Under the Act no. 305/2013 Coll. on e-Government, entrepreneurs have an electronic mailbox in Slovakia set up by the state, which is available on the portal www.slovensko.sk. Why is it important to have access to it and what is at risk for you if you do not have it?

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What is electronic mailbox?

The electronic mailbox is used for communication between you and the public authorities. Not only can you send submissions to the competent authorities through it, but these authorities also send their decisions, calls, instructions, and other documents to your mailbox. Thus, such communication has replaced postal delivery of paper mail.

How can you sign into your electronic mailbox?

There are several ways to sign into your electronic mailbox. The following are relevant for entrepreneurs:

What can happen if I do not have access nor secure it through another person?

In this case, you risk receiving an official document in the company’s electronic mailbox from which some obligations will arise for you (e.g., a request to prove the facts during the inspection) and you will not find out about it, as a result of which you will not fulfil these obligations. The competent authority can then impose a fine on you which, if you fail to pay within the set time limit, will be recovered by the executor which may increase your costs significantly.

We know from our experience that this problem arises especially in companies with a foreign statutory representative and a foreign partner, who do not have sufficient knowledge of Slovak legislation and often do not even know about the existence of an electronic mailbox. Subsequent contact of an attorney-at-law with a request to resolve the situation is often pointless because there is no more possibility of filing appropriate remedies against the issued decision and the client has no choice but to pay the sanction.

In the case of electronic delivery of documents to an electronic mailbox, the fiction of delivery is applied, i.e. an electronic document will be considered delivered not only if the addressee confirms the notification of delivery (the day, hour, minute and second of delivery is indicated on the electronic delivery note), but also if the storage period (15 days) lapses and the addressee does not confirm the notification of delivery within this period.

Without knowing it, you may receive a request from the authority to fulfil a legal obligation, failure to comply with which is sanctioned by fines often ranging from tens to hundreds of thousands of euros. Calls from the tax authority or the labour authority are frequent, where the maximum amount of fines goes up to EUR 200,000. Also, a payment order issued by the court based on the creditor’s proposal is usually delivered to the electronic mailbox, and if the debtor does not oppose it, the payment order becomes legally valid and the creditor is entitled to collect the owed amount through the executor, while none of these entities examines the legitimacy of the claim and they proceed only based on the statements made in the proposal.

Omission of the simple obligation to ensure that the company takes over delivery mails can therefore end up being quite expensive.

What is the solution?

If your statutory representative does not have access to the company’s electronic mailbox or is so busy that they do not have time to check it, we recommend that you authorize another person to access the mailbox, so that you always find out about all documents received, allowing you to take any necessary legal action.

“It happens that when establishing a company in the Slovak Republic, foreign companies are not even aware of it, and when we alert them to this fact and ensure that the received mail is taken over for a period of several months, even years, sometimes this way they find out how many unpaid fees from different authorities there is. It happens that they are even sanctioned or asked to pay by enforcement authorities,” Simona Dimov points out, adding that “Slovak companies are mostly aware of these obligations, but it is easier for them to grant access to Accace as a provider of accounting or payroll services for a really minimal implementation and then monthly fee and thus ensure smooth and regular delivery of documents both directly to the client and at the same time to those responsible from our accounting or payroll team.”

How can we help you with taking-over of delivery mail in an electronic mailbox?

At Accace, we ensure the take-over of delivery mails sent to the electronic mailbox administration service (eBox), which is automatically sent to designated persons on the client’s side and designated persons from our Accace team. We can also provide the necessary submissions, e.g., in the case of legal services provided by our law firm Accace Legal. Due to the administrative burden associated with receiving mail from our clients’ electronic mailboxes, we have automated this entire process.

We can handle the take-over of delivery mails from the many electronic mailboxes of our clients, which there is still more and more, thanks to the robot that we developed in cooperation with our partner.

Its main advantage for our clients is saving their time and reducing the risk of not fulfilling the obligations arising from the documentation delivered to their electronic mailboxes. The service of administration of the electronic mailbox on the official website www.slovensko.sk is also provided by us at Accace Slovakia, based on the granted permission to access and handle the electronic mailbox of the legal or natural person. For more information, do not hesitate to contact us by email at .

On October 4, 2022, the Parliament has approved a rather extensive amendment to the Labour Code in Slovakia, which introduces several changes in response to the European directives on transparent and predictable working conditions and on work-life balance for parents and carers. We have summarized the most important ones for you.

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Paternity leave

The change that had resonated the most since the draft amendment to the Labour Code in Slovakia was announced is the introduction of the so-called paternity leave. Not only does the amendment introduce a new type of leave for fathers, but the range of persons protected from dismissal under the conditions laid down by law is expanded to them.

From November 1, 2022, a father who takes care of a new-born child will be entitled to 28 weeks of paternity leave, a single father to 31 weeks and father with two or more new-borns to 37 weeks. It should be noted, however, that this is only a kind of clarification and supplementation of the existing regulation, because the right to parental leave from the birth of the child already applies to the father if he takes care of the new-born child.

Working conditions

According to the amendment to the Labour Code in Slovakia, from November 1, 2022 working conditions should not only be fair and satisfactory, but also transparent and predictable. In essence, this means that the employee must have sufficient information to know under what conditions and to what extent the employee will perform work. The introduction of the employer’s information obligation to the employee is closely linked to this.

Essentials of the employment contract and provision of information

Considering the fragmentation of the existing regulation of the essentials of the employment contract, the amendment to the Labour Code in Slovakia introduces a change consisting of the introduction of the obligation to specify in the employment contract only the general essential elements defined in Article 43(1) of the Labour Code, or data on shorter working hours and fixed term, without which the employment contract would not be concluded.

With regard to other essentials, such as the method of determining the place of work in the case of multiple workplaces, the scheduling of working time, the amount of leave, the payment of wages and pay dates, the employer may decide whether to specify them in the employment contract or to provide them to the employee in the written form (or in electronic form, if this is possible under the law) or by reference to the relevant provisions of the Labour Code.

In case the information is not directly contained in the employment contract, the law stipulates a time limit of 7 days or 4 weeks, depending on the type of information to be provided. If these conditions change, the employer is obliged to inform the employee without delay, at the latest on the day the change becomes effective.

If an employee whose employment relationship was established before November 1, 2022 requests such information, the employer is obliged to provide the employee with this information within one month of receiving the request, if it was not part of the employment contract. This legislation opens the way for the employer to change unilaterally certain terms and conditions of employment without the necessity of concluding an amendment to the Labour Code in Slovakia to the employment contract with the employee.

Transition to another form of employment

The novelty of this amendment to the Labour Code in Slovakia is that if an employee with a fixed-term or part-time employment relationship, whose employment relationship has lasted for at least six months and whose probationary period has expired, will seek a transfer to an employment relationship for indefinite period or to a fixed weekly working time, the employer is obliged to provide a written justified response to that request within one month (within three months if the employer employs fewer than 50 employees).

Extension of the period for filing an invalidity claim on the termination of the employment relationship

The general rule remains that invalidity claim on termination of the employment relationship may be filed to the court within two months from the day when the employment relationship is supposed to be terminated.

However, if the employment relationship is prolonged for the duration of the protection period, the employee may claim the invalidity of the termination of the employment relationship by giving notice in court within two months from the last day of the protection period, but not later than six months from the day of termination of the employment relationship if the employee would not be in the protection period.

Deductions from wage

Section 131 of the Labour Code sets out which deductions from wage may be made by the employer without the agreement with the employee. It was being criticized by employers for a long time that this list did not include the deduction in relation to the advance payment of meal allowances. Under the previous legislation, employers would have to enter into an agreement on deductions with the employee in respect of any deduction from wages relating to meal allowances, which was administratively burdensome for employers and rarely used in practice.

That is why the legislator has expanded the range of eligible amounts also to unaccounted advances on the employer’s contribution for meals or for special purpose linked financial contribution for meals. Therefore, from November 2022, in these cases, it will no longer be necessary to conclude an agreement with employees on deduction from wage.

Agreements on work performed outside an employment relationship

The condition of transparency is also reflected in relations with the so-called performers, whom the employer will be obliged to inform about the days and time periods during which the employer may require the employee to perform work. Also, it will be no longer possible to require these persons to come to the workplace as soon as possible, if necessary, since the amendment to the Labour Code in Slovakia introduces a period of at least 24 hours prior notice by which the employer will be obliged to inform the employee about assigned work task. Even in this case, the employee will need to be informed in writing of any change at the latest on the day it takes effect. If the employer fails to comply with these conditions, the employee will be entitled to refuse to perform such work. On the other hand, if the employer cancels the work without giving less than 24 hours’ prior notice, the employee will be entitled to a refund of at least 30% of the remuneration he would normally receive.

Delivery

The delivery of correspondence between the employee and the employer has been the subject of debate for a long time, mainly because there were no precise conditions for delivery by post, but only a reference to a specific regulation. Since in the case of registered shipment the sender could also shorten the time limit for receipt or mark the items “Do not deposit”, especially in cases where such service led to the termination of employment, this often ended up in court. Therefore, the amendment to the Labour Code in Slovakia introduced the rule that in case of shortening time limit for receipt of the shipment, it must not be shorter than 10 days.

Meal cards (gastro cards)

Although this change has not been introduced by the last amendment to the Labour Code in Slovakia, we remind you of it due to the upcoming entry into force of the earlier amendment, which dealt with the catering for employees.

Pursuant to this amendment to the Labour Code in Slovakia, as of January 1, 2023, employers will be obliged to provide employees with meal vouchers only in electronic form, with the exception of those cases where the employee does not have an objective possibility to use a gastrocard near to the employee’s workplace. Therefore, it will no longer be possible for the employer to decide whether to order paper meal vouchers or gastrocards if the employee chooses food vouchers rather than a financial contribution.

Previous amendment to the Labour Code in Slovakia

On Wednesday, February 17, 2021, the President of the Slovak Republic signed an amendment to the Labour Code in Slovakia, which brings more changes to labour relations. We have analysed one of the most important ones regarding meal voucher and financial contribution for you here. In this article, we will focus on two other significant changes that the amendment to the Labour Code in Slovakia brings.

Housework and telework

The amendment to the Labour Code in Slovakia introduced clarification of the conditions for housework and telework. According to the amendment, if the employee performs work that could be performed at the employer´s workplace, regularly and within specified weekly working time or its part in his/her household, it is considered as a housework, respectively a telework, if he performs work using information technologies, in which electronic data transmission at a distance takes place on a regular basis. The household is considered a place of work that is different than the workplace of the employer and which is selected by the employee himself. Such performance of work and its conditions must be agreed directly in the employment contract.

According to the new version of this amendment to the Labour Code in Slovakia, the employer and employee can agree on whether the employee may set his working time on his own or the work will be carried out in flexible working hours. In case when the employee sets his working time on his own, the employee is not entitled to certain benefits provided to ordinary employees who have working time set by the employer. These deviations include:

  • the provisions on the schedule of specified working time, continuous daily rest and continuous rest during week do not apply,
  • the provisions on the downtimes do not apply, except for downtimes for which the employer is responsible,
  • the employee is not entitled to the compensation of wage in case of important personal obstacles at work, apart from compensation of wage in case of the death of a family member,
  • the employee is not entitled to wage for overtime, wage advantage for work on a holiday, on Saturday, Sunday or nightwork and wage compensation for difficult work performance, unless the employee agrees otherwise with the employer.

The amendment to the Labour Code in Slovakia also specified obligations of the employer regarding the measures to be taken by employees in such a form of work and extended them to housework. These measures include in particular:

  • to provide, install and regularly maintain technical and software equipment necessary for the performance of telework, except when employee performing telework uses own technical and software equipment upon agreement with the employer,
  • to provide data protection that are processed and used during telework, especially when using software equipment,
  • to pay for increased expenses of the employee under conditions agreed in the collective or employment contract associated with the use of his own equipment, device, and items necessary for the performance of telework or housework,
  • to inform the employee of all restrictions on the use of technical and software equipment, as well as the consequences of violating these restrictions,
  • to prevent the isolation of the employee performing housework or telework from other employees and allow him to enter the workplace, if possible, for the purpose of meeting other employees,
  • to enable the employee to deepen the qualification in the same way as in case of employee with the place of work at the employer´s workplace.

The word “in particular” in the given provision of Labour Code indicates that in individual cases, the employer will be obliged to accept even other measures if he identifies that they are needed.

On the employee side, a new obligation for employee performing housework or telework is to immediately inform the employer about technical issues associated with malfunction of technical or software equipment, malfunction of internet connection or other similar causes that prevent him from performing work.

On the other hand, the amendment to the Labour Code in Slovakia also ensures a certain degree of protection for the employee so that the employer doesn’t perceive this way of performing work as such, when the employee is available “non-stop”.

The employee performing housework or telework is entitled not to use work equipment for housework or telework during continuous daily rest and continuous weekly rest, unless he is ordered an on-call work or overtime at that time, during leave or a holiday for which the work has fallen out and during obstacles at work.

In case, when one of these situations occurs, the employer may not consider the refusal of the employee to perform the work as a breach of his obligation to follow the employer’s instructions.

As housework or telework is still not considered a work performed from home by the employee occasionally or in exceptional circumstances with consent of the employer or upon agreement with him if the form of work allows it. In this case, it is so called home-office, on which the employer and employee don’t need to agree in the employment contract. Even in this case, the employer is obliged to ensure data protection which are processed or used during the employee’s work and to respect the refusal of the employee to perform a work, if any of the conditions listed in the previous paragraph is met. On the other hand, the employee is obliged to inform his employer about all technical issues that prevent him to perform work.

Employment termination with an employee older than 65

From January 1, 2022, employer may terminate the employment relationship with an employee who reaches the age of 65 and at the same time the age for entitlement to a retirement pension. These two conditions must be both met at the same time. The employee is in such case entitled to compensation in the amount corresponding to the number of years worked  for the employer.

If employer decides to conclude an agreement on employment termination with the employee due to this reason, he is obliged to state in it the use of this provision as a reason for termination of employment.

An Act on support for short-time work, or kurzarbeit in Slovakia entered into force on March 1, 2022. Its main purpose is to provide partial compensation of employer’s costs on employees’ wages in a situation in which the employer can’t assign them work due to external factors. What are the conditions for obtaining the subsidy and who may apply for it?

What is short-time work?

As the title of the Act states, the subsidy is provided by a state when the employer’s activity is temporarily restricted due to influence of external factors that could not be prejudiced or prevented and which have a negative impact on the assigned work to the employees. Put simply, they are circumstances that force companies to retain their employees at home due to obstacles at work on the employer’s side.

These circumstances are especially extraordinary situation, state of emergency or occurrence of force majeure. However, the Act also mentions that the external factor can’t be a war or a state of war, seasonality of the performed work or planned shutdown.

When can the employer apply for the subsidy?

The Act on kurzarbeit in Slovakia stipulates basic conditions that must be met on both employer and employee sides in order for the employer to apply for the subsidy.

The employer:

The employee:

Is the subsidy limited?

Yes, the subsidy is limited by the amount and the period during which it is provided. The subsidy is provided in the minimum amount of 60% of the employee’s average hourly earnings in a month for which it applies, up to the EUR 7.8138 per hour. The employer may apply for the subsidy only for 6 months during 2 years. In case when the external factors will last longer, the government can prolong the period.

How can the employer submit the application?

The application shall be submitted via electronic mailbox at slovensko.sk portal and signed by a qualified electronic signature.

How long does it take for the application to be approved?

The respective authority will examine the application and if it meets all conditions, it shall take a decision on its approval within 10-day period. Otherwise, it will ask the applicant to supplement the information. In a case when the authority approves the application, it shall pay out the subsidy without a written decision. If the authority denies it, it shall inform the applicant in a written form.

Do any obligations arise from the application in case it will be approved?

Yes. Pursuant to the related provision of the Labour Code, the employer is obliged to pay the employees compensation for the time of short-time work in the amount of at least 80% of their average earnings. If the employer has entered into an agreement with the employee representatives setting out the operational reasons due to which the employer can’t assign work, because of which they are entitled to a wage compensation of at least 60% of their average earnings, this will not apply for the period for which the employer is applying for short-time subsidy.

Besides, the employer is obliged to preserve a work position for which a subsidy was provided, for at least two months after the end of the calendar month for which the subsidy was provided. This shall not apply to cases when the employment relationship is terminated from employee’s own initiative.

The war in Ukraine has affected the world, and many people have joined forces to help those most affected. In response to these events, the Slovak Republic facilitated both the entry of these persons onto its territory and their involvement in everyday life, such as the employment of Ukrainian citizens in Slovakia. All useful information in Ukrainian language is available on the IOM Migration Information Center website. In this News Flash, we offer you a summary of the most important facts as well as useful information for employers.

Entry onto the territory of the Slovak Republic

Nowadays, all persons fleeing a war conflict are allowed to enter the territory of the Slovak Republic, regardless of whether they have a valid travel document or not.

Citizens of Ukraine with a biometric passport can stay in Slovakia without a visa for a maximum of 90 days in any 180-day period.

If you are not just transiting through Slovakia, but plan to stay here, you must report the start of your stay to the relevant Foreign Police Department in person or by post within 3 working days of entry – download form and more detailed information HERE. All the workplaces of the Foreign Police are currently working around the clock.

Temporary refuge

Temporary refuge is provided, inter alia, to protect foreigners from war in their country of origin. The Slovak Republic provides temporary refuge to Ukrainian citizens and their family members from 1.3.2022 to 31.12.2022.

A family member of a citizen of Ukraine is:

All necessary information on the provision of temporary refuge is available in Slovak and Ukrainian language here.

How to employ refugees from Ukraine

If the applicant is provided with temporary refuge, he can work in Slovakia without the need for additional permits. However, he cannot run a business. For business purposes, the applicant first needs to obtain permanent or at least temporary residence in the territory of the Slovak Republic.

Useful information for employers for the employment of Ukrainian citizens in Slovakia

The employer is entitled to employ a person who has been issued with a tolerated stay document and thus granted the status of “ODÍDENEC”. In this case, no work permit or confirmation of the possibility of filling a free job position is required.

The employer is obliged to inform the relevant labour office about the recruitment of such a person no later than seven working days from the date of commencement of employment relationship. The same obligation shall apply to him in the event of termination of employment of that person. The employer shall provide a copy of the employment contract or agreement on work performed outside the employment relationship and a copy of the document on tolerated stay in the territory of the Slovak Republic marked “ODÍDENEC” with the information card.

The health contributions and social contributions of such an employee shall be subject to the same rules as by all other employees.

Update: On Wednesday, December 15, 2021, the Constitutional Court of the Slovak Republic decided to suspend the effectiveness of Article 63 section 1(f) of the Labour Code, which allowed employers to terminate the employment relationship with an employee who had reached the age of 65 and at the same time became entitled to a retirement pension. This decision of the Constitutional Court of the Slovak Republic means that the provision of the law in question will not apply from January 1, 2022 and employers will therefore not be able to use it. In the following months, the Constitutional Court will decide whether the given provision of the Labour Code is in accordance with the Constitution of the Slovak Republic and will therefore enter into force or is not in accordance with the Constitution of the Slovak Republic and will be deleted.

An amendment to the Labour Code brought, besides changes related to financial contribution for meals, telework, housework and part-time job for persons older than 15 years which are valid from March 1, 2021, another change that will come into effect  on January 1, 2022. This change affects the employment contract termination above 65 years of age in Slovakia, and it allows the employer to terminate an employment relationship with an employee who shall reach 65 years of age and simultaneously becomes entitled to retirement pension. What does it mean in practice?

From January 1, 2022, the provision of § 63 par. 1 of the Labour Code enabling the employer to dismiss the employee will include a new letter – “f) the employee has reached the age of 65 and the age for entitlement to a retirement pension”. At the same time, the related provisions of the Labour Code will be changed, namely those related to the termination of employment by agreement and severance pay. We have summarized the most common questions related to this change.

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What if I am not entitled to a retirement pension

Can my employer terminate employment with me because I am over 65?

No. Both the condition for age and condition for entitlement to a retirement pension must be met at the same time. If one of the conditions is not met, the employer can’t terminate the employment with you according to this provision.

What does it mean for me if the employer according to § 63 par. 1 letter f) of Labour Code will terminate an employment with me after January 1, 2022?

If your employer terminates an employment with you according to this provision, on the first day of the month following the month after you received the termination, the notice period begins to run. The basic notice period is 1 month. However, if you worked for the employer more than 1 year, the notice period is 2 months, during which you shall stay and perform your work according to your employment contract. If you don´t stay with your employer during the notice period, he is entitled to financial compensation up to the amount that is the product of your average monthly earnings and the length of the notice period, if you agreed on this financial compensation in the employment contract. The agreement on financial compensation must be in a written form, otherwise it is invalid. Therefore, we recommend you checking whether it is included in the employment contract.

What should I be careful of?

The employer doesn’t want to give me notice but wants me to sign a termination agreement with him.

In the case of concluding an agreement on termination of employment due to reaching the age of 65, provided that entitlement to a retirement pension arises, this reason must be clearly stated in the agreement, so insist that the employer must include it in the agreement.

Am I entitled to a severance pay?

If yes, then in what amount?

The employee with whom the employer terminated the employment due to reaching the age of 65 and meeting the conditions for entitlement to the retirement pension, is entitled to the severance pay depending of the number of years worked for the employer on the date of termination of employment. The severance pay shall be paid in a different amount when terminating the employment by notice and agreement.

In case of termination by the employer due to § 63 par. 1 letter f) of the Labour Code, the employee is entitled to severance pay at least in the amount of:

In case of concluding an agreement on termination of employment due to above-mentioned reason, the employee is entitled to severance pay at least in the amount of:

The word “at least” in the given provision of act means, that the employer may provide the employee a higher severance payment than he is entitled to according to the act. Thus, only the lower limit is set that must be respected.

Am I obliged to reimburse my employer for the costs incurred?

I had an agreement with them in relation to upgrading my qualifications, but he wants to terminate the employment with me before the end of the period for which I have undertaken to remain with him.

The employer may conclude an agreement with the employee, by which the employer undertakes to allow the employee to upgrade his qualification by providing him a time off work, wage compensations and reimbursement of other expenses related to studies, and the employee undertakes to remain with the employer after the end of his studies for a certain period of time or to compensate his expenses related to the studies even if the employer ends his employment before the end of his studies. If the employer terminates the employment with you by notice or agreement due to reaching the age of 65 at the same time as entitlement to a retirement pension arises, you are not obliged to reimburse the employer’s expenses that incurred due to upgrading your qualification.

An amendment that entered into force in October 2020, changed several provisions of Commercial Code, as well as of Commercial Register Act. One of these changes include registration obligations that arose to entrepreneurs regarding the update of company data in the Slovak Commercial Register.

Organisational units

Founders of companies and organisational units are obliged to submit a petition for registration by which they confirm the entered data on foreign legal person’s company, foreign legal person’s organisational unit and Slovak legal person’s organisational unit in the Commercial Register or propose a change in the entered data in the Commercial Register until September 30, 2021.This obligation arises even if the data on the company or organisational unit entered in the Commercial Register are up-to-date.

It is not necessary to attach any documents to the application for registration confirming the data entered in the Commercial Register. The application is not subject to a fee obligation. If you don’t confirm the data in the given period, the registry court will delete the company or organisational unit from the Commercial Register.

If you are considering terminating an organisational unit, we don’t recommend relying on the deletion mentioned above. The court doesn’t have a set period in which to delete the organisational unit.

Statutory body

It is an eminent rule, that the statutory body’s restriction of permission to act on behalf of the company, is not effective against the third parties even if it has been published. However, from the effective date of the amendment, in the case of an entrepreneur who registers in the Commercial Register, the restriction of the statutory body to act on the behalf of the legal entity shall not be listed in the Commercial Register.

If you have such a restriction listed in the Commercial Register, it is essential to remove it until September 30, 2021. If you don’t do so in the given period, the registry court may impose you a fine of up to EUR 3,310.

Shareholders

Whereas before the effectiveness of the amendment, shareholders only needed to enter their name, surname, and residence in case of natural persons, and only name of the company and its registered seat in case of legal persons, the list of the data is extending now, in order to identify these persons more precisely.

Natural persons are required to also include their date of birth and birth number, if assigned, and legal entities must include identification number.

Existing companies are obliged to include the missing data until September 30, 2022, while after September 30, 2021, you must do so in any first change procedure, if not, the application will be rejected, and the court will ask you to complete the application.

Even in this case, if you don’t fulfil the obligation within the given period, the registry court may impose a fine of up to EUR 3,310.

Our associates in Slovakia can assist you with the fulfilment of both obligations. Don’t hesitate to reach out to them.

On April 20, 2021, the Financial Directorate of the Slovak Republic published a methodological instruction for the taxation of meal contributions for employees, the inclusion of the employee´s meal contributions in the employer’s tax expenses and the inclusion of expenses (costs) for the taxpayer’s own meals with income according to § 6 par. 1 and 2 of Act no. 595/2003 Coll. on income tax, as amended, to the tax expenses of this taxpayer.

The purpose of the methodological instructions for the taxation of employee meal contributions in Slovakia is to ensure a single procedure for assessing the taxation of employee´s income and the application of meal expenses to tax expenses according to the Act no. 595/2003 Coll. on income tax, as amended (hereinafter referred as “ITA”).

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Scope and conditions for employee’s catering from March 1, 2021

An amendment to the Labour Code effective from March 1, 2021 brought to most of the employees an option to choose between meal vouchers and financial contribution for meal.

As mentioned in the previous News Flash, from the effectiveness of this amendment, the financial contribution for meals can be provided to all employees, with exception of those whom the employer provides meals in his own catering facility or in the catering facility of another employer.

In this context, the employer is obliged to allow his employees to choose between a meal voucher and financial contribution for meal under a condition that the employee can´t change his decision within 12 months from the date of his choice.

Even though the amendment to the Labour Code came to an effect on March 1, 2021, many questions arose in connection with its application in practice. The methodological instruction published by the Financial Directorate of the Slovak Republic brought answers to these questions.

Taxation of the financial contribution for meal on the part of the employee

According to § 5 par. 7 letter b) of ITA from March 1, 2021 is exempt from income tax:

A) If the employer provides meals to his employees in the form of meal vouchers (or meal cards) whose value is comprised of the compulsory contribution of the employer according to the Labour Code, the contribution from social fund and employer´s voluntary contribution for meal beyond the scope of his legal obligations arising from special regulations, then for the employee the value of this meal voucher or electronic meal voucher (non-monetary benefit) is exempt from income tax in full amount.

However, as is apparent from the following text,  the full exemption applies only to the non-monetary benefit, thus the meal vouchers or the meal cards. In the case of the financial contributions, several factors need to be considered.

In general, the provision of the financial contribution can´t give an employee and advantage or a disadvantage compared to an  employee who is provided with a meal voucher. However, it will not be the case at all.

If the employer provides his employee meal vouchers instead of financial contribution for meal, then the amount of the financial contribution is always based on the value of the meal voucher he provided to the employee or which he continues to provide to those employees who didn’t choose the financial contribution. The amount of the financial contribution for meal should be therefore the same as the amount in which the employers contributes to the meal voucher to other employees (on the comparable job positions). At the same time, a condition applies that it must be at least EUR 2.11 (55 % of the minimum value of the meal voucher, i. e. for 2021 from the EUR 3.83) and the most EUR 2.81 per one shift (55 % of the meal provided during a business trip lasting 5 to 12 hours).

B) In addition to the above mentioned amounts arising from the Labour Code, the employer can also contribute to the employee´s meals by providing a meal contribution from the social fund. Such a contribution for meals to employees is not restricted by law and thus is considered tax-exempt for the employee.

C) However, if the employer provides employee with a contribution beyond the above mentioned (for example, on the basis of an labour contract, a collective agreement or an internal directive of employer as an employee benefit), such a contribution is already considered as an income on the part of the employee that is a subject to income tax from a dependant activity.

Employer’s tax expenses

Since the financial contribution for meal is on the employee´s side not always exempt from tax, it is necessary to answer when this contribution is considered as a tax expense on the side of the employer.

A) Tax expenses in general are employer´s contributions for employees´ meals, if they are provided under conditions laid down in a special regulation. In accordance with § 152 par. 5 of the Labour Code, the amount of the fee for provided catering services for employees via an entity that is authorized to mediate catering services through meal vouchers is a maximum of 2 % of the value stated on the meal voucher. Such a fee for provision of catering service shall be recognizes in the employer´s tax expenses after payment for the service (§ 17 par. 19 letter d of the ITA).

If the employer provides the employee with a financial contribution for meal and he:

B) If the employer also contributes to employees´ meals with a contribution from the social fund, the tax expense is only the creation of the social fund, but not its absorption. The payment of the contribution from the social fund for catering of the employees is not the employer’s expense (cost).

C) The financial contribution for meals which based on agreement with the employee is provided by the employer as an employee benefit in the amount higher than its maximum amount according to the Labour Code (letter A) and is not paid from the social fund (letter B), is for the employer a tax expense. The recognition of such an employee benefit as employer´s tax expense applies under a condition that it has been agreed in the labour contract, collective agreement or an internal regulation of the employer and taxed to the taxpayer as an income from a dependant activity.

Please note, that such a benefit is considered as a tax expense only in a case when it is provided as a financial contribution for meals to the employee. If the employer provides meals to his employees in the non-monetary form (e.g. meal vouchers), as such income is not taxed on the part of the employee due to tax exemption, the employer can´t claim any amount beyond the law as a tax expense.

Pay attention to the deadline for the payment of the financial contribution

Finally, we would like to point out that it is essential to pay attention to the fact that the employer is obliged to provide meals to his employees so the employee has at his disposal meal vouchers or financial contribution on the first working day of the month. This date is particularly important because according to the methodological instruction, the financial contribution provided during the month, i.e. for the past days, is considered as a taxable income of the employee because due to its late payment it didn’t fulfil its purpose which is to provide a meal to employee.

Simply said, it is not recommended to provide the financial contribution for meals for the current month together with the salary for the previous month.

An example: The employer will pay the employee a salary for April together with the financial contribution for meals for May on May 20. Due to the fact that the employee doesn’t have a financial contribution available on the first working day of the given month, the contribution doesn’t fulfil its purpose. Therefore, from May 1 to May 19, it is considered a taxable income on the part of the employee.

Our lawyers from Accace Legal are available at your service and ready to prepare an internal regulation for you.

Redemption means asking the management company to redeem the units = termination of the investment. In this article, we will focus on the redemption of units in Slovakia from a tax-contribution point of view.

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Units acquired until 2003

When redeeming units that are not included in business assets, it is necessary for natural persons to follow the transitional provision of § 52b par. 11 of the Income Tax Act (referred to as the “ITA”). Under this provision, the obligation to tax deduction also applies to units acquired before December 31, 2003. In accordance with this provision, the management companies are obliged to tax deduction in the event of redemption of units in Slovakia from which a unitholder has gained a profit, regardless of the year of their acquisition.

In case of tax deduction for this group of units, it is recommended to submit a tax return, since the transitional provision of § 52b par. 20 of the ITA may also apply to these groups of securities, namely to apply tax regulations valid until the of 2003.Therefore, if the management company deducts the tax when redeeming the units acquired before the end of 2003 and the taxpayer meets the conditions for tax exemption of such income in accordance with the legislation in force as amended until the end of 2003, the taxpayer shall claim the amount of the withheld tax via submitted tax return.

An investor (a natural person) shall indicate the withheld tax to the taxpayers as a tax according to the § 43 of ITA, while income from such a unit won´t be included in the tax return as a part of special tax base under § 7 par. 1 letter g) ITA, since this income is exempted from tax in accordance with the transitional provision of § 52b par. 20 of the ITA.

The provisions of § 4 par. 1 letter d), 10 par. 3 letter a) and § 58 par. 8 of Act no. 366/1999 Coll. on income taxes (hereinafter referred to as the “old ITA”) must be applied to taxation of income from sell of securities, i.e. also to redemption of units acquired before 2004, even when they were redeemed after 2003. In accordance with § 4 par. 1 letter d) of the old ITA valid from January 1, 2020 to December 31, 2003, the income from sale of securities was exempted from tax, if the period between their acquisition and sale exceeded three years, whereas the sale of a security for the purposes of the old ITA was also considered a resale, i.e. redemption of the units.

In case of units acquired until the end of 1999, the Act no. 286/1992 Coll. on income taxes, as amended, was in force and according to which the income from sale of securities was considered as other income according to the § 10 par. 1 letter d) of the Act no. 286/1992 Coll. with an exemption in § 4 of this act. According to the exemption, incomes from sale of securities were exempted from tax if the period between their acquisition and sale exceeded one year and these incomes weren’t a subject of a business of the taxpayer or they didn’t serve to his business or another self-employed activity, while this provision didn’t apply to the incomes from capital assets. This provision also applies to the application of tax exemption in the event of units redemption acquired until the end of 1999, in case when the units are held by the taxpayer until now.

It means that, in case of redemption of units in Slovakia acquired before 2004, the conditions in 2020 for tax exemption required by legislation valid until 2003 will be fulfilled. In the event of redemption of such units in 2020, it is recommended to shareholders to submit tax return for 2020 and indicate an amount of withheld tax by the management company as a tax advance. As income from the redemption of such units will be exempt from tax, the amount of withheld tax will constitute an “excess payment” of tax from this type of taxpayer’s income.

Units acquired from 2004

Income from distribution, or refund of units is considered as income from capital assets. A special tax base in case of such income means the amount by which the total income from the redemption of units within a given calendar year exceeds the total amount of the unitholder’s deposits. This also applies if the taxpayer owns units in several funds.

The special tax base of such taxpayer is, in case of redemption of units in several funds, calculated from the difference between incomes from all units attained from their redemption and the

The special tax base of such a taxpayer is, in the case of a redemption of units in several funds, calculated from the difference between the income from all units obtained from their redemption and all unitholder´s contributions relating to those redeemed units. If such an overall difference is negative, it is not considered for tax purposes. This means that in case of redemption of units, it is possible to compensate the profits and losses gained from their redemption within the calendar year.

In accordance with § 43 par. 3 letter b) of ITA, the tax shall be levied by deduction also in the case of income from units achieved by their redemption. The taxpayer, e.g. management company is obliged to the tax deduction in accordance with § 43 par. 10 of ITA, whereas the tax deduction is made on the positive difference between the paid untaxed amount and the unitholder´s contribution, which is the selling price at the time of issue. The tax thus deducted shall be deemed as paid once it is properly deducted, but a natural person may decide to treat such a tax deduction as his advance on the tax. The above-mentioned is significant especially if the taxpayer gains profits or losses from redemption of different units within calendar year, while from their total offsetting it shows such a special tax base for which the amount of tax liability calculated from it is lower than amount of the withholding tax deducted on the units from which he gained profit, e.g. by filing a tax return, he can “get back” to all or part of the amount of tax withheld during the calendar year.

Incomes from redemption of units in Slovakia are subject to tax at tax rate of 19%.

Redemption of units and contributions

Income from redemption of units in Slovakia is not a subject to social and health contributions.

UPDATE: On December 16, 2020, new information was published on the website of the Ministry of Economy on the possibility of applying for a rent subsidy for the second wave of the coronavirus pandemic. According to this information, application can be submitted from December 16, 2020 to March 31, 2021.

On  December 1, 2020, the National Council of Slovakia approved an amendment to the act on provision of grants within the competence of the Ministry of Economy of the Slovak republic, which changes the conditions for obtaining the rent grants during the 2nd wave of the coronavirus pandemic.

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Changes due to the amendment

The amendment brings several changes in the current conditions for applying for this type of state aid:

April 1, 2021 as a key date

The most significant change represents the term April 1, 2021. Until now, the tenant should start to pay the rent for the period of difficult use (regardless of the fact whether they agreed on rental discount or not) from the month following the month, in which the emergency situation ends. Pursuant to this amendment, the tenant will be obliged to pay the full rent for this time of period not later than on April 1, 2021. It continues to apply, that during the rent payments, the landlord or his legal successor is not obliged to increase the rent unilaterally, if this right was not agreed in the contract before August 1, 2020.

The change in due date of the rent doesn’t affect the agreements concerning the unpaid rent  for the period of the difficult use for which the grant was provided before December 1, 2020. The change doesn’t apply to the unpaid rent for the period of difficult use in the first wave, if the landlord and tenant didn’t agree on the rent discount before December 1, 2020.

These cases will be administered by the previously valid law, i.e. the tenant will still be able to pay the rent for the period until December 1, 2020  in a maximum of 48 monthly instalments always due on the 15th day of the calendar month, starting on the 15th day of the calendar month following the calendar month  in which the coronavirus emergency situation ended.

As of the date of the publication of this article, the Ministry of the Economy of the Slovak republic hasn’t yet published the specific conditions based on which it will be possible to apply for the rent grant for the second wave. The application shall be available from December 15, 2020.

We introduced you in the previous article the individual legal forms of business. Since we recommended a limited liability company as the most advantageous solution, we will use it as a model. This time, we will focus on a memorandum of association which is one of the basic documents of a company.

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What shall memorandum of association contain?

The memorandum of association contains basic information about company, such as its name, seat, subject of business, amount of registered capital and deposits, information about partners and first directors, and other basic information defined by Commercial Code.

In terms of participating in the life of the company, it is significant for the partners to determine in particular:

Is deposit and business share the same?

It is a simple answer, but slightly complicated explanation. The terms deposit and business share are not the same. The deposit represents specific values which the partner puts into the company and shares the company´s business result. These values may be in monetary or non-monetary character and together they create the registered capital of the company. In general, we could say that it is an initial investment of the founder (partner) in the business.

On the other hand, the business share represents a participation rate of the partner in the company, i.e. the extent of the property and non-property rights and obligations of the partner. Therefore, we could say that the business share is a share in the managing, decision-making and control of the company´s activities. Each partner may only have one business share – in the case of a new deposit in the registered capital, the partner doesn’t acquire another business share, but the existing one increases.

The basic rule according to which the amount of the business share in the company is determined is the ratio of the deposit amount to the amount of the registered capital of the company – e.g. in the case of a deposit of EUR 2,500 and registered capital of EUR 5,000, the partner has a business share of 50%. However, in this case, it is a dispositive provision of a law which means that the partners may agree on the amount of the business shares regardless of the ratio of their deposits to the registered capital. It is important that in the end, they represent a total of 100%.

In a company, it may therefore look like the company has two partners whose deposits to the registered capital are the same (each contributed EUR 2,500), but their business shares are different (for example, the partner 1 has a business share of 70%, the partner 2 has a business share of 30%). Therefore, the amount of the business share can be set voluntarily according to the will of the partners.

The reason for this kind of agreements is usually a fact that one of the partners is the “brain” of the company and brings a significant know-how, while the another has better management skills and can ensure the company´s management, represents the company in business negotiations with investors and so on (he therefore also holds the position of an executive manager in most of the cases) – however, his business share is lower because without the first partner, the company would not be able to function for the purpose for which it was established.

Determining the amount of the business share is also substantial for a reason because it has a significant influence on the amount of the profit share, voting rights and liquidation balance. However, these can be agreed differently, as well.

The general meeting of the company is the highest body of the company and is entitled to decide on its internal affairs, but for example, it can decide on the election and dismissal of statutory bodies. For this reason, we shouldn’t omit the distribution of the voting rights in the company and the setting of a quorum, i.e. the required number of votes for a decision on a matter. It is therefore up to the partners if they agree that the decisions will be adopted by over a half of the majority of votes (so-called simple majority), 2/3 majority of votes (so-called qualified majority) or the decision will require the consent of all of them (so-called absolute majority).

Last but not least, the profit-sharing and the liquidation balance agreement must be kept in mind. Unless the partners don’t agree separately, their profit shares and the liquidation balance are governed by the amount of their shares, which means that if one partner has 70% share and the another has 30%, they will share in such a ratio the profit or the liquidation balance in the case of company´s dissolution.

What is the tag-along and drag-along right?

When it comes to business shares in the company, you may encounter the requirement to agree on the right tag-along and drag-along in the case of negotiations with the investor. These two rights represent obligations for you in the event of a transfer of business shares in the company, so you need to know exactly what they stand for.

The tag-along right represents a situation when you as a partner secure the right to add to the transfer of a business share of another partner. In practice, if any partner decides to sell his business share or its part, the other partners have the right to sell their business share or its part to the same buyer under the same conditions as agreed by the first partner.

On the other hand, the drag-along right means the right of the partner to require from other partners to sell their business shares to the buyer, which was chosen by himself, with whom he agreed on the conditions of the transfer of his share, if this buyer showed an interest in gaining the shares of other partners.

These conditions are typically the subject of an individual agreement between the partners. However, it is not excluded that they are included directly in the memorandum of association.

What to beware of?

The above-mentioned shares in the company usually change with the arrival of a new partner or discharge of the existing one. Therefore, when you change the ownership structure in the company, it is crucial to think of their correct setup.

We may assume, that the investors will require a lower business share, but higher share on the voting rights and profit, alternatively, they might be interested in being a dominant shareholder in all company´s business areas. If you want to keep the control over the company and to avoid the risk that the new majority partner would dismiss you from your function in the future, or force you to transfer your business share, pay attention to the correct distribution of the voting rights in the company, as well as correct setup of the conditions of the tag-along and drag-along rights, or insist on a setup when any decision has to be approved by an absolute majority votes of the partners.

With regard to the transfer of the business shares, the basic principle we recommend to agree on in the memorandum of association, is to require the consent of the general meeting with the transfer. Otherwise, any partner would be able to transfer its business share to another partner or a third party freely.

Another principle we recommend to define in this regard is the pre-emptive right, which will secure that in a case when a partner decides to transfer his business share in the company, he will be obliged to offer it to you first. This will prevent third parties who are unknown to you to enter the company.

At the end, it must not be forgotten that if the partners don’t exclude the succession of a business share in the memorandum of association, it passes to his legal successors in the event of the death of the partner.

The correct setting of the mutual rights and obligations of the partners in the memorandum of association, or in the special partnership agreement – is a basic assumption of the proper functioning of the company. Thanks to this, you can avoid unexpected and unpleasant situations at a time when the originally good relationships between the partners would break down and reaching any consensus between them becomes unreachable.

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