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Entering the Slovak market may look simple on paper, but the reality on the ground is often very different. From legal setup to tax, payroll and reporting, even small missteps can turn into costly problems if local specifics are ignored. Drawing on our experts’ hands-on experience, we’ve seen even well-prepared companies run into avoidable issues, simply because they didn’t have the right support from the start.
With the right guidance, Slovakia can be a rewarding place to grow. Especially in industriesseeing strong growth and investment potential, like:
Additionally, businesses entering the Slovak market can benefit from incentives, such as:
State funding
Tax holidays
Supporting employment of foreign or local employees
Even with the best intentions and strong business plans, foreign investors often face challenges simply because they aren’t familiar with local specifics. Based on real cases we’ve handled, here are the most common mistakes we see companies make when entering the Slovak market – and how you can avoid them from the start.
What mistakes do investors usually make during company formation?
Sometimes we see that investors are eager to start business as soon as possible. Therefore, they do not consider establishment of their own company but decide to buy a ready-made one or some small company from a seller that doesn’t want to continue doing business due to whatever reason. While the acquirement of a shelf company can seem easy, in fact the transfer to new owners takes the same time as establishing a new one. By new company the investors can be sure that there are no skeletons in the closet. They appear mainly in situations when the investors bought a company that already functioned for some time and did not undergo proper due diligence. We encountered a case where new owner was charged a fine because of the mistakes the original one made. In such cases it is not easy to gain back the money and the administrative or court proceedings can be pricey and long.
Another common mistake when entering the Slovak market is the establishment of the company via online tools. Yes, it can be really cheap, but the investors don’t know that many rights and obligations of the shareholders can be agreed differently than is the default set-up given by Commercial Code. Good examples are voting rights, entitlement to profit, possibility to exclude inheritance of the share, tag-along and drag-along rights, etc. These are never set without proper consultation with attorney-at-law, but it may be these rights that save your investment in the future.
Last but not least, every company has automatically set up electronic mailbox on the portal www.slovensko.sk which is used for communication with local authorities. The official mail is therefore not sent via post office, but only to this mailbox. When the executive directors of the company are foreign citizens, they may not have access thereto, therefore the situation may occur when the company is not aware of the received notices and resulting obligations therefrom, which may again lead to the imposition of sanctions and possible execution.
What tax-related mistakes do new investors often make?
When entering the Slovak market, new investors frequently make several tax-related mistakes that can have significant financial and operational consequences. One of the most common issues is delaying mandatory VAT registration. The result of the delay is the obligation to file VAT returns, VAT transaction statements and EC Sales list for each tax period for which the investor became a VAT payer. The VAT Act requires VAT documentation to be submitted in chronological order, which is both administratively and financially burdensome because it is subject to sanctions for each delayed submission.
From income tax point of view, foreign investors entering the Slovak market often do not realize that their activities in the territory of Slovak Republic may trigger a permanent establishment (PE). If a foreign investor determines that its business has a PE in the Slovak Republic, it may be required to pay corporate income tax on the profits generated from that presence. Failure to register a PE or comply with local tax laws can result in significant fines and penalties. Consulting with tax experts and legal professionals specializing in international taxation is crucial to assess your potential risk factors and ensure compliance.
Transfer pricing is another area that is frequently overlooked. Many businesses fail to document intercompany transactions properly or align pricing with the arm’s length principle, thereby exposing themselves to provide the tax authorities with a local transfer pricing documentation within very short period (15 days).
We also often encounter situations where many investors seek out a local tax advisor only after completing a transaction, without first analysing its tax implications. To avoid unexpected tax burdens and ensure efficient structuring, we strongly recommend consulting a tax advisor before any transaction is executed. Early planning allows investors to evaluate available options, benefit from potential tax advantages and remain compliant with local tax regulations.
What can go wrong when setting up payroll in a new country?
If you are planning to employ employees, you should keep in mind that you have obligations as an employer.
Every employee, whether working full-time under an employment contract or only a few hours a week as a Work performance agreement, Student Agreement, etc. must be registered with the Social Insurance Agency. The Social Insurance Agency allows a period of 8 calendar days for registration, but in the event of an inspection by the Labor Inspectorate, work without registering with the Social Insurance Agency is considered undeclared work and is subject to significant fines.
Another important point is occupational safety and fire protection. The employer must provide regular training for employees, provide protective equipment at work and depending on the riskiness of the work, may be obliged to provide regular medical examinations.
Among the relatively common mistakes (that can be easily corrected) when entering the Slovak market is the payment of meal allowances “retroactively” based on time worked. Please note that meal allowances must be granted to the employee in advance.
In any case, as an employer, you are obliged to comply with multiple laws and regulations at the same time, from the Labor Code, the Income Tax Act, the Social Insurance Act, the Health Insurance Act and others.
What are the most common labour law issues for foreign employers?
During our praxis we saw tons of different employment contracts, many of them made with the help of Google and later AI. It may seem easy, cheap and fast to write the employment contract in such way, but on the other hand we can guarantee that they will always miss something important. E.g., at the end of 2022 the Slovak Labour Code underwent big changes. However, many employers did not include them in their praxis to this day, thus the templates they use are outdated and erroneous. Since AI cannot think by its own, only makes compilations of documents found online, it cannot provide you with correct solution. Following this, the labour inspectorates impose fines on employers for something that could be done properly from the beginning if only consulted with an attorney-at-law.
Another common mistake is the wrongful termination process. The Slovak Labour Code states strict rules, which must be respected. Otherwise, the employees are entitled to challenge invalid termination in court, which can lead to significant financial damage on the side of the employer. The highest compensation that the company must have paid to the employee after losing a court proceeding to them was above EUR 100,000.
What accounting or reporting problems do new companies usually face?
What accounting or reporting problems do new companies usually face?
When entering a new market, it is essential to partner with a reliable local expert. Relying on trusted recommendations rather than making decisions based solely on cost is critical. We often encounter cases where clients prefer to centralize their accounting processes. However, Slovakia is a highly specific market with complex regulations and compliance requirements. To operate in full compliance, companies must invest in local advisory support.
Ultimately, this approach proves more cost-effective than managing everything in-house from the outset. By outsourcing to a capable local firm initially, companies can ensure a smooth launch and gradually build internal systems with expert guidance.
Too often, companies do not treat their accounting provider as a strategic partner. As a result, they delay involving them in planning and only present the final setup once it is already being implemented. At that point, it becomes significantly more difficult to optimize processes and mitigate risks.
What practical or legal issues can delay financial setup or operations?
Slovakia has a strict AML regulation. When opening a bank account, banks usually want to see the whole structure and the official documents cannot be older than 3 months. For foreign companies, mainly joint-stock companies with many shareholders can be therefore difficult to undergo the process alone without local support. Many times, it happens that the documents expire, and the shareholder must ask local authorities to issue new ones. Also, in case when the company intends to cooperate with state institutions, it must be registered in the public sector partner register, where it must provide duly information on its ultimate beneficial owner. However, shareholders often do not know who it is and it is the local advisor who knows what documents must be submitted in order to find it out.
What risks do companies face when trying to manage everything remotely or alone?
Many foreign companies, when expanding to a new market, rely on the experience from their home country. Even if they are EU based and rely on the similarities of EU law, it is rarely the same. It’s those small differences that can one day cause big problems for a company. Neither AI (may it be helpful in day-to-day life) can advise you correctly every time. Therefore, it is always recommended to search for a local advisor. What may seem as a useless investment at the beginning, can in fact save a lot more money in the future, because thanks to local experts the company can avoid possible administrative or court procedures and fines.
Starting your business journey in Slovakia doesn’t have to be overwhelming. With our full-range company incorporation services in Slovakia, we’ll help you choose the right legal form, handle all the paperwork and ensure a smooth and compliant setup from day one.
If you’re still exploring your options or unsure where to begin, book a free market entry consultation with our local experts. We’ll walk you through the key steps and help you avoid the most common pitfalls of entering the Slovak market.
About Accace
Accace is a proactive consultancy and outsourcing partner who bridges the gap between needs and solutions. Combining smart and streamlined technology with a holistic approach, we provide an all-round care to clients and consider their matters as our own. With over 800 experts and approximately 2,000 customers, we have vast experience with facilitating the smooth operation and growth of small to large-scale, global businesses.
About Accace Circle
Accace operates internationally as Accace Circle, a co-created business community of like-minded BPO providers and advisors who deliver outstanding services with elevated customer experience and erase the borders of service delivery. Covering over 60 jurisdictions with more than 7,000 professionals, we support over 80,000 customers, mostly mid-size and international Fortune 500 companies from various sectors, and process at least 800,000 pay slips globally.
