Slovakia

The economy of Slovakia and its company formation is based upon Slovakia becoming an EU member state in 2004, and adopting the euro at the beginning of 2009. Its capital, Bratislava, is the largest financial and company registration centre in Slovakia. As of 2018 (1.Q.), the unemployment rate was 5.72%.

Due to the Slovak GDP growing very strongly from 2000 until 2008 – e.g. 10.4% GDP growth in 2007 – the Slovak economy was referred to as the Tatra Tiger.

Slovakia has been a regional FDI champion for several years, attractive for company formation due to a relatively low-cost yet skilled labor force, and a favorable geographic location in the heart of Central Europe. Exports and investment have been key drivers of Slovakia’s robust growth in recent years. The unemployment rate fell to historical lows in 2017, and rising wages fueled increased consumption, which played a more prominent role in 2017 GDP growth. A favorable outlook for the Eurozone suggests continued strong growth prospects for registering a company in Slovakia during the next few years, although inflation is also expected to pick up.

Among the most pressing domestic issues potentially threatening the attractiveness of the Slovak market are shortages in the qualified labor force, persistent corruption issues, and an inadequate judiciary, as well as a slow transition to an innovation-based economy. The energy sector in particular is characterized by unpredictable regulatory oversight and high costs, in part driven by government interference in regulated tariffs. Moreover, the government’s attempts to maintain low household energy prices could harm the profitability of domestic energy set up businesses while undercutting energy efficiency initiatives

Justice in Slovakia is administered by the ordinary law courts and the Constitutional Court of the Slovak Republic.

Judicial power is exercised by independent and impartial courts. At all levels, judicial matters are separated from those of other national authorities.The President of the court is in charge of the administration of justice. Law courts in Slovakia are administered, as laid down in law, by the Ministry of Justice of the Slovak Republic and the President of the court, who is also a statutory body of the court. A court is also administered by the administrative director of the court within the scope of the law.

There is a tax of 21% for registered companies and a tax rate from 19% to 25% for individuals, and every self employed person has an option to deduct up to 20.000 Euro as flat fee for costs without further proof.

Registered companies are taxed only on business profits: since 2017 there is a 7% taxation on dividends at shareholders level in Slovakia, but there are ways to avoid it. Because dividends usually are taxed in the country of residence, a foreign registered partnership can be a good solution.

Interesting possibilities for accounting policy: for example, in the evaluation of inventory or of receivables. This can be combined with e.g. Austrian group taxation which allows compensating profits with losses of associated registered companies.

If there is a Double Tax Treaty (DTT) with exemption method, a partnership is useful: the profits in the other country will be taxed at a tax rate that is based on the total registered business income, and this can work in both directions: so losses of a partnership in Slovakia can be interesting, too.