Our experience and longtime research on foreign investments confirm that Eastern European countries offer a wide variety of opportunities, especially for small and medium enterprises. Besides their strategic geographical position, the Balkans represent an economic bridge between Western and Eastern Europe: they benefit from very convenient tax and social security systems, with substantial tax breaks for investing enterprises and a very competitive cost of labor. Moreover, the establishment of companies is pursuant to European laws and regulations.
What follows is a summary of opportunities offered by Slovenia.
The Republic of Slovenia is located in Central Europe, its capital isLjubljana. Slovenia is a small country, its area is20,273 km2 and population is 2,029,680. Slovenia is a European Union member state from May 1st, 2004, and from January 1st, 2007 its currency is the Euro.
Slovenia has a very convenient tax system. In 2014 the company income tax waslowered from 17% to 16%, and the Slovenian government has planned to further cut it to 15% in 2015.
The law also regulates a tax on repatriation of capitals, which represents taxation on distribution of company profits to non-residents:
– 15 % for earnings of non-residents (which may be reduced according to specific bilateral agreements against double taxation);
– 0% for earnings of EU residents;
– 0% if the capital quota exceeding 10% is held for at least 24 months.
Taxation of natural persons is applied according to proportional rates:
– 16% for 0 to8,021.34 Euros incomes;
– 27%for8,021.35 to 18,960.28 Euros incomes;
– 41%for18,960.29 to 70,907.20 Euros incomes;
– 50% for incomes beyond 70,907.21 Euro.
There is also a withholding tax policy:
– 25% on interests and dividends;
– 15-20% on financial revenues(depending on the duration of their possession).
The Value Added Law was passed in 1999,and amended in 2001 and 2002. It is now fully pursuant to EU regulations: a VAT tax is applied to goods and services transactions within the Slovenian territory, as well as on imported goods and services, and in some cases on transfers of properties. There is the requirement of a VAT registration for businesses with a cash circulation of more than 50,000 Euros (7,500 Euros for agricultural activities).
There are two VAT rates: regular at 22%,and a reduced rate at 9.5%.
Cost of Labor
Retirement and medical contributions are mandatory in Slovenia, both for the employer (16.1%)and for the employee(22.1%).
The minimum wage in Slovenia is 748 Euros net, for 12 months, plus a 780 Euros vacation (leave) allowance. There is no severance indemnity, nor 13thmonth salary.
European Funds and Tax Relieves
For the 2014-2020periodthere is the Cohesion Fund, which is an investment instrument adopted by the European Union aimed at achieving Europe 2020 strategic objectives, addressing: growth and jobs, climate change and reduction of energy dependence, poverty and social exclusion. In general, the reformed cohesion policy will allow the distribution of up to 351.8 billion Euros destined to EU regions and cities.
Foreign investors in Slovenia are welcomed by a system of incentives aimed at speeding up economic development.
a. Grants to foreign investors. Foreign companies directly investing in Slovenia may request financial grants. The aim of the Foreign Direct Investments (FDI) policy is to increase Slovenia’s attractiveness through the sharing of costs, thus lowering initial costs (at a start-up phase)for investments having a positive impact on Slovenia’s economy. The incentives program started in 2000, encouraging and simplifying investments, like other neighboring competitive countries do. The law is based on national and EU incentives directives, with the aim of reducing initial costs barriers for new enterprises in the industrial and services sectors, so as to keep them competitive on worldwide markets.
b. Jobs creation incentives.There are substantial incentives for all companies willing to employ young, less than 26 years oldworkers, or mothers with children younger than 3 years; in the latter case, after two years the national social security returns to the employer 50% of first year paid contributions, and 30% of second year paid contributions. Employing the elderlyis also convenient: there is a 30% exemption for pension and medical contributions for people olderthan 60, which increases to 50% for those who already have retirement prerequisites but are still working.
c. Fiscal relieves for capital investments: there is a 20%cut on net incomes for research and development.
There are two main legal types of companies in Slovenia:
• Individual company: it is a natural person autonomously pursuing a business goal in the market,within an organized enterprise. In order to establish this type of enterprise, there is no need of a capital stock, as the founder can be liable through personal assets.The individual entrepreneur is subject to an incremental tax according to the rate of existing income. The entrepreneur may freely employhis capital.
• Limited liability company: may be incorporated by one or more natural or legal persons who become shareholders. By law, the minimum capital stock is 7,500 EURO, and may be deposited in cash or in assets.
• Joint stock company: a company where the capital stock is divided into shares. It may be established by one or more natural or legal persons with an incorporation document, only through a notary public deed. Stock value can be deposited in cash or in-kind, however at least 1/3 of the initial capital stock must be deposited in cash.
• General partnership company: is a company established by two or more partners who are liable through their entire personal capital. There is no minimum amount of capital, while the company goal must contain at least one of the founding members’ family names, and the specificationthat there is more than one partner.
• Limited partnership company: established by one or more partners, where at least one partner is liable with his entire personal capital (general partner), while at least one partner is not liable (limited partner). There is no minimum capital stock requirement.
For all procedures regarding incorporation, variation and termination of companies, Slovenia benefits from all-purpose bureaus (E – VEM), located at all national Public Affairs Territorial Agencies (AJPES), or at the Chambers of Economy (GZS), or at the Chambers of Craftsmanship (OZS),and at the Regional Development Agencies (Razvojne Agencije).
In particular, these bureaus can finalize:
1. Incorporation, any variation and termination of individual companies;
2. Incorporation of partnership companies and some company association deed variations;
3. Incorporation of non-complex capital companies and some company association deed variations.
For non-complex companies we mean companies with the capital stock deposited in cash, or having their entire capital deposited.For complex companies the law requires a notary public.
In order to establish a company in Slovenia, like all other European Union countries, both the single entrepreneur and natural or legal person shareholders must possess a Slovenian fiscal code.In order to file for a Slovenian fiscal code and proceed to incorporation, it is necessary to have a valid EU ID, or a valid (not older than three months) Italian certificate of incorporation from a Chamber of Commerce (in case a shareholder is a legal person), with a Slovenian sworn translation.
It is necessary to transmit the following data in order to establish a company (both at the all-purposeE–VEM bureau, and through a notary public):
1. The name of the company, which according to the Slovenian law must not contain foreign words; in case of an individual company, the first name and the family name of the entrepreneur must also be included.
2. The company registered address.
3. The amount of capital stock–in case such company is to be established–and its division among shareholders.
4. The name of the director.
5. The official scope of the company, that is a list of all activity sector codes and relevant descriptions, including the main business goal to be pursued.
Another necessary information, however not mandatory upon incorporation, is the Slovenian bank where the company account will be open. In Slovenia,companies are obliged to open a bank account; existing laws on currency mandate the use of a bank account for operations of more than 400 Euros.
Companies are usually registered within 7 days after incorporation, that is the date in which the capital stock has been deposited. Upon registration at the Company Registry, all companies are provided with a registration number and a fiscal code.
The registration certificatecan be downloaded and printed by logging onwww.ajpes.si.
Incorporation costs: for non-complex companies, using the abovementioned all-purpose public bureaus, incorporation is free of charge. Incorporation through a notary public amounts approximately to 360 Euro, plus legal costs of around 120 Euro.