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Slovakia
Company formation in brief
In establishing a company in Slovakia, a foreign investor, as a rule, chooses one of the following organizational and legal forms:
• Akciová Spoločnosť (A.S.) - Public company limited by shares
• Spoločnosť S Ručením Obmezeným (S.R.O.) - Private Limited Liability Company
Akciová Spoločnosť (A.S.) - public company limited by shares is established by at least two physical persons or by at least one legal person and characterised as follows:
• minimum charter capital is € 25’000;
• capital must be paid up at the time of registration;
• maximum number of shareholders (residents and non-residents of Slovakia) is not limited;
• both registered and bearer shares may be issued;
• company may be listed on a stock exchange;
• company is managed by the Board of Directors and by the Supervisory Board composed of, at least, 6 persons;
• company is managed by the Board of Directors and by the Supervisory Board composed of, at least, 6 persons. One of the directors must be a resident of a EU country.
Spoločnosť S Ručením Obmezeným (S.R.O.) - Private limited liability company is established by at least one physical or legal person with a minimum charter capital of €5’000 to be fully paid up at the time of registration. Maximum number of shareholders (of any residency) is 50; a private company may issue registered shares only, however they may not be offered for public subscription. Shareholders may not transfer their shares to third parties without the other corporate members’ consent. One director may manage the company. All companies must obtain a license reflecting the types of activity specified in the constituent documents.
According to information provided by Slovak lawyers, the local holding company is a good alternative to similar entities in such jurisdictions as Cyprus, Malta, the Netherlands, Luxembourg or the UK.
Among the most important aspects of owning and managing a Slovak company, the following ones should be highlighted:
• the company's share capital does not need to be fully transferred to a bank account;
• shareholders may be any country’s citizens;
• a shareholder’s corporate documents do not need to be apostilled or translated into Slovak;
• directors may be citizens of any EU country. The director’s place of residence has no effect on a Slovak company’s place of tax registration.
• the procedure of issuing a tax certificate is very simple.
ECONOMIC SUBSTANCE OF SLOVAK COMPANIES
In setting up holding and trading schemes with the use of foreign companies, customers are frequently faced with a lack of the so-called economic “substance” of their companies within this structure.
Companies with a P.O.Box address automatically attract attention of tax authorities and give them a reason to challenge a foreign company's tax residency. As a result, tax benefits received under the double tax agreements may be invalidated (e.g. due to a refusal to apply a reduced withholding tax rate under a tax convention, etc.).
A company’s economic substance in the international tax planning used to be challenged very rarely in the past; this was done by tax authorities of only some European countries. However, this practice has become recently widespread in the tax law of all EU countries due to taking steps for fighting tax evasion.
Moreover, the lack of economic substance may cause issues in the company’s daily activities since a company having no signs of real existence may be considered by third parties (counterparties, customers) as unreliable partner.
For this reason, corporate services providers consider it very important to focus customers' attention on creating a foreign company’s image as actively operating and evidently independent in taking decisions.
The practical steps that customers may take include:
• Renting a separate administrative office with the company nameplate,
• arranging an individual telephone line registered in the company name,
• mail-hosting and web-hosting in the country of registration,
• making a base information website describing the company's business activities and providing its contact details.
TAXATION OF LEGAL ENTITIES
A legal entity is a Slovak tax resident if it is registered in Slovakia or if its activities are managed and controlled in Slovakia. Directors’ place of residence has no effect on the tax residence. Obtaining a tax residence certificate is not difficult.
Tax residents’ income received from different sources around the world is subject to taxation. Non-residents’ income received from a source in Slovakia only is subject to taxation.
Tax residents’ income received from a source abroad is subject to corporate income tax in the same way as the income received from a source in Slovakia.
Branches are taxed in the same manner as subsidiaries.
As a rule, a tax year coincides with the calendar year. However, the taxpayer may choose his fiscal year. The tax period may be reduced, for example, if the company moves from a calendar year to a fiscal year.
Capital gains are included in the company's income and are subject to corporate income tax.
Losses may be deducted from the tax base by equal portions within 4 years.
PREFERENTIAL TAXATION
Income tax paid abroad may be deducted from Slovak tax on the same income. At the same time, the deducted amount is limited with the amount of tax due in Slovakia on the income received abroad, if this is provided for by the relevant tax agreement.
Some Slovak tax agreements eliminate double taxation by way of tax exemption; this means that the income taxed abroad is excluded from the Slovak tax.
TRANSFER PRICING
Transactions between Slovak legal entities and non-resident affiliates are subject to anti-tax avoidance rules which are basically in compliance with the OECD Directives.
Taxpayers are required to submit up-to-date documents regarding the methods used as the basis for determining prices in transactions related to property items transfer between affiliates.
INSUFFICIENT CAPITALIZATION
Profit tax reducing interests on debt owed to a foreign entity which directly or indirectly owns a Slovak company will be limited to 25% of EBITDA (earnings before interest, taxes, depreciation and amortization).
VALUE ADDED TAX
Sales of goods and provision of services are subject to VAT. Imported goods are subject to VAT at the same rate as domestically produced goods. Exports to non-EU countries are exempt from VAT.
Slovakia is not a tax heaven or offshore jurisdiction, and a concept of Slovakia tax exempt company (and/or Slovakia international business company (IBC), offshore company, trust, foundation etc. registration) does not exist in Slovakia as such. A company formation in Slovakia could be arranged with a professional registered agent providing incorporation, virtual office and other corporate services in Slovakia. To set up a company in Slovakia is possible by correspondence, but to open a bank account in Slovakia will, most probably, require a personal visit.
Slovakia Double Taxation Agreements
Armenia, Australia, Austria, Belarus, Belgium , Bosnia and Herzegovina, Brazil, Bulgaria, Canada, China, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Ethiopia, Finland, France, Georgia, Germany, Greece, Hungary, Iceland, India, Indonesia, Iran, Ireland, Israel, Italy, Japan, Kazakhstan, Korea, Kuwait, Latvia, Libya, Lithuania, Luxembourg, Macedonia , Malaysia, Malta, Mexico, Moldova, Montenegro, Netherlands, Nigeria, Norway, Oman, Poland, Portugal, Romania, Russia, Serbia, Singapore, Slovenia , South Africa, Spain, Sri Lanka, Sweden , Switzerland, Syria, Taiwan, Tunisia, Turkey, Turkmenistan, Ukraine, United Arab Emirates, United Kingdom , USA, Uzbekistan, Vietnam.
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