Slovakia, Romania, Austria:
How to avoid tax pitfalls in each country

1. Why thorough preparation is crucial for international business

Companies operating across multiple countries benefit from new markets, tax advantages, and cost-effective production or service structures. But these opportunities also come with tax challenges.

Austria, Slovakia, and Romania each have different tax systems and regulations. Mistakes can lead to double taxation, unexpected tax burdens, or issues with the tax authorities. This article shows you how to avoid tax pitfalls in these three countries.

2. Corporate tax: Where companies can save the most

Corporate tax (CIT) is one of the most important taxes for businesses. It varies by country and has a major impact on your tax burden.

Key points:

• Austria: Corporate tax rate of 24% (from 2024: 23%), dividend tax of 27.5%.
  
  Tip: Companies looking to distribute large profits should note that Austria has relatively high taxation.


• Slovakia: Corporate tax rate of 21%, dividend tax of 7% for individuals, 0% for corporate shareholders.
  
  Tip: Slovakia is more tax-friendly for companies that reinvest profits or use holding structures.


• Romania: Corporate tax rate of 16%, with special rules for micro-enterprises (1–3% depending on turnover).
  
  Tip: For small businesses, Romania is especially attractive, with just 1% tax on turnover under certain conditions.

3. VAT: When and where it applies

Businesses operating internationally must also deal with VAT (Value Added Tax).
In the EU, the destination principle applies, but there are many special rules.

Key points:

• Austria: Standard VAT rate of 20%, reduced rates of 10% and 13% for certain goods and services.


• Slovakia: Standard VAT rate of 23%, reduced rate of 19% or 10% for specific goods and services.


• Romania: Standard VAT rate of 19%, reduced rates of 9% and 5% for specific goods and services.
  
  Tip: Check if you need VAT registration in another country. In many cases, you can use the reverse charge mechanism to reduce administrative work.

4. Double taxation: When companies are taxed in two countries

Many companies fall into the double taxation trap when they earn income in multiple countries or establish a permanent establishment.

Austria, Slovakia, and Romania have double tax treaties (DTTs) to prevent companies from being taxed on the same income in more than one country.

Key points:

• When does a permanent establishment arise? A permanent establishment triggers tax liability in the respective country.
• In Austria, this can happen if a company regularly operates or employs staff locally.


• Slovakia and Romania have similar rules, with construction projects typically creating tax liability after 6 to 12 months.
  
  Tip: Clarify early whether your activities create a permanent establishment, as this can lead to tax obligations in a second country.
• Tax credits and exemptions: In many cases, taxes paid abroad can be credited in your home country or exempted to avoid double taxation.
  
  Tip: Regular cross-border businesses should plan their tax strategy carefully to prevent double taxation.

5. Social security: Where contributions must be paid

Companies employing people in multiple countries also need to consider social security.
Deciding where contributions are due is often complex.

Key points:

• Basic rule: Social security in the country of work: Employees pay contributions where they work.


• Exception for postings: With an A1 certificate, employees posted temporarily abroad can remain insured in their home country.
  
  Tip: Apply for A1 certificates before starting work abroad to avoid back payments and fines.


• Special rules for directors: Directors working in multiple countries must check their social security obligations carefully.
  
  Tip: If you hold management roles in several countries, consider a tailored tax and social security strategy.

6. Tax optimisation strategies for businesses

Depending on your activities, there are several ways to reduce your tax burden.

Options include:

• Holding structures: A Slovak holding company can help reduce dividend taxes.


• Reinvesting profits: Romania offers tax relief for companies that reinvest profits.


• Choosing the right location for specific business areas: Labour-intensive businesses might benefit from lower labour costs in Romania or Slovakia.
  
  Tip: If you’re planning long-term, check whether smart location choices and company structures can bring tax advantages.

Conclusion: Avoid tax pitfalls with good planning

If you do business in Austria, Slovakia, or Romania, it’s essential to understand the local tax environment.
Corporate tax, VAT, social security, and double taxation are the most critical issues.

A well-thought-out tax strategy helps optimise your tax position, reduce risks, and avoid unpleasant surprises.
If you operate internationally, rely on professional tax advice to make the most of your opportunities.

(This article is for general information only and does not replace professional legal or tax advice. For specific questions and personalised support, please feel free to contact us.)