Slovak Republic is a landlocked country in central Europe. Slovakia has been independent since 1 January 1993, after friendly separation from the Czech Republic, with which it formed Czechoslovakia. Nevertheless, the two countries remained closed partners. Slovakia became a member of the European Union on 1 May 2004 and on 1 January 2009 adopted Euro as its national currency.
The Slovak legal system is a ‘continental’ one. For historical reasons it had been influenced by the Austrian and the German legal orders and therefore it can be accompanied with the Roman-Germanic legal culture. The legal system is also heavily influenced and in compliance with EU law. Principal areas of the Slovak law system are codified. In relation to commercial matters the following codes are significant:
- The Civil Code (Act No. 40/1964 Coll.) is the basic normative act that provides origins for the entire sphere of private law and the legal system generally. It contains provisions on legal personality and subjects of legal relations, property rights, legal rights and obligations, types of obligations and contracts, unjust enrichment, civil liability, succession.
- The Commercial Code (Act No. 513/1991 Coll.) governs the relationships between business participants and commercial activity in general. It stipulates types of commercial contracts and also provides essential provisions on company law, namely on types of legal entities, incorporation procedure and company rules. Moreover, this Code prescribes special provisions on commercial liability.
The economy of Slovakia is mostly focused on industrial production, which tends to account for a quarter of the GDP. The automotive industry plays a big role among the industrial production, whereas several manufacturers have their plants here (for example, Volkswagen, Kia, Jaguar Land Rover, PSA). Other significant sectors are for example electronics industry, IT, iron and steel industry, paper industry, construction industry, agriculture, tourism. Slovakia is exported oriented and the main business partner is Germany.
Business of Foreign persons
Foreign persons (i.e. individuals with residence and legal entities with registered office outside the territory of the Slovak Republic) may generally conduct business in the territory of the Slovak Republic under the same conditions and to the same extent as Slovak persons. Legal personality of a foreign legal entity under the Slovak law shall correspond to the law under which such legal entity was established and this law shall also govern its internal relations and the liability of its shareholders for the entity’s obligations. Foreign persons authorized to do business abroad are regarded as entrepreneurs also under the Slovak Commercial Code. However, systematic business activities of the foreign person in the Slovak republic may generally only be conducted through a Slovak company or through an established branch (organizational unit) registered in the Slovak Commercial Register.
A foreign person may establish a Slovak company or may join an already established company. In all forms of commercial companies, a 100% equity participation of a foreign person is possible. A company is founded on the basis of a Memorandum of Association or a Deed of Foundation (in case of a sole shareholder) and incorporated on the date of its registration in the Commercial Register. A foreign person is entitled to conduct business through its organizational unit from the date of its registration into the Commercial Register. A company or an organizational unit may conduct business to the extent of the scope of business recorded in the Commercial Register and this only on the basis of a trade permission or another permission, if applicable (e.g. trade license issued by the competent office in accordance with special legal provisions). The most common forms of conducting business activities in the Slovak Republic are through a limited liability company or an organizational unit.
A Limited Liability Company is a stock business company. The minimum amount of the company’s registered capital is 5.000,- EUR, whereas the minimum amount of the contribution of one shareholder is 750,- EUR. The Limited Liability Company may be established by a single person or by more persons (the maximum number of shareholders is 50). Slovak as well as foreign natural persons and legal entities may be founders of a Limited Liability Company. The Company is liable for any breach of its obligations with its entire property. Shareholder’s liability for the Company’s obligations is limited to the outstanding part of his pledged contribution registered in the Commercial Register.
Organizational unit of a foreign person is a part of the foreign person’s enterprise which is not situated at its registered office. Organizational unit is not an independent legal subject, only a part of the enterprise of the establishing foreign company. The organizational unit has its own legal subjectivity only in labour law relations. The establishing company is directly bound by and entitled from the acts of the organizational unit. The establishing company is liable for all obligations arisen from the activity of the organizational unit at large.
Generally, legal entities in Slovakia are subjects to an income tax of 21% and individuals of 19% or 25% (depending on the amount of the income). From 01.01.2020 a lower 15% income tax has been introduced for selected legal entities and individuals. With regard to VAT, general rate of 20% is levied on all taxable supplies. However, certain categories of goods are taxed on 10% rate, for instance, pharmaceutical products, books, equipment for physically disabled persons etc.
Among other things, in the Slovak Republic there is an excise duty that is levied on certain commodities produced/manufactured, supplied or imported into the country. These include mineral oils, tobacco and tobacco products, spirits, beers, wines, electricity, coal and natural gas.
The Slovak rates of customs duty comply with the General Agreement on Tariffs and Trade that regulates international trade and tariffs in particular. Nonetheless, in addition to customs duty, national law stipulates import VAT of 20% or 10% rates towards particular imported goods.
The main normative acts that regulate employment relationships in the Slovak Republic are the Labor Code (Act No. 311/2001 Coll.) and the Act on Collective Bargaining (Act No. 2/1991 Coll.). The Labor Code, in its turn, governs the employment relationships between Slovak legal entities and their employees in Slovakia. In the context of employment with a foreign element, the Labor Code is also applicable, unless otherwise is provided by conflict-law rules. Regardless of some exceptions relating to EU-citizens, diplomatic and armed forces personnel, other foreign nationals employed in the Slovak Republic are required to apply for and obtain a residence permit and a work permit from the relevant Slovak authorities. A foreign national who wishes to act as a member of the board of directors of several types of legal entities (limited liability company and joint stock company) must also obtain a residence permit, unless such foreigner is a citizen of the EU or the OECD Member-State.
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