. The In the case of a sale of shares in a Slovak by a merger or other reorganization if a mainamendment to the income tax law passed at company held by a non – Slovak shareholder, purpose is to obtain a tax advantage.the end of 2007 introduced some potentially the double tax treaties Slovakia hassignificant changes in a number of areas concluded with other countries normally THIN CAPITALIZATIONincluding transfer pricing documentation provide for the right to tax the capital gain in Thin capitalization rules originally includedrequirements. In 2009 the amendment to the the jurisdiction of the shareholder. However, in the income tax legislation which wereSlovak tax legislation introduced a new tax some double tax treaties allow the gain to be supposed to apply from 1 January 2010 weretreatment for business combinations effective taxed in Slovakia, either generally in the case deleted from the Slovak tax legislation by anfrom 1 January 2010. In December 2010 the of the double tax treaty with Germany or amendment to the Slovak Income Tax ActParliament approved an amendment to the specifically in the case that the Slovak and thus did not come into effect.Slovak tax legislation introducing tax on company which is being disposed ofemission quota and, among other changes, comprises substantially real estate as in the WITHHOLDING TAxdefining withholding tax as the final tax with case of the double tax treaty with Ireland. DIVIDENDScertain exceptions, with effect from 1 January Dividends are currently not subject to any2011. The amendment to the VAT legislation There is no concept of fiscal grouping for withholding tax if paid out of profitspassed in 2009 introduced the possibility of corporate income tax purposes in Slovakia. generated from 1 January 2004 onwards.VAT grouping and accelerated VAT refunds Dividend withholding tax is applicable at thefor qualifying taxpayers. In addition the EU TAx DEPRECIATION rate of 19% for profits generated prior to thisVAT Package was passed by the Parliament Depreciation of fixed assets is calculated date. This is generally reduced under doubleand implemented with effect from 1 January on a straight line or accelerated basis using tax treaties to which Slovakia is a party. To2010. The amendment to the VAT Act rates laid down in legislation. Depreciation is apply the reduced rate, it is advisable for theeffective from 1 January 2011 extended the based on categorization of assets into groups payer to be in possessions of a tax residenceperiod for the application of capital goods with depreciation periods between 4 and 20 certificate of its shareholder. Dividends paidscheme to real estate from 10 to 20 years years. Buildings are normally depreciated to, EU/EEA resident companies are exemptand temporarily increased the basic VAT rate over 20 years. It is possible to decide to from Slovak withholding tax if the terms offrom 19% to 20%. interrupt (not claim) depreciation in any the Parents-Subsidiary Directive as applied in particular year. This prolongs the Slovak law are met. CIT AND CAPITAL GAINS depreciation period. Land is not depreciated CIT in Slovakia is levied on all taxable for tax purposes. INTEREST, ROYALTIES ANDincome at the standard corporate tax rate of INTANGIBLE SERVICES19%. Income is computed as taxable It is also possible to divide fixed asset into Under Slovak domestic legislation,revenues reduced by eligible costs incurred separate detachable components if the withholding tax of 19% applies on paymentsto generate, assure or maintain taxable acquisition value of each respective of interest, royalties and fees for intangibleincome. component is higher than €1,700 and in the services made abroad. This is generally case of certain components of real estate reduced or eliminated under the double tax There is no separate capital gains tax in depreciate them separately in a different tax treaties to which Slovakia is a party.Slovakia and gains on the disposal of fixed depreciation group. However, in order to apply the treaty rates,assets and intangibles are included in a the payer should have a certificate of taxtaxpayer´s total income. On disposal, the TAx LOSSES residence of the recipient. Furthermore, thetaxpayer can deduct the net tax value of the Tax losses may be carried forward and Interest and Royalties Directive fully appliesassets (after accumulated depreciation) and utilized for 7 years if the loss was incurred in Slovakia.associated disposal expenditures. Taxable after 31 December 2009. Tax losses incurredincome can be reduced by tax losses in tax periods ending before or on 31 With effect from 1 January 2011available for utilization. Losses on the sale of December 2009 may be carried forward withholding tax is regarded as the final taxbuildings are generally tax deductible but over five years. Under current rules there are with certain exceptions, e.g. certain incomelosses on the sale of land are not deductible. no restrictions on the amount of loss which of tax non-residents listed by the taxWith effect from 1 January 2011 capital gains can be utilized each year. Prior to 2004 legislation.on sale of real estate, rental income or other highly complicated tax loss rules appliedincome from real estate situated in Slovakia which significantly restricted loss carry SECURITY TAxis under the local rules subject to income tax forwards and imposed reinvestment Payments to an entity which has or mayalso if both parties involved in the transaction requirements. These rules still apply to „old“ have a Permanent Establishment in SlovakiaContact: zblazejova@kpmg.sk CollieRS inteRnAtionAl | P. 144
  • 2011 COLLIerS reAL eStAte reVIew » SLOVAKIASLOVAKIA TAX SUMMARYare subject to a 19% security tax. This is not Slovakia if sold within 5 years of first legislation passed in February 2009, VAT willapplied if the receiving entity holds a occupancy permit or first use. The sale of be refunded to qualifying taxpayers within 30certificate proving it makes advance building land is also subject to VAT. The days of the deadline for filing the tax returnpayments of tax or from 2007 onwards if the standard VAT rate in Slovakia is with effect for the respective taxable period. The newreceiving entity has its registered seat or from 1 January 2011 set at the rate of 20% rule should effectively accelerate VAT refundsaddress in the EU. for building land and buildings. To the extent for eligible VAT payers by 30 days as real estate sales do not meet these conditions compared with previous rules. The BUSINESS COMBINATIONS they are VAT exempt but the supplier has the accelerated refund mechanism should be With effect from 1 January 2010 taxpayers option to choose to charge VAT. applied to VAT payers whose taxable periodin Slovakia may decide that in the case of is a calendar month, who have beencertain business combinations the fair value Rental of real estate is exempt from VAT registered for VAT purposes for at least awill be used not only for accounting, but also but the supplier may elect to charge VAT if period of 12 months before claiming thefor tax purposes. the supply is made to a VAT registered entity. excess tax deduction, and who did not have any outstanding liabilities towards the state In such a case the revaluation difference VAT GROUPING budget and towards social/health insurancearising from the restructuring must be According to an amendment to the tax law institutions during 12 calendar months beforeincluded in the taxable base in line with the passed in February 2009, VAT grouping is the end of the calendar month in which thetax law, but on the other hand the company possible in Slovakia with effect from 1 excess VAT deduction arose. Taxpayers whomay depreciate assets from their fair value January 2010. comply with these conditions will have toand must not continue in the tax depreciation note this in the respective VAT return. Forof assets from their tax residual value. In The application for the VAT group other VAT payers the refund procedureaddition, the amortization of goodwill may registration should be filed by the member of remains unchanged.under certain conditions be tax deductible. the group who is appointed as the representative of the group. The tax Slovakia applies the capital goods scheme TAx ON EMISSION qUOTA authorities should register the VAT group to modify VAT recovery on assets if the use Tax on emission quota applies to emission with effect from 1 January of the calendar of a building changes within a 20 year period.quota issued for 2011 and 2012. year following the year in which the application for registration was submitted if SLOVAK ACT ON VALUE ADDED TAx REAL ESTATE TAx the respective application has been filed by (VATA) GENERAL RULE FOR DETERMINING Real estate tax is in general applied to 31 October of the current calendar year. THE PLACE OF SUPPLY OF SERVICEScompanies and individuals owning land and The amendment to the VAT legislationbuildings. The tax is based on the area of the Should the application for the VAT group passed in October 2009 introduces a changeland and building, number of floors of a registration be filed after 31 October of the in the general rule for determining the placebuilding, usage and location. There is current year, the tax authorities will register of supply of services (i.e. the “place ofconsiderable flexibility for local authorities in the group with effect from 1 January of the taxation”). The new rules stipulate that: thesetting the rates of tax. second year following the calendar year in place of supply of service to a taxable person which the application for the registration of (so – called B2B – business to business REAL ESTATE TRANSFER TAx AND OTHER the VAT group was filed. This means that the service) is the place where the customer is TRANSFER TAxES AND DUTIES first VAT groups may exist in Slovakia from 1 established; and the place of supply of Real Estate Transfer Tax was abolished January 2010 subject to filing the respective service to a person other than a taxablefrom 1 January 2005. There are no application by 31 October 2009. person (so – called B2C – business tosignificant stamp or other duties on the consumer services) remains in the Membertransfer of land or buildings. VAT grouping can positively affect the State of the service supplier. Exceptions to cash flow of companies in a VAT group since the general rule will apply for specific kinds Acquisition of shares in Slovak companies VAT will not be charged on transactions of services.is not subject to any transfer tax or between the group members.significant stamp duties. There are also changes to the VAT REFUND determination of: the date of supply for VAT Slovak entities may apply for a refund of services received from foreign suppliers GENERAL PROVISIONS REGARDING REAL VAT incurred. Generally the refund takes (where the person obliged to pay tax is the ESTATE approximately 90 days if the supplier is a recipient of the service); date of supply of The basic VAT rate was temporarily monthly VAT payer. services procured in one’s name but onincreased from 19% to 20%. Generally the behalf of another person; and also the date ofsale of the property is subject to VAT in According to an amendment to the VAT supply of partially and recurrently suppliedP. 145 | CollieRS inteRnAtionAl Contact: zblazejova@kpmg.sk
  • 2011 COLLIerS reAL eStAte reVIew » SLOVAKIASLOVAKIA TAX SUMMARYservices. TRANSFER PRICING Prices use in transactions between relatedparties must comply with arm´s lengthprinciples. Under the Slovak tax law, if theagreed price for a transaction is differentfrom a fair market price and the differencewould lead to the decrease of the taxablebase of the Slovak related party, a fair marketprice will be substituted for tax purposes.Related parties are generally defined aseconomically or personally connectedindividuals or legal entities. Economicconnection is understood as a participation ofmore than 25% in share capital or votingrights. Personal connection is understood asa participation in the management or controlof the other person. From 1 January 2004 to 19 July 2005 andagain from 15 December 2005, strictlytransfer pricing rules do not apply betweenSlovak entities although these continue toapply to transactions between Slovak andforeign related parties. The Slovak taxauthorities are however of the opinion thatthey have other mechanisms under generalSlovak principles to challenge non-arm´slength prices between Slovak entities. Based on transfer pricing principles theremuneration of the supplier should reflectthe risks borne and functions performed. Inprinciple any method recognized by OECDcould be used for the price determination(e.g. cost plus, resale minus, comparableuncontrolled price). It should be stressedhowever, that regardless of the method usedif the price charged for the service or goodssupplied is significantly different compared tothe prices charged for similar transactions byindependent companies, the tax authoritieswould probably challenge the structure inplace. Formal transfer pricing documentationrequirements are effective from 1 January2009. The Ministry of Finance issuedguidelines to transfer pricing documentationrules which should be followed by relatedparties in Slovakia.Contact: zblazejova@kpmg.sk CollieRS inteRnAtionAl | P. 146
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