COVID-19: Slovak government measures

COVID-19: Government measures

Implementation date: 02-04-20

The Slovak Parliament has approved on 2 April 2020 the following package of fiscal related measures to mitigate the inpact of Covid-19 for employees, self-employed persons, small and medium-sized enterprises:

  • The standard deadlines (expiring during the pandemic) for submission of Financial statements, Annual reports and Audit reports will be considered as met if the companies fulfill these obligations by the end of the 3rd calendar month following the month in which the end of the pandemics will officially be declared; or within the deadline for filing of the CIT return – please see below (whichever comes first). The same applies also the other accounting related obligations (bookkeeping, inventory counts, etc.) if there are objective reasons (technical, personal) for non-fulfilment).
  • The standard deadlines (expiring during the pandemic) for submission of the income tax returns, motor vehicle tax returns and announcements on non-monetary income by health care providers, as well as for payments of relevant tax liabilities / withholding of tax will be considered as met if the companies fulfill these obligations by the end of the calendar month following the month in which the end of the pandemics will officially be declared.
  • The standard deadlines for submission of the employers reports on tax settlement (“Hlásenie“), annual tax settlements for employees, confirmations on personal income tax paid for employees and declaration on assignment of share of income tax (“2%”) of individuals, will be considered as met if the companies fulfill these obligations by the end of the 2nd calendar month following the month in which the end of the pandemics will officially be declared.
  • Measures in relation to third sector were presented to ensure that share of the income tax paid by companies will be delivered to the non-profit organizations like in normal situation (“2%” of the paid tax).
  • Import of the medical material from non-EU countries will be exempt from import duties and VAT.
  • The black list of tax debtors and VAT payers will not be updated during pandemics.
  • Tax inspections and tax proceedings will be suspended, apart from those whose outcome will be the return of funds (e.g. focused on return of VAT excessive deductions). Tax distrainment procedures will be delayed as well.
  • Missing the statutory deadlines without submission of an application will be forgiven, i.e. without fees and the need to issue a decision (except for submission of tax return and paying taxes).
  • No payment of administration charges for actions that have to be taken as a result of the pandemic.
  • Matching delivery of correspondence by the tax administrator with the current post office rules. Further updates will follow.

Implementation date: 02-04-20

A new government of the Slovak Republic on Sunday, 29 March 2020, presented the following proposed fiscal and financial measures (not yet effective, subject to legislation change):

  • Companies and self-employed individuals will be able to deduct one-off unutilised tax losses reported in the taxation periods 2014 – 2018 in their 2019 tax return, up to the amount of the reported tax base.
  • Companies and self-employed individuals whose revenues decreased in the current month compared to the same month last year by at least 40%: the postponement will be announced to the tax authority in a form of an affidavit submitted electronically every month, and the postponement will be applicable for the relevant month / quarter only (i.e. taxpayers will be obliged to file such announcement every month should the drop in revenues compared to the last year persists). The (unpaid) advances will be settled in the 2020 tax return filed by the taxpayers.
  • (Measure approved by the Slovak Parliament on 2 April 2020) Employers will be able to postpone the payment of their social security and health insurance contributions if their revenues dropped by more than 40%.
  • (Measure approved by the Slovak Parliament on 2 April 2020) The Slovak Ministry of Finance in cooperation with the Slovak Investment Holding (SIH) has prepared a scheme of bank guarantees and interest subsidies. SIH earmarked 38 million euros, which will constitute a guarantee for loans provided to clients by contracted commercial banks. Aid in the form of loans to overcome the unfavourable period is intended for self employed persons and small and medium-sized enterprises. Overall, banks will provide loans of more than 80 million euros under this scheme. The interest subsidy will be granted up to 4%, which means that the interest will be borne by SIH, and the client can obtain a low-interest/non-interest loan if the employment will be unchanged. Supported enterprises will be able to use credit resources for their investment and operating costs in order to maintain employment unchanged.

There are also a series of further measures expected, however, none of them have been implemented or announced yet. Further updates will follow.
Implementation date: 18-03-20

A new government of the Slovak Republic has been appointed just very recently, on Saturday 21 March 2020 and is planning to implement a series of tax-related measures into legislation in the course of the following week/s. The following measures have already been taken by the leaving government of the Slovak Republic:

  • Standard deadline for filing of both personal and corporate income tax in Slovakia is 3 months after the end of the taxation period (e.g. on 31 March 2020 for financial years ending on 31 December 2019), with a possibility of extension by another 3 months (or 6 months in case of existence of a foreign sourced income) based on a written formal structured announcement (filed electronically – except for individuals who can file also a hard copy). In connection with the current situation, the Slovak Government issued a Regulation on 18 March 2020, based on which any penalties for late submission of both personal and corporate income tax returns and for late payment of corporate income tax will be waived (applicable for deadlines passing on 31 March, 30 April and 31 May 2020), if the income tax returns are filed and the tax is paid by 30 June 2020.
  • The same applies to a special announcement on withholding of tax filed by healthcare providers and on actual payment of the withheld tax.
  • The deadline for filing the February 2020 VAT return (being 25 March 2020) has not been extended; however, penalties could be waived upon considering individual circumstances by the relevant Tax Authority.

There are also a series of further financial measures communicated by both the leaving and the new Slovak Government; however, none of them have been implemented yet. Further updates will follow.

Courtesy of: BDO Slovakia

Important changes to Slovak Income Tax Act make founding a company more attractive

Amendments to the Income Tax Act have brought changes that could improve the business environment in Slovakia and make founding a company more attractive.

Tax reduction for entrepreneurs and small businesses

A vital change is a reduction in the income tax rate to 15% for small businesses with a turnover of up to EUR 100,000 a year (both private entrepreneurs and companies). The rate can be applied for the first time in 2021 with the tax declaration for 2020. At the same time, it should be noted that advance income tax payments would be paid at an unchanged rate of 21%.

Micro-taxpayer as a new category

A micro-taxpayer is an entity that does not exceed turnover requiring registration as a VAT payer, i.e. EUR 49,790.

Micro-taxpayers will enjoy benefits including improved tax optimization options such as greater possibilities to deduct tax losses, better optimization options for depreciation of tangible assets (except real estate and luxury cars) plus the possibility to include correcting book entries for claims in tax expenses.

However, these changes will be effective only from 2021 for the business year 2020.

Improved possibilities for exploiting tax losses

It will be possible to amortize tax losses from previous periods over a 5-year period. Losses will no longer have to be amortized equally.

Losses can be applied up to a maximum of 50% of the tax base in the respective year. However, if the loss for the previous year is less than 50% of the tax base, it can be fully amortized. The 50% threshold does not apply to micro-taxpayers, who will be able to apply tax losses on the amount up to the entire tax base.

All these changes provide interesting legal options for tax optimization and make Slovakia more attractive among other European countries for founding a company.

Courtesy of: bnt attorneys in CEE

Obligation to register beneficial owners to the Commercial Register by 31 December 2019

Obligation to register beneficial owners to the Commercial Register

Under the amendments to the Commercial Register Act and in connection with amendment of the Anti-money Laundering Act, almost all companies are obliged to file a notification regarding registration of their beneficial owners to the Commercial Register by 31 December 2019. This applies to both new and existing companies.

It is also important to note that if a company has already registered its beneficial owners in the Register of Public Sector Partners (RPSP), this registration does not substitute the obligation to register beneficial owners in Commercial Register and vice versa.

In 2017, the Act on the Register of Public Sector Partners (ARPSP) entered into force in Slovakia. The Act introduced the obligation to register and publish entities which receive or intend to receive funds from public resources (so-called public sector partners) and the beneficial owners of these public sector partners in a specific Register of Public Sector Partners (RPSP). The register is public and, in principle, anyone wishing to participate in procurement must be registered. Further, according to new act, beneficial owners must also be registered in the Commercial Register.

The law defines beneficial owner. However, this will need to be assessed for each company separately.

Corporate veil pierced in Slovakia

Creditors will be able to enforce their claims directly against controlling shareholders

One of the main reasons businessmen conduct their business through companies is to transfer the risk from themselves to the company. In other words, creditor claims against a company can only be satisfied from company assets, whereas the assets of its owners – the shareholders are protected. The statutory protection of shareholders has the prosaic name corporate veil.

The recent amendment to the Slovak Commercial Code introduces a provision, which, for the first time in Slovak law, partially pierces the corporate veil.

The new regulation applies only to controlling shareholders. A “controlling shareholder” is a legal entity or a natural person that holds a majority share in a company’s voting rights. Any company so controlled is considered to be a “controlled company”.

According to the amendment, any controlling shareholder that significantly contributes to its controlled company’s insolvency is obliged to compensate the company creditors for the damage caused as a result of the insolvency of the controlled company. The law assumes that the company is insolvent not only if it has more than one creditor and the value of its obligations exceeds the value of its assets, but also if, due to lack of assets, the insolvency cannot be declared, or continued, or the enforcement proceeding executed.

A controlling shareholder can relieve itself of this obligation if it can prove that it acted in an informed way and in good faith for the benefit of the controlled company. Thus, it appears that a form of the “business judgement rule”, well established in common law jurisdictions, is being introduced in Slovakia. Hence, the controlling shareholders are protected from the consequences of incorrect business decisions which were not aimed at damaging the company or its creditors.

The law presumes that the damage is in the extent of the unsatisfied claim. However, this does not prevent creditors from claiming damages in their actual amount together with lost profit.

The new regulation enables creditors to enforce their claims even if the insolvency was caused by a shareholder of their business partner.

The discussed provision will come into force on 1 January 2018.

Article courtesy of   bnt attorneys-at-law, s.r.o.


Disputes with producers in Central and Eastern Europe (CEE)

Trouble with a producer in a CEE land? Unclear text and foreign law always favor the domestic producer. But there are tips and tricks that can help, even in the middle of a dispute. We deal with tough cases; we know the local courts. Intimately. We work with arbitration. And we love it.

1         When the sun is shining and everybody is happy

It is a paradox, but this is the time to think about a possible dispute. There are approaches that can help to mitigate a dispute in a foreign land before it happens. Obviously, a buyer can agree to apply the buyers law on the contract. Also, B2B contracts are usually arbitrable, so choosing a reputable arbitration court should be advantageous. Be assured, dodging a foreign court could be priceless. However, do not forget to check if your contract is also arbitrable under the local law and therefore, you will not have trouble enforcing the arbitration award locally.

Please, do not forget to attach your general terms to the signed contract. A simple cross-reference to a web page with the general terms might not suffice under some CEE laws. If you have no general terms, prepare them. We can help you with that, too. And do not forget to limit your liability.

2        When there are dark clouds on the horizon

This is the time for your local lawyer in CEE. We can negotiate the potential dispute. Speaking from experience, more than half of the disputes are negotiable. Producers in CEE do not usually like court processes. They often will accept a proposed settlement, even if less than advantageous for them. We recommend writing it down and preparing the written settlement in a way that is enforceable.

3        The legal storm and legal help with disputes in CEE

In case your (ex)business partner/producer did not settle and you are in a middle of a lawsuit, heads up. Check if you have a counterclaim. The counterclaim can be raised during a lawsuit, but there are other possibilities, too. For example, in some cases, it is possible to file the counterclaim as a separate claim in another EU member state, e.g. when the claimant is from a different EU country. In such instance, you can choose witch EU court will decide this part of the lawsuit (forum shopping). This might be of advantage, since a different judge in a different EU country will hear this part of the case.

Also, if you are a provider you might have a subcontractor. From a legal point of view, you might be able to include a subcontractor in some lawsuits. This can be done in the main lawsuit or a separate lawsuit can be initiated.

All in all, you need an experienced international lawyer that is specialized in disputes in CEE from the beginning till the end of your doing business in CEE.

Article curtesy of:

bnt attorneys-at-law, s.r.o.

Business Registers Interconnection System – BRIS

Interconnection of central, commercial and companies registers in the EU, Iceland, Liechtenstein and Norway.

An amendment to the Act on the Commercial Register, which came into force on 15 June 2017, introduces an interconnected system of central, commercial and companies registers in the European Union (the Business Registers Interconnection System – BRIS).

The new system implements the requirements of Directive 2012/17/EU of the European Parliament and of the Council of 13 June 2012 amending Council Directive 89/666/EEC and Directives 2005/56/EC and 2009/101/EC of the European Parliament and of the Council as regards the interconnection of central, commercial and companies registers.

Apart from introducing legislative and technical changes related to authorization of electronic documents, the amendment also addresses publication of registered data and provision of deposited documents through BRIS in electronic form.

An enterprise or an organization unit of a foreign person can now be deleted from the commercial register upon notification of the foreign commercial or other register via BRIS.

BRIS will include information on cross-border mergers by means of acquisition or by means of a new formation where the successor is a Slovak company, as well as information about the possible winding-up or insolvency of a company. The information will be accessible free of charge and immediately after the data is registered in the state of registration. The system will be available in all EU languages (especially the description of services and search criteria).

Under an amendment to the Act on Court Fees, various court fees will be cancelled. These include the fee for confirmation of non-existence of a certain entry in the commercial register, the fee for issuance of a deposited document in electronic form and the fee for electronic confirmation that a document is not deposited in the collection of deeds.

As for verification, this will be achieved by the electronic seal of the operator of the public administration information system as to the correctness of the data in an excerpt, or confirmation of non-existence of a certain entry in the commercial register, in a copy of a document or in confirmation that a document is not deposited in the collection of deeds sent to the applicant electronically.

Courtesy of:

New European Rules on Data Protection – GDPR

The General Data Protection Regulation (“GDPR”) is the new European data privacy regulation, which comes into force in less than eight ten months on 25 May 2018.

Does your business process any personal data such as names, birth dates, photos, email addresses, social network profiles, location details, computer IP addresses biometric or other sensitive data?

If the answer is “YES”, GDPR compliance shall be placed at the top of your agenda, as it applies to you regardless of whether such data processing takes place within or outside EU. Ahead of 25 May 2018, all organisations are strongly encouraged to review their data protection policies to ensure their compliance with GDPR.

GDPR will be directly applicable in all EU Member states. Nevertheless, each member state may modify certain clauses or even adopt more restrictive measures in certain areas. The Slovak Data Protection Authority (DPA) took this advantage and in June 2017 introduced a brand-new Personal Data Protection Act, which shall replace the current legislation. The proposal of the new act is strongly discussed by wider public.

The GDPR and the new Slovak Personal Data Protection Act imposes wide range of requirements on controllers and processors. Your organisation shall be prepared that it is the person who´s personal data are processed, who shall be on the driver´s seat.

GDPR penalties for non-compliance will be substantial. A failure to comply with the new rules may lead to fines amounting to €20 million or 4% of global annual turnover for the preceding year. The new Slovak Act will also adopt these penalties. Of course, we are closely monitoring the process of implementation of the new Slovak Data Protection Act and will keep you updated.

Register of Public Sector Partners in the Hands of Experts

Are you a public sector partner? Do not forget to register!

In February 2017, the so-called act against shell companies came into force. This introduced the register of public sector partners. From now on, persons acting as public sector partners must be registered.

Mandatory registration applies to all persons who accept financial means or performance from public sources, and to selected persons (such as persons who enter into a contract as the result of a public tender, health care providers, organizations that hold a mining licence) and, in certain cases, their sub-contractors as well.

However, the act sets limits on the persons who have to be registered, so that not all persons, regardless of the financial means or performance accepted, have to register. The duty to register is established if the once-off amount of EUR 100,000 (or EUR 250,000 in total during a calendar year) is exceeded.

The aim of the act against shell companies is to uncover and disclose the property and management structure of persons “who do transactions with the state”. The most important disclosed data is information on persons who benefit from the business activity of these companies (so called ultimate beneficial owners).

The aim of the legislator is that identifying the ultimate beneficial owners should be carried out by so-called authorized persons who have the best overview of the property and management structure of the public sector partner, i.e. those who either suggested and set up the structure or came into contact with it. This means that these persons in particular include attorneys, tax advisors, auditors, banks and notaries.

Authorized persons have a legal duty to identify and confirm the identity of the ultimate beneficial owners on the basis of all available information. In practice, identification will mainly be based on founding documents, excerpts from registers, various agreements on the exercise of rights and distribution of profit, annual financial statements and business reports. This means that the extent of documents and sources of information will always depend on the specific public sector partner. Authorized persons have to act with due care and are not bound by the instructions of the public sector partner.

An application for registration of a public sector partner can only be filed by the abovementioned authorized persons electronically. Žilina District Court manages the registration within the statutory period of five days.

Sanctions for violation of the law are severe. The registrar can impose a fine of up to EUR 100 000 on a public sector partner or member of the statutory body. Apart from a financial sanction, the registrar may also delete a registered public sector partner from the register, which can have a major influence on their business activities.