Lawyers criticise some changes to tax laws. (source: SME)
The Slovak Spectator spoke with Daniel Futej, partner at Futej & Partners, Allen & Overy Bratislava law firm, Tomáš Urban, attorney at Čechová & Partners, Ľubomír Leško, attorney at Peterka & Partners, and Havel, Holásek & Partners law firm.
The Slovak Spectator (TSS): Which legislative changes or new laws adopted in 2014 do you consider to be most important, and why?
Daniel Futej (DF): The revision of the tax law, collective bargaining and amending the code concerning agency employees are pretty important. Furthermore a new law on energy effectiveness is important in identification of energy savings. Certain changes were made even in the area of immigration law related to double citizenship rules.
In spite of the corporate tax dropping from 23 percent to 22 percent it is still far from the original 19 percent. Unfortunately, the decrease made by the government is compensated through the introduction of tax licenses. The newly introduced license fee is paid by enterprises irrespective of whether they make a profit or not. Even though such fees are tax deductible, they do not contribute to simplification of the business environment. Mandatory electronic VAT records introduced for VAT-payers will allow fighting of carousel fraud by accepting monthly and quarterly VAT records only in electronic form.
Introduction of specific rules related to whistleblowers are very critical since it sends a signal to the public at large that the government is ready to fight corruption. The introduction of transfer pricing rules, even between two domestic companies, is a very important tool for the tax office to fight tax evasion. Under the new legislation, even domestic entities will be forced to demonstrate that the prices applied in their mutual business transactions, including prices for services, credit and loans; do not differ from the prices used by non-related entities in comparable business transactions.
Allen & Overy Bratislava: In our view, two pieces of legislation governing arbitration and capital markets which were adopted in 2014 were particularly encouraging and will have a positive impact on the business climate.
First, a major amendment to the Arbitration Act has aligned the Slovak framework with the modernised 2006 UNICTRAL Model Law and will, undoubtedly, facilitate the settlement of commercial disputes by arbitration. At the same time, an entirely new Act on Consumer Arbitration will regulate an alternative method for resolving consumer disputes. The clear separation between commercial and consumer arbitration will benefit both by introducing greater flexibility in commercial arbitration and more robust protection in consumer arbitration. These changes will send a strong signal that Slovakia wishes to be recognised as an arbitration-friendly and welcoming jurisdiction.
Secondly, the Slovak capital markets have been modernised by an amendment to the Act on Bonds. Slovak legislation now expressly recognises established concepts such as bondholder meetings and joint trustees. The adopted measures may facilitate the development of the Slovak capital market and bond financing by Slovak issuers.
Finally, an important piece of EU legislation was also adopted in 2014 – the Directive on Damages for Competition Law Infringements. Once implemented into Slovak law, this legislation will facilitate claims for damages brought by consumers or businesses on the basis of anti-competitive conduct, such as cartels or bid-rigging.
Tomáš Urban (TU): We believe that adoption of the Whistleblowing Act deserves to be marked as a breaking point and an important step in the corruption-fighting effort within Slovakia. Even though it has its shortcomings and it creates a number of obligations and administrative burdens for businesses, it has the potential to effectively protect and thus encourage potential whistleblowers. A whistleblower who reports one of the so-called “serious anti-social activities” to the authorities may be granted protection and even a reward and free legal assistance.
Further, we appreciate the news that the Electronic Market Place, which was introduced by legislation adopted earlier in 2013, was finally created on July 1, 2014 and since March 1, 2015 is supposed to be mandatorily used by the public contracting authorities for all specified below-the-threshold-limit contracts. We believe that this may significantly increase transparency in the public procurement sector and allow a wide range of businesses to compete for public contracts.
Ľubomír Leško (ĽL): We noticed several important changes to tax laws in 2014, especially regarding income tax, where we can mention the tightening of duties in the field of transfer pricing in the form of more precise anchoring of its content and extending the group of taxpayers on whom these rules apply (originally the rules were applied only on transactions between domestic and foreign related legal entities, while under the new rules they also apply on transactions between domestic related legal entities). We can also mention the changes to the depreciation of tangible property, introducing the rules of low capitalisation, or allowing reduction of tax bases by additional expenditures on research and development.
Regarding labour laws, the amendment to the Protection, Support and Development of Public Health Act was adopted which introduced a mandatory health service to every employer, regardless of the categorisation of work from the point of evaluating health risks. As of January 1, 2015 employers, including those having only one person in an employment relationship (including working agreements outside employment), are obliged to secure health supervision by a working health service which can be implemented in two ways: either by having their own professional employees or by signing an agreement with an external supplier. Another important change is the amendment to the Labour Code effective as of July 1, 2014, which limited the duration of agreements other than those of employment to no more than 12 months.
The amendment also changed the maturity and payments of salaries, which increased the administrative burden on employers, especially in relation to login and logout to the health and social insurers.
As for businesses, also the amendment to the Law on Protection of Competition adopted in May 2014 was important. The changes pertain mostly to the field of agreements limiting competition, anchoring the institutes of settlements and commitments directly into the law, or their more detailed changes in the law, new rules for leniency and changes in the field of reporting concentrations which should simplify the access of participating parties when reporting and assessing the concentrations.
Havel, Holásek & Partners: An amendment to the Public Procurement Act was adopted in 2014 whose aim is to prevent the participation of the so-called “shell companies” in public procurements. As a result, competitions can involve only business entities that can prove their ownership structure up to a natural person (demonstration of equity participation § 26a). The bidders who will falsely inform about their ownership structure will face a fine from the Public Procurement Office of up to €10,000 and ban from participating in public procurement for three years.
Further, two important new tax changes were adopted: the amendment to the Income Tax Act and the amendment to the Value Added Tax Act which are expected to contribute to an increase in the state budget, to create a favourable and stable business environment, to increase legal certainty and to fight tax evasion. Unlike the amendment to the Value Added Tax Act, the amendment to the Income Tax Act negatively interferes into nearly every business sector.
A significant legislative change is undoubtedly the adoption of the amendment to the Arbitration Act and the completely new Act on Consumer Arbitration, which became the only regulation based on which decisions can be passed in consumer disputes in Slovakia.
