1) **The Legal System of Slovakia: An Overview** 

Slovakia follows a civil law system rooted originally in Roman law. The country’s legal framework is governed by its Constitution.

Division of the state power is made through executive government, single-chamber parliament (National Council) adopting legislative and courts.

Laws are created through legislation by the National Council, with courts applying codified laws whereby court precedents as well as scholarship opinions are taken into consideration subsequently only.

2) **Foreign Investment in Slovakia** 

Slovakia’s strategic location in Central Europe, well-developed infrastructure, and skilled labor force make it still an attractive hub for businesses targeting European markets.

Foreign investment in Slovakia operates under an open, liberalized system. As an EU member, Slovakia adheres to European regulations, offering foreign investors the same rights and protections as domestic businesses. Slovakia is part of the eurozone, providing currency stability and facilitating cross-border transactions within Europe.

Setting up a business requires registration with the Slovak Commercial Register, and investors can establish various legal entities, with limited liability companies (s.r.o.) being the most popular. The process is relatively straightforward, but it involves some paperwork and compliance with Slovak corporate law. Generally, establishing the company (should the paperwork is done) can take between 3 business days up to 3 weeks depending on region location of the company´s seat.

Foreign loans are permitted, and Slovakia imposes no specific restrictions on foreign funding or capital inflows although common EU legislation mainly for the screening of foreign direct investments into the Union shall be taken into consideration.

Moreover, purchasing of property especially of agricultural property for entities and individuals outside of the European Union may be restricted in cases where states from which such entities or individuals come from do not enable purchasing of agricultural land to Slovak entities and individuals.

3) **Direct Investment in Equity** 

Setting up an enterprise in Slovakia can be done through subsidiary having or several legal entities, including limited liability companies (s.r.o.) or joint-stock companies (a.s.), with the s.r.o. being the most common having mainly benefit of limited liability.

There are also possibilities to establish limited partnership (Slovak komanditná spoločnosť) or public partnership (Slovak verejná obchodná spoločnosť) or even cooperatives (Slovak družstvo).

Managers and board members of the companies are subject to specific liabilities including obligation of at least temporary residence in Slovakia for non- EU and non-OECD individuals.

4) **Corporate Taxation** 

Corporate taxation in Slovakia has a general standard corporate income tax rate of 21% (with companies with turnover of 5 Mio EUR and more corporate income tax rate of 24% starting from 2025). Moreover, bank transactions shall be, starting from 2025, subject to special tax representing 0,4% rate of the transaction value with cap of 40 EUR.

Companies are taxed on their worldwide income if they are residents, while non-resident companies are taxed only on income sourced within Slovakia.

Dividends are subject to 10% tax for the incomes.

The country has tax treaties with many nations, reducing the risk of double taxation for foreign investors.

5) **Other Types of Foreign Investments** 

Slovakia’s market is open and integrated into the EU, following EU trade regulations.

Therefore, import and export activities are primarily subject to the EU regulations and standards as well as local regulations. However, each case has to be considered separately.

Furthermore, foreign investment, although not often used is through joint ventures, where participants form a special purpose vehicle (SPV) for a specific project. On the other hand, founders can create a joint venture as de facto association of two or more legal entities but the JV will not have a legal standing itself (although foreign members of JV would need to establish in Slovakia at least its branch).

To regulate the establishment and, importantly, the operation of the SPV being a legal entity or non-legal-standing JV, participants typically enter into a Joint Venture Agreement (JVA). In Slovak law, joint venture has only a general regulation and key points of the JVAs are governed by the principle of freedom of contract, which is a key aspect of Slovak contract law.

6) **Labor Laws** 

Slovakia has a well-regulated labor market, with employee rights strongly protected.

Compensation

Compensation must meet the national minimum wage, and employees are entitled to statutory benefits such as paid vacation (minimum of 20-25 days depending on age), sick leave, and maternity/paternity leave. Employers are also required to contribute to social (including pension and unemployment insurance) and health security.

Termination

Termination of employment in Slovakia is governed by strict regulations. Dismissal requires a valid reason, such as redundancy, poor performance, or misconduct and must comply with notice periods that range from one to three months, depending on the length of employment. Employees cannot be dismissed during certain protected periods, e.g. maternity leave or sick leave. In cases of collective dismissals, special procedures and consultations with employee representatives are required. Severance pay is mandatory in certain cases including termination of employment by agreement of the parties.

In cases of disputes, Slovak court are strongly pro-employee oriented and therefore each step connected with employment relations including termination must be made with due care.

7) **Intellectual Property** 

Slovakia offers solid intellectual property (IP) protections, with national bodies like the Industrial Property Office overseeing patents, trademarks and designs. Copyright is subject to supervision by Ministry of Culture via special organizations performing collective administration of copyrights (e.g. SOZA for music art, LITA for literal arts etc.).

Copyright act provides protection for works from literature, art and science for the entire life of the author plus extra 70 years after his death.

On the other hand, patents last up to 20 years from application submission.

Trademarks are valid for 10 years from application submission and can be renewed for additional 10 years.

Slovakia adheres to international agreements such as the WIPO, and the Berne Convention. It is also part of regional organizations like the European Patent Office (EPO) and the Office for Harmonization in the Internal Market (OHIM).

8) **Regulatory Agencies** 

Business activities in Slovakia are regulated by various agencies, including the:

• the National Bank of Slovakia mainly for the supervision of business in financial market;
• the Antimonopoly Office ensuring fair competition;
• the Public Procurement Office overseeing public procurement;
• The Data Protection Office overseeing compliance with data protection regulations.

There are also another regulatory agencies covering more specific fields such as energy, telecommunications etc.

9) **Alternative Dispute Resolutions** 

Alternative dispute resolution mechanisms such as mediation and arbitration are available in Slovakia. The country follows international standards in arbitration, offering an alternative to litigation.

Since 2020, amended regulation of arbitration courts is in force, which led to crystallization of arbitration courts leaving most reliable on the scene.

Arbitration clause or a separate agreement is prerequisite for the dispute to be held at the arbitration court instead of regular court.

The process is conducted according to the rules of procedure of respective arbitration court. It starts with the submission of a lawsuit to the court. If the disputing parties have selected a single arbitrator, the claim is also forwarded to that arbitrator. Legal representation is not necessary, and the entire proceedings can even be carried out in writing.

Finally, decision of the arbitration court has the same effect as the decision of regular court and in principle can be used abroad as well.

However, under certain circumstances decision of the arbitration court can be terminated by regular court but such motion shall be submitted to regular court within 60 days from delivery of arbitration judgement.

Biggest benefit of arbitration proceedings is the speed compared to regular court proceedings, which can take long years in Slovakia. On the other hand, there are still arbitration courts that have questionable reputation and their arbitrators can be in conflict if interests with one of the disputing parties that can undermine reliability of such decision.

10) **Anti-corruption Law and Compliance Programs** 

Slovakia has anti-corruption laws in place, which focus on transparency in public procurement and business operations.

Among others, the following laws (besides general regulation in criminal law) are in place:

• Act on the Protection of Whistleblowers of Anti-Social Activity that provides protection for the so-called a whistleblower who reports corruption or other illegal activities. The aim is to protect persons who report anti-social behavior from retaliation by employers or others;
• Public Procurement Act regulating public procurement procedures to ensure transparency, equality of access and fair competition, thereby minimizing corruption in the public procurement process;
• Law on the Register of Public Sector Partners– Also known as the law on “box companies“, this law requires companies that enter into contracts with the public sector to disclose their true ultimate beneficiaries whereby such information are publicly available.

11) **Other Peculiarities of Slovakia** 

Each country has own peculiarities and the following are, besides comments above, relevant in Slovakia when doing business:

• Notary’s Role in Legal Transaction / In Slovakia, notaries have a more significant role than in many other countries. They are required to verify important legal transactions, such as real estate transfers or inheritance procedures. Notarized documents hold a high degree of legal authority;
• Unique co-ownership of land / Slovakia has some unique land use regulations commonly known as “Urbár”. These rules allow for collective ownership of agricultural or forest land, where multiple individuals own undivided shares of the property. This could lead to complicated communication with owners of such land while negotiation its possible purchase or use.
• Separate ownership of land and constructions built on it / Slovak law system does not recognize, unlike many other countries, superficies solo cedit principle, i.e. system under which part of the land is everything that is connected to it in a natural or artificial way. This means that the owner of the land and owner of the construction built on that land can be and often are different entities, which can lead to legal disputes when acquiring/using respective land or building.

If you need further info please contact terem.legal law firm, Andrej Terem, email: andrej@terem.legal.