The most common legal form for doing business in Slovakia is the limited liability company (or LLC in short). The incorporation time usually takes up max. 2 weeks, counted from when the necessary documentation is signed.

There are no limitations for foreign investors when it comes to setting up companies doing business in Slovakia, they enjoy identical rights and obligations as Slovak persons.

The fees for establishing an LLC are:

• EUR 220 for court fees
• EUR 15 for regulated trades (the so-called free trades are free of charge).

At least one shareholder (natural or legal person) is required for setting up a limited liability company, in which case anti-chaining rules apply (i.e., LLC with only 1 shareholder cannot be a sole shareholder in other LLC), or two or more persons (the maximum number of shareholders is limited to 50).

The minimum registered capital is EUR 5,000. The minimum contribution of each shareholder must be EUR 750. If the Limited Liability Company is founded by a single entity, the registered capital must be paid up in full.

A limited liability company doing business in Slovakia acquires legal personality status upon its registration in the Commercial Register. A company shall have registered seat in the territory of Slovakia. It is not possible to register the company in the Commercial register without document proving the seat in the premises.

The LLC is also required to have at least 1 director. Only a natural person can be appointed as a director. If there are more directors, each of them is entitled to act individually on behalf of the company doing business in Slovakia unless stipulated otherwise in the Memorandum of Association/Foundation Deed.

The Commercial Register in Slovakia is administered by the Registry (District) Courts, and it is public. The website is accessible at www.orsr.sk.

A Limited Liability Company may be established by a sole shareholder or by more shareholders, in both cases it is irrespective of whether they are a legal or a natural person. In respect of one shareholder there are the following restrictions:

• a limited liability company owned by a sole shareholder must not be a sole shareholder in another limited liability company,
• a natural person must not be a sole shareholder in more than three limited liability companies.

The maximum number of shareholders is limited to 50.

The registered capital must be at least of EUR 5,000 with a minimum contribution of EUR 750 of each shareholder. Contributions can be monetary or non-monetary, while an official appraiser must value a non-monetary contribution.

At least 30% of each shareholder’s monetary contribution, and in cases of non-monetary contributions at least 50%, must be paid up before the application for the registration of the Limited Liability Company is filed at the Commercial Register. The contributions do not have to be paid to the bank account and for the purposes of registration, the person administering the contributions will issue an affidavit declaring that the respective contributions have been paid up. If the Limited Liability Company is founded by a single entity, the registered capital must be paid up in full.

A general meeting is composed of all shareholders and decides on all major issues as the appointment and dismissal of the executive directors, modification of the statutes and Memorandum of Association/Foundation Deed, increases and decreases of the registered capital.

The statutory body of the Limited Liability Company is formed by one or more executives (executive directors). Only a natural person can be appointed as an executive director. In the event that there are several executive directors, each of them is entitled to act individually on behalf of the company unless stipulated otherwise in the Memorandum of Association/Foundation Deed.

Establishment of a supervisory board is optional. If it is established, the supervisory board must be composed of at least three members appointed by the shareholders’ meeting.

The activity would be regarded as an unauthorized trading if the person systematically, independently, on own behalf, on own responsibility, for the purpose of earning profits, without holding a trade licence performs an activity subject to craft, regulated or unregulated trades or licenses.

The fine for unauthorized trading ranges from EUR 1,659 to EUR 3,319. Unauthorized trading can be also considered as an offence under the Slovak Criminal Code.

The Slovak tax system comprises the following taxes:

Income taxes (personal income tax, corporate income tax)

Personal income tax

The tax rates applicable for income derived in 2024 are:

• annual taxable income (except for income from business activity, capital and dividend income) up to EUR 47,537.98 is taxed at 19%
• annual taxable income (except for income from business activity, capital and dividend income) above EUR 47,537.98 is taxed at 25%
• income from business activity is taxed at reduced tax rate of 15%, if its annual taxable value does not exceed EUR 60,000 (note: in 2020 the threshold was EUR 100 thousand; between 2021 – 2023 the threshold was EUR 49,790); otherwise, 19% rate applies for taxable business income up to EUR 47,537.98 and 25% rate applies to the amount, which is above that threshold
• income from capital is taxed at flat rate of 19%
• income from dividends paid out of pre-2004 profits and profits derived from January 1, 2017 to December 31, 2023 is taxed at 7% (35% applies if dividends are from foreign sources of non-cooperating state).
• income from dividends derived from profits for periods starting after January 1, 2024, a tax rate of 10% applies (while the rate of 35% still applies for dividends from foreign sources of non-cooperating states).

Moreover, an additional tax of 5% is to be paid by the representatives of constitutional bodies (e.g. the President, Members of Parliament) on their employment income.

Certain types of income are not aggregated but are subject to a final withholding tax of 19%, 10% or 7% in the case of dividends paid out by domestic company.

Corporate income tax

Corporate income tax is levied at a rate of 21%. However, since January 1^st, 2021, taxpayers with taxable revenues not exceeding EUR 60,000 per tax period (note: in 2020 the threshold was EUR 100,000; between 2021 – 2023 the threshold was EUR 49,790) are entitled to apply reduced tax rate of 15%. This is the final tax burden on 2024 corporate profits in some cases because dividends paid out of 2024 profits are not taxed in the hands of shareholder if the shareholders are corporate and based in other than non-cooperating state.

Starting from the 2024 tax period, the minimum corporate tax (commonly known as tax licenses) has been reinstated in the tax legislation, following its abolition from 2017 to 2023. Legal entities are required to pay a minimum corporate tax of between EUR 340 and EUR 3,840 based on the amount of taxable income. Only a limited number of exceptions from the payment of the minimum tax are allowed, such as companies in bankruptcy, companies in their initial taxable period, non-profit organizations, etc.

Value added tax (VAT)

• 20% is the standard VAT rate in Slovakia
• 10% is the first reduced VAT rate
• 5% is the second reduced VAT rate

Export of goods and services is zero rated.

Intra-Community supplies of goods are zero rated under certain conditions.

Excise duties

Excise duties are levied on mineral oil, beer, wine, spirits, electricity, coal, natural gas and tobacco products.

Motor vehicle tax

Levied on motor vehicles and trailers in categories L, M, N, and O if registered in Slovak Republic and used for business purposes.

Special taxes

Special taxes cover special duty paid by regulated industries and special levy on non-life insurance premium. Further, in 2023 and 2024, companies operating in the oil, gas, coal and refinery sectors shall pay a special solidarity contribution.

Moreover, there are local taxes to be paid, e.g. real estate tax.

For more details about taxation in Slovakia, download our free 2024 Tax Guideline!

Investment incentives are serious arguments in favour company formation in Slovakia. As an EU member country, Slovakia must ensure compliance with EU rules. In general investment incentives (or state aid) are linked to the region where the investment takes place and the European Commission has determined which regions are entitled to receive aid and the amount of aid each of those regions may receive. The connection with a certain region is one of the fundamental characteristics of the incentives and their provision shall serve to support not only foreign, but also Slovak investments.

In general, there are four categories of projects that can be supported by the investment incentives for company formation in Slovakia:

• industrial production
• technological centres
• shared service centres
• tourism

Each category has specifically defined conditions which shall be met in order to apply for the investment incentives. The incentives are provided in general in the form of:

• a subsidy for the acquisition of material assets and immaterial assets
• an income tax relief
• a contribution for newly created jobs
• transfer of immovable property or exchange of immovable property at a price lower than a general asset value

The provision of the state aid is governed in particular by the European Union law that forms the basic legal framework also for the Slovak authorities.

The acquisition of real estate in Slovakia requires two obligatory steps:

Execution of a written agreement for real estate transactions in Slovakia

The ownership of the real estate may be transferred by written purchase agreement concluded under the Slovak law. The demonstration of will to transfer the real estate of both the transferor and the transferee must be on the same document and the signature of the transferor shall be verified.

The purchase agreement can be drafted by either party and it does not need to be drafted by a public notary or certified attorney. The purchase agreement must include all the particulars required by the Civil Code and must also comply with the requirements of the Cadastral Act specifying more precisely its content.

The purchase agreement must be in Slovak language (or Czech language). Any other language version must be translated into Slovak by a certified translator, making it eligible to be registered in the Real Estate Registry.

Prior to the execution of the purchase agreement, the parties may conclude a preliminary agreement in which they undertake to enter a purchase agreement within the agreed time period. Based on the preliminary agreement, either party can sue for the performance of the purchase agreement if the other party breaches the obligation to enter in the purchase agreement.

Registration of the ownership title in the Real Estate Registry

The title to real estate is acquired by the registration in the Real Estate Registry upon the Resolution of the competent Real Estate Administration.

The registration process starts by the submission of the Application to the respective Real Estate Administrator and should be completed by the Resolution of the Real Estate Administration.

In line with the established practice for real estate transactions in Slovakia

1. Parties conclude a purchase agreement, the signature of the transferor shall be verified
2. Parties regulate how the payment of the purchase price should be “secured” (from the signing of the agreement to the registration of the new ownership), for example:
   • Purchase price can be deposited in the notarial custody for the benefit of the transferor,
   • Purchase price can be deposited on escrow account administrated by a bank for the benefit of the transferor, and the purchase price will be paid to the transferor once the respective Resolution of the Real Estate Administration is issued
3. Application is submitted to the respective Real Estate Administration. The Administration decides on the Application for the registration of the ownership title within 30 days, the fee is in the amount of EUR 66. The parties of the agreement can apply for registration in accelerated proceedings, in this case the fee is in the amount of EUR 266 and the registration is completed within 15 days.

Prohibition of fragmentation of a land

It is prohibited to create a new land as a result of the splitting up of existing land with an area of less than 3 000 m² in the case of agricultural land and less than 5 000 m² in the case of forest land.

The table below provides a brief overview of fees and taxation with respect to the real estate transfer in Slovakia

Specificity

1. Ownership of a land does not include ownership of a building located on it.

Slovak law does not recognize the principle according to which the ownership of a land includes the ownership of a building located on it. Consequently, the owner of a land may be different form the owners of the buildings on it.

2. Due diligence

The real property ownership is registered in the Real Estate Registry.  A Resolution of the respective Real Estate Administration approving an entry in the Real Estate Registry and the registration of the transfer in the Real Estate Registry may not be considered as a guarantee that the ownership title was validly transferred, as there are several circumstances under which the transfer was in compliance with law.

Legislation for real estate transactions in Slovakia

• The Act No. 40/1964 Coll., Civil Code, as amended
• The Act No. 162/1995 Coll. on the real estate cadastre and entering of ownership and other rights to real estates, as amended (Cadastral Act)
• The Act No. 140/2014 Coll. on acquiring the ownership of agricultural land, as amended
• The Act no.180/1995 Coll. on some measures for land ownership arrangements, as amended

The bankruptcy proceedings and restructuring proceedings start officially with the resolution of the court which is published in the Company Gazette (in Slovak: “Obchodný vestník”). The date of publication is also the starting date of the period during which creditors may submit their claims on receivables against the company

• in the bankruptcy proceedings such period is 45 days. If the creditor delivers the application later to the administrator, the application shall be taken into consideration, but the creditor cannot exercise the voting right and other rights granted otherwise by law. The right to proportionate satisfaction of the creditor shall not be affected thereby, however it can be satisfied only from the proceeds included in the distribution plan from the general assets,
• in the restructuring proceedings the period is 30 days. Any claim delivered after the expiration of the term shall be disregarded within the framework of the restructuring proceedings and the claim enforced thereby shall not be included in the Restructuring Plan.

In both procedures the submission of claims is free of charge. Each submitted claim shall be reconciled by the administrator with due care. If administrator finds out while analysing the claims, that any of them is disputable (as to the title of its existence or enforceability), the administrator shall be obliged to contest such claim to the extent in which it is disputable. However, the creditor holding a contested claim may file with the court an action asking the court to acknowledge the claim.

The property which is liable to the bankruptcy shall made up a bankruptcy estate, which shall be split between:

The creditors are satisfied by the funds which were converted by the sale of the assets from the respective group.

In general, the receivables are satisfied in the following order:

• costs of the insolvency procedure which include mainly costs of selling the assets, remuneration of the administrator,
• alimony,
• employees’ wages and other claims of employees that arose after the bankruptcy was declared,
• taxes, duties, health insurance payments, social insurance payments and other contributions to the state,
• other claims.

In the restructuring proceedings is applied that the property is divided as it is proposed in the Restructuring Plan, which shall be approved by the creditors and subsequently ratified by the court.

According to the law, the rate of satisfaction of any of the unsecured receivables shall not be lower than 50% of the amount of the claim, this does not apply if the concerned creditor agrees in writing with a lower level of satisfaction.

Sanctions on the side of the company (as the debtor)

Penalty for company´s (as the debtor) management

Company as the debtor is obliged to file a proposal for the bankruptcy order within 30 days since it knew or while maintaining due diligence should have known of its status. This obligation on behalf of the company (as debtor) has mainly the statutory body as well as the member of the statutory body of the company.

For the event of breach of the obligation to file a proposal for the bankruptcy in time, there is a fiction stipulated by the law, that between the company and the person obliged to file the proposal for the bankruptcy a contractual penalty in the amount of EUR 12,500 is negotiated. This sum serves for the satisfaction of bankruptcy costs and satisfaction of creditors (if the sum surpasses the bankruptcy costs). Any agreement between the company and the person obliged to file proposal for the bankruptcy, which excludes or restricts entitlement for the contractual penalty, shall be prohibited.

Entitlement for the contractual penalty shall not affect the entitlement to compensation for damage exceeding the contractual penalty.

Disqualification of the member of the statutory body to execute the function of the statutory

If the court decides that the person breached the obligation to file a proposal for the bankruptcy in time and therefore the person is obliged to pay the contractual penalty as described above, the person will be disqualified by the court to be a member of the statutory body of the company (as debtor) and also of other companies and the prohibition can be up to 3 years.

Further the person will be registered in the state Registry of Disqualification which is a public registry operated by the district court.

Criminal offenses on the side of the company (debtor)

There are several relevant criminal offenses according to Slovak Criminal Code concerning acting in insolvency status or in respect of the bankruptcy or restructuring proceedings, as:

• Fraudulent insolvency
• Culpable insolvency
• Fraudulent conveyance of a creditor
• Fraudulent preference of a creditor
• Distortion of data in financial and business records
• Deceitful practices in bankruptcy or restructuring proceedings
• Obstructing bankruptcy or restructuring proceedings.

Sanctions on the side of the creditor

Criminal offenses for an improper acting in the bankruptcy or restructuring proceedings are mainly:

• Deceitful practices in bankruptcy or restructuring proceedings
• Obstructing bankruptcy or restructuring proceedings.

Sanctions for any third person

All third persons are obliged to collaborate under the Act of bankruptcy and restructuring. The collaboration shall be provided promptly and free of charge. If any third person fails to provide collaboration as required by the law, the court may penalize such person by a fine up to EUR 3,300.

Legal regulation:

• Act No. 7/2005 Coll., Bankruptcy and Restructuring Act
• Act No. 513/1991 Coll., Commercial Code
• Act No. 300/2005 Coll., Criminal Code

Pursuant to the Act on Illegal employment, it is prohibited for an employer to employ persons without an established employment relationship. This is applicable for all types of individuals bellow:

• Slovak citizens,
• citizens of European Union (“EU”) or of contracting states of the Agreement on the European Economic Area and Switzerland (“EEA”),
• non-EU and non-EEA citizens.

A third-country national has the same right to use employment services as a citizen of Slovakia, with the following restrictions:

EU citizens

EU citizens are entitled to stay in Slovakia without any conditions or formalities for three months after the date of entry into the territory of Slovakia.

An EU citizen staying in Slovakia for more than three months is required to apply for registration of residence in Slovakia, while one of the reasons under which an EU citizen is authorized to stay in Slovakia is, for example, an employment in Slovakia.

NON-EU citizens

Citizens of other countries than the EU or EEA countries are entitled to work in Slovakia if they meet the specific conditions set by legislation (e. g. to have a work permit / temporary residence permit for the purpose of employment).

Throughout 2018 have been introduced several new regulations to make employment of non-EU citizens more flexible in areas of industry with lack of workforce, in particular in relation to shortening the time periods for granting of temporary residence permits and reducing of a related administrative burden.

Minimum specifications

The employment contract contains the employer’s and employee’s identification details. In order to conclude an employment contract, the employer and the future employee need to agree on the following minimum specifications that will be included in the contract:

Information about employment terms and conditions

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 employer is obliged to provide the employee with given information within the period of 7 days or 4 weeks, depending on the type of information to be provided.

Obligations

On taking up the employment, an employer is obliged to acquaint the employee with work rules, health and safety regulations and collective agreements, if any.

Pursuant to the Act on Illegal work and illegal employment, it is prohibited for an employer to employ persons without an established employment relationship.

Contract duration

The employment contracts in Slovakia can be concluded for:

The Labour Code contains certain limitations in respect to the employment contract concluded for definite period of time. Such contracts can be concluded for a maximum of two years and it is possible to extend them or conclude them again only twice within these two years. The limited duration (i.e. definite period of time) of the contract must be agreed in writing in the contract, otherwise the contract is deemed to be concluded for indefinite period.

Probationary Period

The parties can agree on an initial probationary period of:

Cases

The employment contract terminates also:

Notice period

Both employer and employee may terminate an employment contract by a written notice. As mentioned above, the employee may terminate the employment contract for any reason or without stating any reasons. On the other hand, the employer may terminate the employment contract only in the situations expressly stipulated in the Labour Code:

• The employer or its part:
  • is being wound up or
  • relocated and the employee does not agree with the change of the agreed place of work.
• The employee has become redundant because of a written decision of the employer or a competent authority to change the employer’s function, its technical equipment, or to reduce the number of employees in order to ensure labour efficiency, or other organisational changes, and the employer that is a temporary employment agency may also give notice to an employee if the employee has become redundant with regard to the termination of the temporary secondment prior to the expiry of the period for which the employment for a definite period of time was agreed,
• with regard to his or her medical fitness pursuant to medical opinion the employee has lost, for an extended period, his or her capacity to carry out their current work or must not carry out such work because of an existing occupational disease or the risk of occupational disease, or if the employee has reached in his or her workplace the maximum permissible exposure as determined by decision of a competent public health authority.
• The employee:
  • does not satisfy the prerequisites for the agreed work provided in legal regulations,
  • has ceased to satisfy the requirements referred to in Section 42 Subsection 2 of Labour Code,
  • does not satisfy, without any fault of the employer, the requirements for properly carrying out the agreed work as determined by the employer in its internal regulation, or
  • performs his or her work tasks in a dissatisfactory manner and during the last six months the employer has delivered to the employee a written notice requesting him or her to remedy such underperformance and the employee has failed to remedy it within a reasonable time,
• reasons exist in relation to the employee for which the employer could have terminated his or her employment with immediate effect, or could have terminated it for a less serious breach of work discipline; notice may be given to an employee on the grounds of a less serious breach of work discipline if the employee has been notified in writing during the last six months of the possibility of termination of employment.
• the employee has reached the age of 65 and the age for entitlement to a retirement pension; however, in December 2021 the Constitutional Court of the Slovak Republic decided to suspend the effectiveness of this Article of the Labour Code, which means that the provision of the law in question will not apply from January 1, 2022 and employers are therefore not 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.
• The general length of the notice period for a Slovak labour contract is:
  • the statutory minimum notice period is 1 month (unless longer notice period is stipulated by the Labour Code),
  • 2 months, if the employee was employed for at least 1 year but less than 5 years,
  • 3 months, if the employee was employed for at least 5 years.
  • Longer statutory notice period depends on the length of employment and the reason of its termination.

Social contributions

The employer is obliged to pay monthly contributions to health insurance, social insurance and advances on the income tax. The amounts of contributions are presented in the table below.

Please note that as of January 1^st, 2024 the minimum monthly wage in Slovakia is EUR 750 in case of the 1^st degree of labour difficulty. The minimum wage depends on the degree of labour difficulty rating. Minimum hourly wage is EUR 4.310.

Income tax

An individual’s tax liability is derived from the taxable income. Slovak tax residents are liable to personal income tax on their worldwide income, subject to provisions under applicable double taxation treaties. The tax year is the calendar year and the income is taxed at a progressive tax rate of 19 % and 25 %.

The tax rates applicable for income derived in 2024 are:

• annual taxable income (except for income from business activity, capital and dividend income) up to EUR 47,537.98 is taxed at 19%,
• annual taxable income (except for income from business activity, capital and dividend income) above EUR 47,537.98 is taxed at 25%.

Regular working time

The maximum weekly working time is 40 hours, employees working on the basis of a two-shift system may work up to 38.75 hours per week and employees working on a three-shift system or who are involved in continuous operation may work up to 37.5 hours per week. It is also possible to agree on an uneven distribution of working time with the representatives of the employees.

Overtime

In general, upon agreement with the employer, employees may perform overtime work. Overtime work may reach up to 400 hours per calendar year. Of this time, the employer may order the overtime work in the extent of up to 150 hours per calendar year, the remainder of overtime work shall be agreed with the employee. For the work performed in excess of the standard working time, the employee is entitled to an allowance, specifics of which are regulated in the Labour Code.

Time off

Any employee who works for the same employer constantly for at least 60 days in a calendar year is entitled to annual paid leave on a proportionate basis. The basic annual leave entitlement is at least 4 weeks, rising up to 5 weeks for employees who are 33 years old or older (already in the year in that the employee reaches the age of 33, regardless of the birth date of the employee) and an employee who is permanently taking care of a child.

From 2022, employees who permanently take care of a child are entitled to an aliquot of 365 days, according to the number of days counting from the date they permanently take care of a child and date of its written announcement to their employer. For example, if the child was born in the 200^th day of the year and its parents announced it to the employer at the exact day of its birth, they are then entitled to: 200/365 days * 5 = 2.75, which is 3 days of extra time off after rounding.

Benefits include cash benefits and non-cash benefits provided by the employer to the employee.

The cash benefit refers to the financial bonus on top of the standard wage or salary.

The most common non-cash benefits in Slovakia are:

Meal allowance up to the statutory limit is exempt from tax. As of March 2021, the employer is obliged to allow his employees to choose between a meal voucher or a financial contribution for meal. As of January 2023, the employer can only provide meal voucher to employees in electronic form. Paper meal voucher may only be used if the use of a gastrocard (electronic form of meal voucher) at or near the employee’s workplace during the work shift would not be possible. The amount of the financial contribution for meal should be the same as the amount in which the employer contributes to the meal voucher to other employees (on the comparable job positions).

Effective from January 1, 2022 there is a new type of exemption from personal income taxation applicable. Specifically, benefits in kind, i.e. non-cash benefits (e.g. team-building activities, firm events, gifts to employees etc.) provided to an employee of up to EUR 500 from all employers in a calendar year can be exempt from taxation, provided that costs of such benefits in kind are treated as tax non-deductible costs for the purpose of employer’s corporate income tax.

As of January 2024, non-cash benefit in form of the employee shares or in the form of a business share in an LLC are exempt from income tax, if the comapny has not paid dividends so far; and these employee shares have not been/are not listed on a regulated market until the end of the tax year in which the benefit was acquired by the employee.

Special types of contracts

Besides an employment contract, the Labour Code recognizes three other contract types: (a) Work performance contract, (b) Work activities contract and (c) Temporary student job contract.

As of November 2022, the work conditions have to be transparent, which means in case of mentioned contracts that the employee must be informed about the days and time periods during which the employer may require him/her 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 introduced 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.

Work performance contract

The work performance contract may be concluded if the anticipated extent of work (work tasks) for which the agreement is concluded is not in excess of 350 hours in a calendar year. It can be concluded for maximum 12 months.

Work activities contract

Under the work activities contract the working period may not exceed 10 hours per week and the contract can be concluded for maximum 12 months.

As of January 2023, in the case of the performance of seasonal work under Annex 1b of the Labour Code, a new type of work activities contract may be concluded, which for these purposes is referred to as a work activities contract for the performance of seasonal work. The working period may not exceed 520 hours per calendar year and the weekly average working time for the duration of that contract, up to a maximum of four months, may not exceed 40 hours. The contract can be concluded for maximum 8 months.

Temporary student job contract

The temporary student job contract can be concluded only with a person with the status of student, who is under the age of 26 years. Work performance may not exceed 20 hours per week and the contract can be concluded for maximum 12 months.

Personnel leasing

Temporary assignment (personnel leasing) is also one form of employing individuals. This is a flexible form of employment where employees are temporary assigned to a so-called user employer, while the employee is in employment relationship with another employer or a temporary employment agency.

A temporary employee cannot be assigned to a particular user employer for more than 24 months.  Subject to that 24-month limit, a temporary assignment of a temporary employee to a particular user employer can be extended or renewed up to four times. A temporary employee is entitled to be paid at the same rate as the user employer’s core employees. If there is a difference between those pay rates, the user employer is obliged to pay any shortfall to the temporary employee. The user employer is not permitted to assign a temporary employee on to another user employer.

• The Labour Code
• Act on Illegal Employment
• Occupational Safety and Health Protection Act
• Act on International Cooperation when Posting Employees
• Act on Travel Allowances

General social security and health insurance

1. The maximum assessment base was abolished as of January 1, 2017 only for health insurance; for social insurance it was increased to 7-times the average wage in Slovakia. The minimum assessment base for the employee and the employer is not defined and; for the sole entrepreneur it is EUR 652 starting January 1, 2024.
2. The contribution is voluntary.
3. Starting from January 1, 2011 it was introduced that dividends are also subject to the health insurance contributions if they are paid on the account of individuals obligatorily insured for health insurance purposes in Slovakia. This applies to dividends paid out of profits generated from January 1, 2011 to January 31, 2016. Also dividends paid out of profits generated before January 1, 2004 are subject to health insurance contributions. Starting from January 1, 2024 the maximum annual assessment base is EUR 78,240. Dividends paid out from profits generated from January 1, 2017 are not subject to health insurance at all.
4. The rate of health insurance contributions increased as of January 1, 2024 for the contributions paid by employer from 10.00% to 11.00% and for the contributions paid by sole entrepreneur from 14.00% to 15.00%.

Persons residing in the EU are subject to the provisions of EC Regulation 883/2004, which provide for the applicable social security regulation in the case of cross-border activities. If non-EU residents work in Slovakia or Slovak nationals work in a third country, a bilateral social security agreement may provide for the applicable social security legislation.

General comments on labour law

• Income Tax Act No. 595/2003 Coll. (Sections 2/n-r, 17/5, 17/6, 17/7, 18, 18a)
• Double Tax Treaties
• Financial Reporters No. 14/1997, 20/1999, 3/2002 where OECD Transfer Pricing Guidelines from 1995 and 1997 were published in Slovak language
• Financial Reporters No. 1/2009, 8/2014, 5/2015, 7/2016, 12/2018 where administrative guidance of the Slovak Ministry of Finance on content of the transfer pricing documentation were published

As an OECD Member State and an EU Member State, Slovakia adheres to the OECD Transfer Pricing Guidelines and to the EU Code of Conduct on transfer pricing documentation for associated enterprises. Slovakia also acceded to the EU Arbitration Convention, which establishes a procedure to resolve disputes where double taxation occurs between enterprises of different Member States as a result of an upward adjustment of profits of an enterprise of one Member State.

Applicability

The arm’s length principle is based on a comparison of the terms which were agreed in any business or financial transactions between related parties and the terms which would have been agreed between unrelated parties in similar business or financial transactions, in comparable circumstances.

The review of comparability of the terms is made by confronting in particular the businesses conducted by the parties, including, but not limited to their production, assembly works, research and development, purchase and sale, the scope of their business risks, the characteristics of the compared property or the service, the terms agreed between the parties to the transaction, the economic environment in the marketplace, and the business strategy. The terms shall be considered comparable if there is no difference at all or if only minor adjustments would compensate such a difference.

If there is a difference between the prices agreed in transactions of related parties, and the prices applied between unrelated parties in comparable business transactions, as long as such difference results in a reduction of the tax base or increase of tax loss, the related party shall increase its income tax base by that difference. As from January 1, 2023, the materiality threshold was introduced for controlled transaction (or group of controlled transactions that may be aggregated), for which such tax base adjustment is required. As qualified controlled transaction is considered a legal relationship or other similar relationship in which one or more related parties achieve taxable income or tax-deductible expense exceeding EUR 10,000. In the case of loan transaction, the qualified transaction is with a principal amount above EUR 50,000.

General terms

As from January 1, 2023, it is also extended that by economic tie shall be understood along:

• the relation between tax resident taxpayer and his permanent establishments abroad,
• the relation between tax non-resident and his permanent establishments in Slovakia,
• the relation among permanent establishments of taxpayers that are considered as related parties in the sense of the abovementioned, and the relation between such permanent establishment and such taxpayer
• also the relation among permanent establishments of the taxpayer.

Content

The transfer pricing documentation represents a set of information, data and facts which demonstrate and explain the method of taxpayer’s price formation in controlled transactions.

Transfer pricing documentation in general consists of general and of specific part.

General rules

Transfer pricing documentation shall be prepared for each controlled transaction separately or for each group of aggregated controlled transactions.

The documentation should be prepared in Slovak language. However, as from January 1, 2023, it can be filed with the tax administrator also in a foreign language. If the latter occurs, the tax authority may upon request ask for translation to Slovak within 15 days from the delivery of the request.

Transfer pricing documentation shall be kept for the respective tax period. If no new facts occur – facts that would affect the valuation method for controlled transactions, when preparing documentation for the next period – a taxpayer may refer to information stated in documentation for the previous taxation periods.

Deadlines

The taxpayer shall submit the transfer pricing documentation within 15 days from delivery of the tax administration’s or financial directorate’s request. Such request may be for the transfer pricing documentation for the relevant tax period, sent no earlier than on the first day following expiry of the period for tax return filing for that particular tax period. Due to short 15-day period it is recommended having the documentation prepared in advance.

Documentation types

There are three different types of transfer pricing documentation in terms of the required minimum scope:

Obligation to keep the documentation

Starting with the tax period, which begins after December 31, 2017, complete documentation has to be kept by the following taxpayers:

• taxpayers who follow for statutory purposes the IFRS in booking or closing of booking – the obligation to keep a complete documentation is with respect to significant cross-border controlled transactions;
• taxpayers that are engaged in the cross-border controlled transaction with value exceeding 10 million EUR per tax period;
• taxpayers who perform significant business transactions with a related party seated in a state which Slovakia has no double tax treaty or international tax information exchange agreement with;
• taxpayers who are engaged in the controlled transactions with respect to which they opt for an APA (Advance Pricing Agreement)
• taxpayers who asks for secondary adjustments for the controlled transaction according to double tax treaties
• taxpayers who are engaged in the controlled transactions with respect to which there was a request filed for a mutual agreement procedure according to a tax treaty;
• taxpayers who claim a tax relief – the obligation to keep a complete documentation is with respect to significant cross-border controlled transactions.

In other cases, the taxpayer is obliged to keep a basic documentation for the following transactions:

• cross-border controlled transactions with annual value exceeding 1 million EUR;
• non-significant transactions with a related party seated in a state which Slovakia has no double tax treaty or international tax information exchange agreement with;
• significant cross-border controlled transactions, if the taxpayer’s total operating and financial revenues per tax period exceed 8 million EUR;
• significant domestic controlled transactions, if the taxpayer claims a tax relief.

If neither complete documentation nor basic documentation is prepared on controlled transaction, taxpayer is obliged to keep on such transaction a shortened documentation (following the template prepared by the Slovak Ministry of Finance), except for some cases, when it is sufficient to properly report controlled transactions in income tax return only.

Also, some Slovak public entities may qualify for keeping of shortened documentation.

In that respect it has to be mentioned that simplified types of documentation may in the listed cases be sufficient from administrative point of view but will not help a taxpayer to prove the application of the arm’s length principle, unless a comparability analysis is made. Therefore, any material transaction from the perspective taxpayer is recommended to be followed by functional and risk analysis and benchmarking.

Any traditional and other transfer pricing methods according to OECD Transfer Pricing Guidelines can be used while the principle of the best method shall be applied. Also, combination of more methods is possible if necessary. If appropriate, other methods may be used by Slovak taxpayers, too.

Methods based on comparison of prices

Methods based on comparison of profits

Taxpayers in Slovakia can ask the tax authority for an Advance Pricing Agreement (APA) – an approval of a particular method of transfer pricing – at least 60 days before the beginning of the tax period during which the approved method shall apply. By this way they can approve the chosen methodology and avoid potential disputes as far as the method is concerned. Only the method can be approved with the APA, not the used transfer prices itself.

The tax administration shall issue a decision on the approval of the valuation method valid for no more than five tax periods. Extension for next five years is possible if the taxpayer demonstrates that no change has occurred in the conditions upon which the decision was issued.

The fee for applying for the APA as from January 1, 2017 does no longer depend on the value of the business case, but is to be set as follows:

From January 1, 2022, the statutory fee is half for a taxpayer who is considered highly reliable at the time of application based on the evaluation of the tax reliability index. For further information regarding the tax reliability index of taxpayers valid from January 1, 2022 please see our News Flash.

The reduced amount of the fee for the APA for highly reliable taxpayers will be applicable only after the first delivery of the notification of the index of tax reliability.

For non-compliance with the Transfer Pricing documentation obligations a penalty up to EUR 3,000 for a breach of a non-monetary obligation can be levied. Moreover, the tax base may be adjusted and additional tax may be levied by Slovak tax authorities during the tax inspection.

The tax authority can assess a tax difference up to 10 years after the end of year, in which the obligation to submit a tax return has arisen, i.e. tax return can be a subject of tax inspection for 11 years.

6*ECB rate or 20% p.a. is the penalty rate from the tax difference instead of 10% p.a. or 3*ECB rate (higher rate shall be applicable). As from January 1^st, 2017 stricter penalties apply for intentional breach of the arm´s length principle. Doubled penalties will apply to taxpayers who decrease their tax base or increase their tax loss intentionally with the help of Transfer Pricing. 

Basic and reduced VAT rates

The basic VAT rate in Slovakia is 20%. 10% is the first reduced rate that is also applicable. 5% is the second reduced rate applicable for limited goods and services.

Although the reduced rate 10 % applies to a longer list that may change, in general, it may be applicable to pharmaceuticals, some medical products, books, dairy or meat products and accommodation. In any case, the actual product or service should be reviewed individually.

Following the special measure, which was adopted at the end of 2022 as a reaction to the crisis on energy market and with the aim to support tourist business, the reduced 10% rate shall apply from January 1, 2023 also to transport of persons by cable cars, ski lifts, access to indoor and outdoor sports facilities, admission to artificial swimming pools and restaurant and hospitality services.

The second reduced rate 5% is applicable from January 1, 2023 on the transactions related to state-supported residential rent.

Export within and outside the European Union

The supply of goods to other EU member states are free from VAT, if delivered to a VAT payer registered in another EU member state and transported to such member state. The export of goods outside of EU is free from VAT but is subject to the confirmation of custom authorities on export from EU.

Taxable amount

The taxable amount equals everything that is deemed to be received or shall be received for the delivery of goods or services. In case of the import of goods from third countries, the taxable amount is based on the value of customs.

Voluntary and obligatory registration

Voluntary VAT registration in Slovakia is possible, but only for a taxable person, i.e. person (natural or legal person) pursuing economic activity. The turnover threshold for obligatory VAT registration is EUR 49,790 within any 12-month period.

The deadline for filing the obligatory VAT registration falls on the 20^th day of the calendar month following the calendar month in which the turnover threshold has been reached. In some special situations there is a shorter period applicable.

Starting from January 1, 2023, domestic taxable persons who perform exclusively exempted activities such as financial, insurance services, delivery and rental of real estate are allowed to voluntarily decide whether to register for VAT purposes after the turnover threshold has been reached.

Group registration for taxable entities

In Slovakia, group registration for VAT is possible. Several taxable persons who have their seat, place of business or fixed establishment within the territory of the Slovak Republic and are financially, economically and organizationally connected, may participate in VAT group registration and as such be deemed as a single taxable person for VAT purposes.

Other specifications of the VAT registration

In Slovakia, a taxable person may become a VAT payer by law without previous registration. It may concern cases of real estate sale, business acquisition or part of a business by purchase or otherwise.

Besides the obligatory registration, Slovak taxable persons must register for the purposes of service delivery to other EU member states, or for the purposes of acquiring goods or services from other EU member states. Registration shall be done in advance.

For those taxable persons that perform e-commerce, it would be worth mentioning that as from July 1, 2021, the rules implementing the Council Directive (EU) 2017/2455 and Council Directive (EU) 2019/1995 entered into force. Further details are available here.

Definition of foreign taxable persons

Foreign taxable persons are entities without seat, place of business or fixed establishment located in Slovakia. Otherwise, they are considered as domestic taxable persons, i.e., the same rules are applicable on foreign persons having a fixed establishment in Slovakia as on domestic taxable persons.

Obligatory registration for foreign taxable persons

Foreign subjects in Slovakia are obliged to register for VAT before the commencement of an activity which is subject to VAT.

In the field of e-commerce, as from July 1, 2021, the rules implementing the Council Directive (EU) 2017/2455 and Council Directive (EU) 2019/1995 entered into force.

Minimum amount and applicable period

The value of requested VAT must be at least EUR 50 for the respective calendar year.

The VAT refund may be requested also for shorter periods than a whole calendar year, however such period shall not be shorter than 3 calendar months and the value of VAT must be at least EUR 400.

Deadline and place of filing for VAT refund

The deadline for filing a VAT refund request is September 30 of the subsequent calendar year. The request for VAT refund shall be filed at the local tax authority in the other EU member state. The deadline for VAT return is 10 working days after laps of period for delivery of the decision made on the VAT refund, which may be between 4 to 8 months since filing VAT refund request.

Refund for foreign taxable persons

Upon the fulfilment of specific conditions. VAT refund for a foreign taxable person is possible.

VAT refund conditions

VAT refund to third countries is possible only upon the fulfilment of specific conditions, including reciprocity.

Minimum amount and applicable period for VAT refund

The value of requested VAT must be at least EUR 50 for the respective calendar year.

The VAT refund may be requested for the whole calendar year or for half calendar year. However, in case of the later, the value of the requested VAT has to exceed EUR 1,000.

Deadline and place of filing for VAT refund

The deadline for filing a VAT refund request falls on June 30 of the subsequent calendar year. The request for VAT refund shall be filed at the Tax office in Bratislava, Slovakia. The deadline for VAT return is 6 months after filing the refund request.

Depending on the nature of breach of the law, penalty for non-compliance can be imposed in form of fine, based on situation and severity, up to EUR 32,000, or in the form of interest, up to 3xECB rate or 10 % p.a. Delay interest for late payment is 4xECB rate or 15 % p.a.