What entrepreneurs should know when starting up their investment in Slovakia

Bart Waterloos, Partner at VGD SLOVAKIA

When you arrive to a new country to start your busi-ness or expand into new markets, you have a thousand questions. It is with excitement and respect that one makes such a step.

COUNTRY DESKS

But where to start? Usually, you would begin by asking for some feedback from the advisors in your home country, but they are sitting far away and most of the time lack the connection to the local culture and habits. If they are part of a larger network, like the Nexia network, there is a big chance that they have a local partner who is qualified and experienced in dealing with foreign investors. Indeed, that is one of the factors you cannot underestimate. Not only the knowledge of a foreign language is required (often I meet with clients who cannot communicate directly with their advisors!), but also the ability to understand what the entrepreneur wants to say to you. This is exactly what we are trying to do via Country Desk, a concierge service. In such a case, you wouldn’t be surprised when a client instructs you to pay out an interim dividend from the profit of the current year. In Slovakia this is not possible, but the local laws of the investor could well allow it. If you are aware of this fact, we can search together for solutions on how to figure out what the investor wants.

EMPLOYEES

Hiring your first employee is always an exciting moment. But with this, you also start an avalanche of obligations and com-mitments. You should register the company as an employer and it goes hand in hand with strict dead-lines when you have to register the employees. Calculating the social and health insurance contributions every month can also be problem-atic. Luckily, the outsourced payroll agency can take care of all of these commitments for you. You will still need your advi-sor, who can explain to you that in Slovakia salaries are not paid on the last day of the month, but rather around the 10th of the following month, or how the staff can have a slightly different salary than the fixed amount you agreed upon every time they have a day of holiday.On our website we have pub-lished a nice series of articles with all the obligations an employer has for the entire cycle: from hir-ing your first employee to letting employees go.

CONTROL ENVIRONMENT

Slovak laws contain a lot of obligations, but from an accounting point of view, there are also several options. Your internal directives provide a method to select the ones that are best for your business. As an entrepreneur you delegate a lot of activities to other smart people, but you also need feedback, which is exactly what you organise with your Internal Control organisation. However, sometimes things can go wrong. Recently, we published an interesting article about major mistakes we often encounter with our clients on our website.An important part of your control environment should be a decent monthly management report. How else could follow-up on the achievement of your objectives? Clearly a Slovak general ledger report will not make you any smarter. Therefore, we discuss with every client what they want to see in a clear dashboard, supported by more detailed reports if they want. All your clients are likely to be web-based, so they can access the reports whenever they want, from wherever they want.

TAXATION

Taxes tend to change frequent-ly in Slovakia. Slovakia used to be the region’s front runner, with the most attractive flat tax rate of 19%. Now, other countries have started a race to lower taxation. Still, with a tax rate of 15% for small business as of 2020, Slovakia is still a good place to consider, especially if you-combine it with smart investments in Research and Development, through whicha super-deduction of up to 200% is possible! Of course, your advisor should inform you regularly of such changes, as we do via our newsletters.Often, we notice that foreign investors ignore the basics transfer pricing rules. It is clear that the local tax authorities have made this a much higher priority than many other tax offices in western European countries. This is proven by the million euros in additional taxes that the Slovak government imposed over the past years, as we nicely described in one article on our website.

2. Dec 2019 at 11:05  | Bart Waterloos