Nine legislative changes affecting the business environment in Slovakia in 2020
We would like to bring to your attention the most important legislative changes that will affect the business environment in Slovakia.
1. Minimum wage increase
As of 1 January 2020, the sum of the basic monthly minimum wage, i.e. the minimum wage for work classified under the first degree of work intensity, increases from EUR 520 to EUR 580 and the sum of hourly minimum wage increases from EUR 2.989 to EUR 3.333. Minimum wage increases depend on the degree of intensity of work performed by an employee. The minimum wage increase affects also the amount of compensation for weekend work or night work as they are calculated from the minimum wage.
The method of calculation of the minimum wage also changes. If the agreement between the representatives of employers and employees is not reached, a new valorisation coefficient will be used, i.e. 60% of the average nominal wage of an employee in the economy of the Slovak Republic published by the Statistical Office of the Slovak Republic for a calendar year 2 years preceding the year of the calculation of the minimum wage.
2. An additional week of paid holiday for employees taking care of a child
The amendment of the Labour Code introduces 5 weeks of the base holiday also for the employees under 33 years of age taking care of a child permanently. The interpretation of the term “permanent” child care may be problematic as the Labour Code lacks a legal definition of the term for now. The amendment became effective as of 1 January 2020.
3. Benefit for child’s sporting activity
The amendment of the Labour Code taking effect as of 1st January 2020, introduces a new voluntary benefit provided by an employer for a sporting activity of children of their employees. An employer can provide its employee with a benefit amounting to 55 % of eligible expenditures, however up to maximum of EUR 275 per calendar year for all children of an employee upon his/her request. An employee is entitled to request for the benefit provided his/her employment has lasted at least consecutive 24 months.
4. Stricter rules for sending monthly statements to the Social Insurance Agency
As of 1 December 2019, if employers fail to comply with the statutory obligation to send the Social Insurance Agency a monthly report of premiums and contributions to pension savings, stricter sanctions apply. The reports must be submitted to the Social Insurance Agency by the due date of the premiums paid by them. If they fail to do so within the stipulated period, the Social Insurance Agency will treat them as debtors and include them in the list of debtors maintained by the Social Insurance Company, regardless of whether the employer has actually paid the premium or not. Being included in the list of debtors then has several negative impacts, mainly on the right to use/apply for loans or subsidies or the possibility to establish subsidiaries or disposing of a business share.
This obligation also applies to foreign self-employed persons who will be treated as having arrears if they fail to notify the Social Insurance Agency of the amount of income and expenditures and the facts decisive for assessing the obligation to participate on the compulsory social insurance.
5. Exception from illegal work and illegal employment applies also to limited liability companies with one shareholder who is a natural person
The amendment to the Act on Illegal Work and Illegal Employment effective as of 1 January 2020 extended the exception from illegal work and illegal employment to limited liability companies with no more than one shareholder being a natural person. Such limited liability companies may now employ a direct relative, a sibling or a partner's spouse, if they are insured and pensioners or pupils or students under 26 years of age without an employment contract or agreement. Before the amendment, this exception only applied to natural persons-entrepreneurs.
6. Termination of old legal enforcements
As of 1 January 2020, the new act on termination of some legal enforcement procedures became effective. The old legal enforcement is defined as an enforcement procedure that had commenced prior to 1 April 2017 and is carried out under legislation effective until 31 March 2017. The old legal enforcement will be terminated ex lege when (i) the decisive period of five years passes as of the day of the delivery of the initial order to carry out the legal enforcement to the legal enforcer and (ii) at the proceeds amounting to at least EUR 15 has not been achieved in the last 18 months (dispossessed enforcements). In connection with the termination of an old enforcement, the entitled person (creditor) will be obliged to bear the lump costs in the amount of EUR 35. The entitled person will be called upon to pay by the legal enforcer in the notice on the termination of an old enforcement. The enforcement proceedings terminate as at the delivery of the notice on termination of an old enforcement to the respective court.
7. Audit of financial statements
The amendment to the Act on accounting, effective as of 1 January 2020, liberalizes the conditions for mandatory auditing of financial statements. Two of the three conditions determining the obligation to audit the financial statements are doubled, namely:
- The condition of the total amount of assets as at the day of preparation of the financial statement increases from EUR 1 000 000 to EUR 2 000 000 and
- The condition of the net turnover changes from EUR 2 000 000 to EUR 4 000 000.
The third condition relating to the number of employees remains unchanged.
8. Changes in the process of liquidation of companies and cooperatives
As of 1 October 2020, the amendment to the Commercial Code introduces several significant changes in the liquidation process that will affect the cost and duration of the entire process.
Pursuant to the new legislation, the Company will not enter into liquidation until the day when the liquidator is registered with the Commercial Register. Upon entry into liquidation, under the new regulation, unilateral legal acts of the company such as power of attorney, orders or procurations, except for power of attorney granted to represent the company in legal proceedings, will expire.
It will be possible to terminate the liquidation only once the 6-month period passes of the notice of company’s entry into liquidation. If there is a tax debt or a tax audit, the period in question will be extended by further 6 months.
The amendment introduces a new obligation to deposit an advance for the liquidator's remuneration in the escrow account of the notary public. The minimum advance payment is set at EUR 1 500.
The new legislation also introduces several new obligations for the liquidator, in particularly the obligation to draw up a list of the company's assets and receivables, reporting and disclosure obligations, etc.
9. Cleanup of the Commercial Register
An amendment to the Commercial Code effective from 1 October 2020 introduces new rules with the aim (i) to ensure full electronization of the Commercial Register, (ii) to arrange for deletion of inactive entities and (iii) to reduce the scope of entities registered with the Commercial Register.
Following the amendment, an entity may be dissolved, if it fails to meet the statutory duty to deposit its financial statements with the Collection of Deeds.
As part of measures to cleanup the Commercial Register, the registry court will also de-register „dead“ companies, e.g. those which: (i) failed to fulfil their statutory duty to convert the nominal value of the registered capital or contributions to the registered capital from Slovak crowns to euro by 1 December 2020; or (ii) enterprises of foreign legal entities, branches of enterprises of foreign legal entities, branches of enterprises of Slovak legal entities, which by 30 September 2021 will not confirm the data registered with the Commercial Register.
The filing with the Commercial Register will only be possible electronically.
Pursuant to the amendment to the Commercial Code, natural persons are not registered in the Commercial Register. At the same time, a person subject to legal enforcement will no longer be able to set up a limited liability company or dispose of a business share in a limited liability company. Similarly, such a person will not be able to be appointed as a managing director of a limited liability company.